2020 National Construction Payment Report Spring Spotlight: Jobsite Coordination LEVELSET Payment help is here. 2020 REPORT: JOBSITE COORDINATION & PAYMENT SPEED The 2020 National Construction Payment Report is based on a survey of more than 540 construction businesses conducted in February and March 2020. Respondents: Subcontractors (44%) General contractors (37%) Both GC and subcontractor (15%) Material supplier (4%) Twice a year, Levelset collects data from hundreds of contractors to increase awareness around the causes for delayed payment and encourage industry-wide visibility, communication, and collaboration. The 2020 survey, a partnership between Levelset and Fieldwire, asked construction businesses about their attitudes and experiences with delays in the field and the impact on payment speed and efficiency. KEY TAKEAWAYS Overall, the construction industry accepts project & payment delays as the status quo.  70% say poor jobsite coordination is a significant contributor to budget overruns and missed deadlines. More than 3 out of 4 construction businesses (77%) say they are happy with their jobsite performance. 80% of companies spend a "moderate" or "substantial" amount of time chasing down payments. Only 52% of businesses say they typically receive payment within 30 days of invoicing. 15% wait for 60 days or longer to get paid on most projects. A majority (53%) are happy with how quickly they get paid for their work.  Fewer than 1/3 of contractors (30%) always finish projects on time and within budget.  levelset.com 2 Table of Contents Section 1: Jobsite Coordination Contractors rate jobsite coordination & payment speed highly 4 Poor coordination causes jobsite problems 5 Poor coordination causes project delays 7 Contractors miss deadlines due to poor planning 8 Contractors are wasting time 9 Impacts: Lost money & unhappy workers 10 Section 2: Construction Payments Getting paid in construction is a challenge 11 Payment takes a long time 12 Payment challenges 13 Contractors don't take steps to speed up payment 14 Contractors don't protect their payments 15 Section 3: Software & Technology 16 Section 4: Survey Respondents 17 JOBSITE COORDINATION CONTRACTORS RATE JOBSITE COORDINATION & PAYMENT SPEED HIGHLY. When asked to rate the productivity of their field work, contractors appear to be content with the status quo. Similarly, when it comes to getting paid for their work, a majority of construction companies say they are satisfied. More than 3 out of 4 construction businesses (77%) say they are “happy” with their jobsite efficiency. Just over half (53%) of all respondents report being happy with how quickly they receive payment for their work. 77% 77% are happy with how quickly they get the job done. 53% are happy with how quickly they recieve payment. levelset.com 4 JOBSITE COORDINATION POOR COORDINATION CAUSES JOBSITE PROBLEMS Though construction businesses report high levels of satisfaction with their jobsite efficiency, fewer than 30% say they "always" finish projects on time and within the budget. 28% finish all projects on time and under budget. CONTRACTORS SPEND A LOT OF TIME TRYING TO GET PAID Even though a majority report being happy with payment speed, over 80% of companies say they spend a "moderate" or "substantial" amount of time chasing down payments 80% Spend a moderate or substantial amount of time chasing down payments. levelset.com 5 JOBSITE COORDINATION ONLY By and large, construction businesses say they’re satisfied with their jobsite planning and productivity. 28% SAY THEY ALWAYS COMPLETE A PROJECT ON TIME AND WITHIN THE BUDGET. At the same time, fewer than 30% of construction businesses say they "always" finish projects on time and within the budget.  Of course, construction projects rarely happen according to plan, especially when multiple subcontractors and suppliers are involved. Construction is a real-life puzzle, and putting all of the pieces together is not an easy task. Unsurprisingly, nearly 80% of survey respondents say that coordinating field work is "somewhat" or "very" challenging. How challenging is coordinating work on a job site? How often do you complete a project on time and within budget? 80% SAY THAT COORDINATING JOBSITE WORK IS SOMEWHAT OR VERY CHALLENGING “My time spent upfront planning and scheduling pays in the long run - before crews get on site wasting time with problems or coordination.” -Survey Respondent levelset.com 6 JOBSITE COORDINATION POOR COORDINATION CAUSES PROJECT DELAYS A construction project is a delicate balance of work sequences, many closely dependent on the ones before it. Any number of outside forces can interrupt the flow of work, from inclement weather to illness to supply chain disruptions. Project delays are exceedingly common: 84% of construction businesses experience delays on some or all of their projects. However, the source of those delays would be largely preventable with better planning and faster payments. Construction businesses blame delays on unexpected change orders (62%), weather (60%), poor subcontractor coordination (54%) and stalled payments (12%). 84% OF CONTRACTORS EXPERIENCE A DELAY ON SOME OR ALL PROJECTS. What is the main cause for job delay? 