Quantifying the impact of the Great Recession on the AEC industry—a call to reevaluate home office overhead costs

Jake B. Smithwick, Thomas C. Schleifer, Jeff T. Sawyer, Kenneth Sullivan

Research output: Contribution to journalArticle

Abstract

The 2007–2009 recession significantly affected the U.S. construction industry, with unemployment peaking at approximately 20%. In such circumstances, construction companies must devise strategies to adapt to and even counteract declining revenue. One tactic is to reduce home office overhead costs, such as bonuses, rent, and business development expenses. The purpose of this study was to examine the degree to which construction companies reduced overhead costs in response to a market downturn, and whether these reductions are correlated with companies’ demographic attributes. A total of 437 contractors across the United States completed a survey on how much their companies reduced expenses; 92% of the respondents reported that their companies reduced overhead in at least one area, by an average of about 15%. Companies with revenue of $100.1 million to $500 million and that primarily performed manufacturing work tended to reduce overhead costs more than other types of construction companies. This study also reveals that larger companies made fewer reductions to overhead, with the exception being roofers who made very minimal reductions regardless of their annual revenue. The Architecture, Engineering, and Construction (AEC) industry can use the data presented in this study to anticipate reductions in overhead spending that future distressed market conditions may necessitate.

Original languageEnglish (US)
Pages (from-to)1-18
Number of pages18
JournalInternational Journal of Construction Education and Research
DOIs
StateAccepted/In press - May 16 2018

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overhead costs
recession
engineering
Costs
Industry
revenue
construction industry
Construction industry
market
rent
tactics
unemployment
Contractors
manufacturing

Keywords

  • Company size
  • financial management
  • home office overhead
  • recession

ASJC Scopus subject areas

  • Building and Construction
  • Education

Cite this

Quantifying the impact of the Great Recession on the AEC industry—a call to reevaluate home office overhead costs. / Smithwick, Jake B.; Schleifer, Thomas C.; Sawyer, Jeff T.; Sullivan, Kenneth.

In: International Journal of Construction Education and Research, 16.05.2018, p. 1-18.

Research output: Contribution to journalArticle

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