June 26, 2017
Technical Assurance, LLC

The U.S. Construction Industry

Construction and engineering are major indicators of economic health, representing roughly 9% of the United States; Gross Domestic Product and 5% of our nation’s workforce.  It is also highly fragmented with the average firm having only eight employees; 91% with fewer than 20 employees and only about 1% having more than 100 employees. 

Categorized into segments: residential, commercial, and infrastructure, each has its distinct features and each share many commonalities.

 

Residential construction is extremely fragmented and cyclical in nature.  Most companies have fewer than 10 employees and local economics tend to drive investment decisions.  Surety bonds are seldom required in residential construction.

 

Commercial construction encompasses a wide range of activities including office buildings, retail space, and warehouses. It too is fragmented but there are also many regional and national firms because of the capital commitments required. Work is generally financed through banks or other third parties who often require bonds as a part of the finance package.

 

Infrastructure work is tied to public appropriation projects and consists of detention facilities, water and sewer lines, roads, hospitals, public schools and mass transit systems. While large firms focus on heavier construction projects, (power plants, highways, etc.), most contractors in this segment are smaller local companies with fewer than 50 employees. The construction of roads is the largest part of this segment because it has few technical complexities or economies of scale advantages that would keep smaller companies from being competitive.