Credit lines expand for construction industry.

The availability of credit continues to loosen for the nation's construction contractors, according to an annual survey of industry financial managers. More than four-fifths (84 percent) of the respondents said that access to credit had improved over the past 12 months, compared to 78 percent who said so last year. What's more, 38 percent of respondents said that their working capital line of credit had increased in 1995, versus 29 percent who reported it had in 1994.

"This is terrific news," said Danny B. Parrish, national president of the Construction Financial Management Association (CFMA), which conducted the survey. "Lenders' confidence in the construction industry - evidenced by their granting easier access to credit and larger credit lines - should mean higher volume and revenue in 1996."

CFMA's 1995 Construction Industry Annual Financial Survey polled 5,000 companies, including CFMA's 3,200 general members and companies on the Engineering News Record's list of U.S. contractors with annual revenues greater than $1 million.

Despite easier access to credit, respondents were not as optimistic about future contract revenue as they were last year. In 1995, 55 percent anticipated an increase in next year's contract revenue, compared to 64 percent last year, 56 percent in 1993 and 47 percent in 1992. Industrial and nonresidential contractors were the most optimistic, however, with 60 percent saying that they anticipate revenue growth next year.

This year's survey, which provides five-year comparison data, also found the following trends:

Increased Backlog: Respondents remain thankfully "burdened" by order backlogs. This year, 57 percent of the respondents said that their backlog had increased over last year, compared to 54 percent who indicated so in 1994. Only about one-quarter (26 percent) of respondents said that backlog had declined.

Greatest Challenges: For the first time ever, "shortage/training of field help" tied with "insurance costs" as the area of greatest challenge for construction contractors, mentioned by 48 percent of respondents. For the past six years, respondents have consistently ranked "insurance costs" as their primary challenge. Other challenges mentioned were sources of future work, litigation and federal legislation.

Total Quality Management: Contractors continue to focus on quality initiatives to keep up with the competition. During the past four years, the use of Total Quality Management programs has grown significantly, up to 39 percent in 1995, compared to 36 percent in 1994 and 23 percent in 1992.

Improving Profitability: "Bolster the basics" appears to be the most popular strategy to improve profitability. When asked a new question this year about what steps (other than geographic expansion) they plan to take to boost profitability, 91 percent of the respondents mentioned "do what we do better," followed by safety and risk management (57 percent), training (49 percent) and cutting overhead (38 percent).

Substance Abuse Testing: Substance abuse testing has increased dramatically over the past five years - from 43 percent in 1991 to 65 percent in 1995. Four-fifths of the respondents (80 percent) from Heavy & Highway construction said they perform such tests. Testing for cause and pre-employment testing were the primary guidelines used by respondents, at 84 percent and 83 percent, respectively.

Management Information Systems (MIS): Contractors rely heavily on computer technology. Nearly all (98 percent) of the respondents said they used general accounting software applications, followed by programs for payroll (96 percent), estimating (72 percent), project scheduling (67 percent) and project control (62 percent). On average, respondents said they dedicated four individuals to MIS functions, and 19 percent of the respondents had a full-time administrator solely devoted to maintaining these networks.