54% “Job site coordination all depends on the GC and other subs’ schedules in our line of work.” Blame job delays on poor coordination between -Survey Respondent subcontractors. levelset.com How often do you experience delays on the jobsite? 7 JOBSITE COORDINATION CONTRACTORS MISS DEADLINES DUE TO POOR PLANNING Finishing a project on time and under budget is critical not just for each contractor or supplier on the job, but for the construction project as a whole. Nearly 70% of contractors say that poor jobsite coordination "sometimes" or "always" causes projects to run over budget or past deadlines. How often does coordination affect deadlines & budget? One culprit appears to be the lack of proper planning. Only 59% of contractors say they work from a set budget and timeline in advance of every project. 69% BLAME POOR JOBSITE COORDINATION FOR MISSING DEADLINES AND GOING OVER BUDGET. FEWER THAN 60% How often is a timeline and budget set in writing at the start of your projects? SET A TIMELINE & BUDGET ON EVERY PROJECT levelset.com 8 JOBSITE COORDINATION CONTRACTORS ARE WASTING TIME Overall, construction businesses are losing more than 1 full day of work every week to inefficiency. Two-thirds (66%) spend more than a quarter of their work hours waiting for work to be done. Nearly 75% of respondents say that their company spends less than half of their time doing actual construction work. And 84% report spending more than 1/4 of their time tracking & reporting on project progress. The lack of jobsite planning and coordination ends up preventing contractors from doing the work they were built to do. 84% 66% 66% spend more than 1/4 of their time tracking and reporting on project progress. 75% spend more than a quarter of their work hours waiting for other work to be done. spend less than half of their time doing actual construction work. levelset.com 9 JOBSITE COORDINATION 58% IMPACTS: LOST MONEY & UNHAPPY WORKERS On a construction project, another party’s delay can have a direct effect on your own productivity - and your ability to collect payment. OF CONTRACTORS LOSE PAYMENT BECAUSE PROJECTS ARE POORLY COORDINATED. 58% of contractors say that poor coordination on the jobsite means they get paid less for their work. How does "Lack of coordination" on the job affect your business? In addition, 40% of contractors say that poor coordination on the jobsite is a significant barrier to their job satisfaction. 40% SAY THAT POOR COORDINATION ON THE JOBSITE IS HOLDING THEM BACK. What’s stopping you from being your happiest at work? NOT ENOUGH SKILLED WORKERS 49% POOR COORDINATION ON THE JOBSITE 40% LACK OF CONSTRUCTION TECHNOLOGY 21% levelset.com 10 CONSTRUCTION PAYMENTS GETTING PAID IN CONSTRUCTION IS A CHALLENGE Getting paid in construction is a challenge, and it makes it difficult for contractors and suppliers to manage their cash flow. The upfront deposit - once a mainstay in the industry - has been eroded over time, putting a heavy strain on a construction business's cash flow. Contractors and subs are forced to deal with last minute change orders or directives, back charges, retainage, and other payment practices particular to the construction industry. In the survey, only 23% of businesses say they "always" receive an upfront deposit on their projects. Without a payment up front, contractors are expected to pay their suppliers and meet business expenses while they wait for payment. Only 52% of contractors say they are always paid in full for their work. Nearly 1 in 10 say that they are "rarely" or "never" paid in full. ONLY 23% Are you generally paid in full for jobs? OF CONTRACTORS ALWAYS RECEIVE AN UPFRONT DEPOSIT 52% OF CONTRACTORS SAY THEY ARE ALWAYS PAID IN FULL FOR THEIR WORK “The ability to purchase and pay on time is critical. When cash flow is slow, we cannot move forward on a project as quickly as we would like.” - Survey Respondent levelset.com 11 49% CONSTRUCTION PAYMENTS PAYMENT TAKES A LONG TIME TYPICALLY WAIT MORE THAN 30 DAYS TO GET PAID Getting paid for construction work isn't easy - and contractors are often forced to wait a long time. According to the survey, almost half of contractors and suppliers (49%) report waiting more than 30 days for payment on a typical job. And nearly 1 in 6 contractors (16%) say they routinely wait longer than 60 days to get paid. Adding to the problem, contractors frequently offer their customers payment terms with their invoices that encourage longer delays. In fact, 59% offer payment terms of 30 days or longer. Nearly 10% submit invoices with terms exceeding 45 days. How many days does it  typically take to get paid after invoicing? What are the payment terms offered? 59% 16% OFFER PAYMENT TERMS OF 30 DAYS OR LONGER TYPICALLY WAIT MORE THAN 60 DAYS TO GET PAID levelset.com 12 CONSTRUCTION PAYMENTS PAYMENT CHALLENGES Back office staff are forced to fight for payments, requiring contractors to spend extra time and money collecting money that they earned. How much time does your company spend on payment paperwork? 81% of construction businesses say they spend a "moderate" or "substantial" amount of time chasing down payments. 81% Property owners don't make it easy for contractors, subs, and suppliers. Only 18% of construction professionals said that the owner always does a good job communicating about when they can expect payments. SPEND A "MODERATE" OR "SUBSTANTIAL" AMOUNT OF TIME CHASING DOWN PAYMENTS. The most common reasons for payment delays? Waiting for payment from the owner (54%), incorrect work (26%), and missing invoices (23%). 