According to Statista, the American construction market was valued at 1.6 trillion U.S. dollars in 2021. The more lucrative a market is, the more competitive it is. General contractors must maintain that edge to attract better-paying clients.
Every contractor should strive to attain three types of competitive advantages:
- Cost advantages
- Value advantages
- Focus advantages
Cost advantages
Cost advantages allow the contractor to be more competitive in terms of price.
However, it’s essential to note that competing on price is not always the right thing to do. This is because competing on price can compromise quality. In addition, it tends to squeeze profit margins, slowing the company’s growth.
Also, if the price is too low, there’s the risk that the construction company will not be able to deliver on its contract.
This can result in legal lawsuits that can destroy the company’s reputation. Therefore, contractors must ensure that cost advantages are only realized sustainably. To do this sustainably, project managers should use modern optioneering platforms.
An example of such a platform is ALICE Technologies. This optioneering platform reduces costs by simulating construction options to optimize resource allocation. The platform gives contractors a competitive advantage over their peers.
Value advantages
General contractors should strive to offer more value than their competitors. Contractors who provide value-added services will attract more clients because clients prefer companies offering superior services.
One way to provide value is by using technology when pitching and making presentations. For example, the project manager can use virtual reality instead of regular blueprints to show designs.
Virtual reality creates an immersive 3D experience of a structure’s appearance once completed.
Focus advantages
To benefit from focus advantages, the general contractor must focus on a particular niche. For example, the contractor can focus on road or rail construction instead of bidding for all construction projects.
By focusing on one niche, general contractors can brand themselves as experts, increasing their value.
5 strategies to maintain a competitive advantage as a general contractor
General contractors must attract top talent to maintain a competitive advantage. By hiring qualified workers, your team can make more competitive bids and ensure that tasks are professionally done. Other strategies that can be used to have a competitive advantage are the following.
1. Use technology
Using technology is the easiest way a general contractor can maintain a competitive advantage.
There are lots of technologies that can be used in the construction world. Instead of using Excel spreadsheets for creating a construction schedule, contractors can use a construction optioneering platform.
Another technology that can be used is drones. Drones can be used for aerial imagery to scan a construction site. Contractors can also use them for security surveillance, equipment tracking, and inspecting hard-to-reach areas.
General contractors can also use structural monitoring systems to identify structural weaknesses.
There are a lot of technologies that can be used in the construction industry. It is up to the general contractor to identify these technologies and use them to have a competitive advantage.
2. Offer a performance bond
It is good when a general contractor offers a financial guarantee such as a performance bond. Project owners feel more confident in working with a contractor who offers a performance bond than a contractor who does not provide the bond.
This is because the bond guarantees the contractor will complete the job.
If the contractor fails to adhere to the terms and conditions of the contract, the client will cash in on the performance bond as a penalty.
3. Have a good relationship with suppliers and manufacturers
Having a good relationship with suppliers is crucial because material costs directly affect profit margins. Contractors can get materials at a discount or on credit by having a good relationship with suppliers.
Suppliers can also sell construction materials at wholesale prices, reducing costs and increasing profits.
If possible, try establishing direct links with manufacturers since this can lower prices. However, remember that most manufacturers prefer supplying to companies buying in bulk. Therefore, this arrangement is ideal if working on a mega construction project.
4. Join a professional association
Joining a professional association is a good way for contractors to market and learn from other contractors.
Also, when general contractors contribute to association events, they can market themselves as industry experts. This gives them a competitive advantage, as project owners prefer to work with experts.
One association that a general contractor can join is Associated Builder & Contractors, Inc., which has more than 21,000 members with 68 chapters around the country. The association is suitable for general contractors targeting the industry and commercial niche.
Another popular association to join is the American Institute of Contractors.
The association was created to help foster professionalism in the industry.
5. Control labor costs
One main construction cost is labor costs. Labor costs can increase overall construction costs, reducing a contractor’s competitiveness. Therefore, general contractors should find strategies for reducing these costs.
For starters, a general contractor can work with subcontractors instead of hiring a team full-time. Subcontractors are cheaper because they are only paid for the work done.
Avoid overtime work hours when implementing a construction project since it increases labor costs. Also, ensure that at no given time that labor is under or overutilized. Overutilized labor will result in low morale, reducing productivity while increasing costs.
Lastly, general contractors should have a unique value proposition. A unique value proposition is a simple but powerful message that tells a client about the value you bring to their project. The more catchy the phrase, the better it is.
As more contractors enter the industry, the market will remain competitive. However, to have a competitive advantage, general contractors should use technology to get ahead. Also, the contractor should strive to reduce costs as much as possible.