The construction industry is a significant part of the U.S. economy with total construction spending reaching $2.1 trillion in 2024, produced by over a million individual construction companies. To get a clearer picture of how this vast industry works, and how these firms get the job done, let's break the industry down into its three main segments: building, infrastructure, and industrial construction.
Building Construction (Residential and Non-residential)
- Residential Construction: The construction of homes, apartments, and other living spaces. Demand fluctuates with economic trends and population growth.
- Non-residential Construction: From office buildings and retail to schools, hospitals, and hotels. Projects tend to be complex, requiring advanced mechanical systems, specialized materials, and safety features.
Infrastructure Construction (Transport and Utility)
- Transport Infrastructure: Roads, motorways, railways, and airports. Generally large in scale, funded by governments or through public-private partnerships.
- Utility Infrastructure: The creation and maintenance of water treatment plants, power lines, and sewage systems.
Industrial Construction (Manufacturing, Processing, and Energy)
- Manufacturing and Processing Plants: Facilities essential for the production and storage of the goods and materials that drive many industries.
- Energy: Oil refineries, power stations, and renewable energy projects such as wind farms and solar facilities.
General Contractors vs. Subcontractors
To add insult to injury, the more than a million separate companies that build this vast array of projects are further subdivided into general contractors (GCs) and subcontractors (subs). GCs contract with owners and subs contract with GCs. Could this industry get any more complicated?
Changing Beliefs
Suggesting changes to long-held beliefs in an industry as extensive and complicated as described above is an uphill battle. Most contractors are pretty much set in their ways guided by their belief that; If it’s not broken, don’t fix it. I am trying to change long-held industry beliefs that have been firmly adhered to.
Most construction professionals believe that they are in the business of supplying labor and materials for a price that challenges their efficiency to make a reasonable profit. They also believe that sometimes you win the efficiency contest and sometimes you lose, but you won’t know until the project is well underway. On the other hand, I believe that what we sell is expertise. The expertise of the teams we have assembled. You have to think about this for a minute because these are two very different points of view.
A Team of Experts
The experts that make up a construction organization ARE the company. When contractors lose sight of that they put themselves and the industry at a competitive disadvantage, by thinking they are selling labor and material, a commodity, instead of expert services. We sell a service. A close friend of mine who founded and ran a successful General Contracting firm for more than 35 years put it like this:
“Right from the outset I tried to hire employees who were better than me. After many years my first project manager is now the CEO of a construction company ten times my size. A couple of my employees went on to own their own construction firms in other parts of the country. Every one of my senior managers was top notch, so I knew that some might eventually move on. But the value they left behind went straight into my pocket. I would never have gotten to where I am without them. I still have a successful company, and I just kept doing the same thing.”
I consider this one of the secrets to success in construction. Put together a team of experts and give them their head. Everyone wins.