54% SAY PAYMENT DELAYS ARE CAUSED BY SLOW PAYMENTS ABOVE THEM Do GCs/owners do a good job communicating when payments will be made to you? What are the reasons for late payment? 17% ONLY 17% SAY PROJECT OWNERS "ALWAYS" DO A GOOD JOB COMMUNICATING ABOUT PAYMENT TIMING. levelset.com 13 CONSTRUCTION PAYMENTS CONTRACTORS DON'T TAKE STEPS TO SPEED UP PAYMENT Even while they're reporting slow payments, construction businesses are hesitant to take action that would speed up payment. How often do you charge interest on late payments?  Nearly 70% of contractors rarely or never t charge interest on late payments. Even more (76%) say they rarely or never offer discounts for quick payments. In effect, the vast majority of construction businesses are providing interest-free loans to their customers, even when they don't pay according to their contract terms. 68% RARELY OR NEVER CHARGE INTEREST ON LATE PAYMENTS Even while contractors say that getting paid is a slow, time-consuming process, few of them send or exchange documents that have been proven to speed up payment. Only 44% say they regularly send invoice reminders. Even fewer report using lien waivers (33%), preliminary notices (29%), notices of intent (20%), and demand letters (15%). How often do you offer discounts to get paid faster?  PAYMENT DOCUMENTS CONTRACTORS USE 76% RARELY OR NEVER OFFER DISCOUNTS FOR FASTER PAYMENTS levelset.com 14 CONSTRUCTION PAYMENTS CONTRACTORS DON'T PROTECT THEIR PAYMENTS In the survey, construction businesses also revealed that they are hesitant to protect their mechanics lien rights. Fewer than 1 in 3 contractors say they "always" protect their lien rights, while 65% say they rarely or never file a lien - or even threaten to file one in order to speed up payment. So why are contractors so reluctant to use the rights provided to them by state laws? Ultimately, contractors are afraid to demand payment. While some said that the lien claim process was complicated (16%) or expensive (16%), a majority said they were afraid to lose a customer (56%). How often do you protect your lien rights? 31% ALWAYS PROTECT LIEN RIGHTS 56% DO NOT FILE LIENS FOR FEAR OF LOOSING CUSTOMERS How often do you file (or threaten to file) a lien to get paid? What are your main reasons for not filing a lien? 78% RARELY OR NEVER FILE A LIEN (OR EVEN THREATEN TO FILE) IF THEY ARE UNPAID levelset.com 15 SOFTWARE & TECHNOLOGY In spite of the challenges that construction businesses say they face, both in field coordination and collecting payment, contractors are largely slow to adopt technology or software that would help. However, nearly half (48%) said they planned to invest in software during the year (as of Q1 2020). More than half use software for plan management (59%) and jobsite coordination (53%). Far fewer use solutions that help them manage payment paperwork (33%) or process payments (29%). More than 1 in 5 say they don't use any construction software at all. ADOPTION OF CONSTRUCTION SOFTWARE 21% What construction software do you use? OF CONTRACTORS DON'T USE CONSTRUCTION SOFTWARE AT ALL 81% SAY SOFTWARE HELPS THEM COMPLETE PROJECTS ON TIME AND UNDER BUDGET 48% Do you plan to invest in more software in 2020? PLAN TO INVEST IN MORE TECHNOLOGY IN 2020 levelset.com 16 SURVEY RESPONDENTS More than 540 construction professionals responded to the survey. General contractors and subcontractors made up the majority of survey responses (96%), with material suppliers accounting for only 4%. Companies of all sizes were well represented. Overall, survey respondents had knowledge of both field and back office work. 96% reported being "somewhat" or "very" familiar with project management on the jobsite. 90% said they were "somewhat" or "very" familiar with the financial and payment side of their company. PROJECT ROLES FAMILIARITY WITH JOBSITE COMPANY SIZE levelset.com FAMILIARITY WITH PAYMENTS 17 ABOUT LEVELSET Levelset's mission is to empower contractors to always get what they earn. Levelset's products help millions in the construction industry each year to make payment paperwork and compliance easier, get cash faster, monitor the risk on jobs and contractors, and better understand payment processes and rules. The results are faster payments, access to capital, and fewer surprises. Backed by investors like Horizons Ventures, S3 Ventures, Altos Ventures, Operating Venture Capital, and Brick & Mortar Ventures, Levelset is headquartered in New Orleans, Louisiana, with offices in Austin, Texas, and Cairo, Egypt, and has over 200 employees. ABOUT FIELDWIRE Fieldwire connects your entire field team, from project manager to each specialty contractor’s foreman, on one construction management platform. Its plan viewing and task management tools make it easy for anyone to view up-to-date drawings, schedule work, and track punch list items from any device in realtime. Fieldwire’s mission is to be the world’s most trusted field management solution for construction teams on projects of any scale. The platform powers more than 750,000 commercial, industrial, heavy-civil, and residential projects worldwide. levelset.com 18