How will the global pandemic affect architecture and engineering firms and what impacts will they have on building product manufacturers? What challenges lie ahead for companies in the AEC industry and what can current metrics tell us about potential failures and successes? Let’s find out….

Deltek is a leading global provider of software and solutions for project-based businesses. They have released the 42nd Annual Deltek Clarity Architecture & Engineering Study which we will explore. Deltek partnered with several organizations such as the American Institute of Architects (AIA) to create the in-depth report.

Introduction

According to the AIA, more than 8 in 10 firms had applied for federal PPE loans in 2020, and the Architectural Billings Index experienced its largest single-month decline in 25 years. Despite such challenges, the Deltek report notes that the outlook for 2021 is positive. Deltek’s report includes the results from 480 companies that represent a cross section of AEC firms for the country. These companies reveal several interesting metrics about key performance indicators, market conditions and industry trends that may affect manufacturers.

Lessons From The Pandemic

A&E firms, building product manufacturers, suppliers, distributors, etc. were all affected by the global pandemic and learned lessons that will continued to be used in the future. According to the Deltek report, during the pandemic A&E firms focused on existing clients, projects under budget were dropped, many design professionals worked remote, and technology investments that had been sidelined for years became a reality.

A&E firms reported that 65% of their existing projects experienced no change during the pandemic. 25% of firms experienced delays and 11% experienced cancellations. Commercial and hospitality projects saw the greatest delays. Many A&E firms already invested in technology tools before the pandemic such as cybersecurity and online collaboration tools. Online meeting platforms had the highest percentage of users amongst the firms in the survey compared to other tech tools.

Several small to medium sized manufacturers were caught off guard by the pandemic and lacked even some of the basic tools that A&E firms had been using for years. More tach-savvy manufacturers had a better leg up when the pandemic started to severely impact the industry. If anything, the pandemic will act as a lesson for future calamities and hopefully help companies prepare for resilience.

Workforce Adjustments

Many A&E firms and building product manufacturers had to adjust their workforce during the pandemic. According to the Deltek report, salary freezes or reductions were cited by 30% of A&E firms, while 26% of firms laid off employees. 18% of employees were furloughed. 35% of firms reported no change at all. Due to the pandemic social distancing recommendations, A&E firms sent many employees home to work. Moving forward 75% of A&E employees expect flexible work options moving forward including working remote. Working remote will no doubt affect manufacturers as well moving forward.

Technology Trends

The Deltek report indicates that 54% of A&E firms struggle with what technologies will yield the greatest results. A&E firms the biggest challenges as the cost of the technology, prioritizing tech applicability, and lack of time to learn about tech trends. Trends included big data, augmented reality, geolocation, and data science. According to Deltak, while continuing to plan for implementation of new technology, firms are slow to take action. While many firms may focus on developing a strategic plan, short-term actions can be taken to keep initiatives moving forward before the comprehensive plan is complete.

Building product manufacturers that had progressive tech strategies did well in 2020. Manufacturers with existing webinar programs and remote spec call programs could meet their needs. However, many small to medium sized firms that had never integrated AIA webinars and remote architectural specification calls were at a major disadvantage. This led to reduced market share and lost spec opportunities.

Financial Challenges

Many A&E firms and product manufacturers faced financial challenges. The Deltek report outlines three major challenges for A&E firms which include finding and retaining qualified staff, increase profits, and managing growth. When firms laid off employees, they had to stretch their staff for projects without burning them out. Many firms were able to lower overhead rates due to reduced travel expenses which actually resulted in higher operating profits on revenue. This may have held true for many manufacturers in 2020.

Business Development

The Deltek report indicates that A&E firms had their business development resources stretched in 2020 during the pandemic. Firms could no longer meet clients or prospects in person. The biggest challenges A&E firms faced were finding time to nurture client relationships, increased competition, and identifying new prospects. These challenges could all ring true for manufacturers as well. Limited resources, lack of intel, and finding the right partners were also factors.

Project Management

There were three major challenges related to Project Management that the Deltek report noted. Competing priorities, staff shortages, and inexperienced project managers topped the list. 2020 was the year of adaptation for both A&E firms and product manufacturers. Only 40% of firms reported that they tracked client satisfaction. Project managers should be given more resources and training to do their job moving forward.

Human Capital Management

Finally, the Deltek report noted that A&E firms have not added to or replaced HR solutions for more than 5 years. The top three challenges listed were the availability of good candidates, matching qualified candidates to open positions, and the ability to offer competitive compensation. Firms may become more competitive in the future by improving branding and their culture. As baby boomers retire, a younger workforce is taking over key positions. Companies should offer more training, succession plans, and upgrade the overall quality of the workforce.

Conclusion

Whether you are a A&E firm, building product manufacturer, supplier, etc. there are many insights to be gleaned from Deltek’s report. We highly recommend researching the metrics further and how they may correlate with your business. What new programs are you launching in 2021 to improve your business and specification opportunities?