The Pandemic’s Impact on Contractors’ Backlogs

The COVID-19 pandemic has resulted in financial concerns and uncertainty for contractors, primarily with respect to generating enough revenue and earnings to sustain business. However, not too far behind revenue and earnings is backlog and the pandemic’s potential impact on it.

A contractor’s backlog is a significant measuring tool for a company’s financial health and future revenue. For some companies, the pandemic has caused temporary delays in ongoing projects, which negatively impacted revenue during 2020. Though this didn’t immediately impact those companies’ backlog, it left them limited in securing additional contracts, since they had to ensure they had the workforce and capacity to complete contracts once they resumed. Some contractors, though -- primarily in road and highway construction -- found efficiencies during the pandemic, as fewer people were utilizing roadways, which allowed them to work through active contracts and move on to the challenge of securing additional work amid the pandemic.

The question remains: what impact did the pandemic have on contractors’ backlogs? According to Construction Dive, out of 13 public companies tracked, four saw their backlogs grow more than 25% from the first quarter of 2020 to the third quarter of 2021. An additional three companies experienced backlog growth during that time frame, while six experienced a decline. In a comparison of backlog ratios obtained from the Construction Financial Management Association, average months in backlog decreased only slightly from 8.2 to 7.9 from calendar year-end 2019 to 2020.

As is consistent within most industries, the pandemic has impacted each contractor differently. Overall, the industry has performed well through the pandemic, and backlogs have remained strong and balanced. Additionally, the passing of the $1.2 trillion Infrastructure Investment and Jobs Act is likely to generate backlog growth over the next two to three years, with the potential for this funding to begin hitting backlogs as early as 2022. The pandemic has brought severe pressure and uncertainty for contractors, but after a challenging couple of years, the future looks promising.

Contact a Schneider Downs representative to discuss how your company stacks up.

See the link below for more information referenced in this article:

How these public contractors' backlogs changed during the pandemic | Construction Dive