A new study has found that proposal activity for architecture, engineering and construction firms sank to its lowest level in over a decade in the second quarter of 2020, as the coronavirus-related downturn trimmed backlog and reduced revenue for firms across the country.
AEC advisory services firm PSMJ Resources reported a near-record-low of its Net Plus/Minus Index (NPMI) of -22% for proposal activity in the latest quarter, substantially down from 17% in the first quarter. The NPMI expresses the difference between the percentage of firms reporting an increase in proposal activity and those reporting a decrease. It is part of PSMJ’s Quarterly Market Forecast, which has been seen as a predictor of construction market health for more than 15 years.
PSMJ Resources
The new data shows that "we’re clearly still a long way from being out of the woods,” said PSMJ consultant Greg Hart in a press statement. “This is the third-lowest quarterly NPMI for proposal activity in the 17-year history of our survey, and while some of the markets and submarkets have remained relatively healthy, most are still struggling."
Hart added that with proposal activity so depressed, the AEC industry is likely to experience an uneven recovery for at least the next several months.
Similar outlooks
The PSMJ proposal activity numbers are in line with another, similar bellwether for construction: The American Institute of Architects' Billing Index, which has reported historic declines in demand for U.S. design services in recent months. The dramatic drop in demand for architecture services portends an equally dire future for the construction sector, economists say.
In addition to weakening in proposal activity, the PSMJ report also found that backlog among AEC firms slid from an NPMI of +6% in Q1 to -24% in Q2 and revenue dropped from +9% to -16%. Projected revenue for the third quarter jumped to -5% from -49%, meaning that about as many firms expect an increase in revenue as expect a decrease.
A few construction sectors showed net growth in proposal activity in the second quarter in the report. These markets are:
- Water/Wastewater 20%
- Energy/Utilities 15%
- Healthcare 10%
- Housing 2%
- Environmental 0%
Market sectors with the least proposal activity are:
- Education -30%
- Heavy Industry -26%
- Government Buildings -13%
- Transportation -10%
PSMJ also identified many struggling submarkets, with restaurants and hotels having the least amount of proposal activity in the second quarter (see chart above).
In addition, a discouraging sign among submarkets was the fact that none of the six transportation submarkets ranked above 0% after half were in the positive in the first quarter, and only one healthcare submarket (medical labs) was positive after strong performances from all four submarkets.
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Report: AEC proposal activity at lowest level in a decade - Construction Dive
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