The construction industry is facing interconnected pressures from shifting data center demand, changing financial markets, persistent labor constraints, and the growing influence of large projects on smaller contractors. These conditions make disciplined project selection and execution more important. Contractors must align market opportunities with their workforce, financial position, and organizational capability, not just their available capacity.

Responding to these pressures requires contractors to understand where their operations are most vulnerable and which conditions they can influence. When project information is organized consistently through standard cost and labor codes, contractors can compare job data across projects, crews, and markets while maintaining a clearer view of backlog, workforce capability and financial exposure. Those comparisons provide the basis to act before market pressures become project-level problems.

Contractors can improve labor capability by:

Using labor code and productivity data to identify the type of work with the greatest losses
Targeting training and crew assignments to the skills the type of work requires
Improving planning, material readiness, and workflow so crews can stay focused on installation
Reviewing results on short, repeating cycles and adjusting field support before losses compound

Across each of these pressures, the contractor's advantage comes from recognizing change early and responding with discipline rather than reacting after performance declines.

Life after Data Centers

Data center construction is creating exceptional demand for skilled labor, specialized expertise, and supporting resources. As demand from large data center projects eventually normalizes, contractors will need to decide how their labor, expertise, and supporting resources can be redeployed across commercial, industrial, utility, and infrastructure markets.

This transition will not affect every market at the same time or in the same way. Some regions and contractors may continue to benefit from sustained digital infrastructure investment. Others may see changes in backlog, workforce utilization, and pricing as large projects wind down.

Contractors should prepare for:

Labor moving back into commercial, industrial, utility, and infrastructure markets
Increased competition as contractors pursue replacement backlog and enter adjacent markets
Changes in labor rates, equipment availability, and supplier lead times as demand is redistributed
Greater emphasis on workforce capability, not just headcount, with the type and timing of future work

The shift beyond current data center demand will require contractors to decide where their labor and expertise can stay competitive. Crews that perform well on repetitive data center scopes may not bring the same capability to other markets. Project data gives contractors a stronger basis for strategic decisions about where to deploy labor and expertise, which markets to pursue, and where prior experience is most likely to translate successfully. Testing future opportunities against that data, regional demand, and the company’s ability to execute helps contractors pursue replacement backlog without overcommitting resources.

Financial Market impact on the construction industry

Financial market conditions affect whether projects move forward, how they are funded, and how much risk contractors must absorb during execution. Changes in financing costs, customer investment, material pricing, and payment timing can alter project feasibility even after work enters the pipeline.

These conditions make it increasingly important to distinguish between backlog volume and backlog quality. Contractors should regularly reassess whether changes in financing, project timing, material costs, and payment terms have altered the expected value or risk of the work in their pipeline.

Contractors should continue to expect:

Greater scrutiny of project funding and financial readiness
Increased pressure on cash flow and working capital
Changes to project timing, scope, or purchasing decisions
Greater exposure to escalation and extended schedules
Increased emphasis on backlog quality over volume

Contractors cannot control financial markets, but they can reduce their exposure by recognizing changes in cost, cash flow, margin, and schedule early. Codified cost and labor data reviewed on shorter cycles lets companies test whether backlog remains financially viable as conditions change, rather than relying on contract value alone.

Improving Labor Capability is the way out of the labor shortage

The labor shortage has evolved beyond workforce availability. Contractors may be able to add people, but a higher headcount does not guarantee more work will be completed. Labor performance also depends on skills, supervision, material readiness, information flow, access, scheduling and the way work is broken down and assigned. Capacity and capability must be evaluated separately. Capacity measures how much labor is available. Capability measures whether that labor has the skills, experience, support, and direction to execute work effectively.

Improving capability requires contractors to:

Utilize Work Breakdown Structure (WBS) to break the work into more manageable tasks
Match crew assignments to the skills each activity requires
Track productivity to measure performance against the plan
Identify productivity losses and their underlying causes
Adjust training, planning, material support and supervision based on the results

Adding workers to undefined or poorly coordinated work can increase congestion, trade stacking, and supervision demands without improving quality, predictability, or effectiveness. Addressing the labor shortage therefore means strengthening the conditions that let available workers succeed, rather than treating headcount as the only measure of workforce readiness.

The Impact of large jobs on small contractors

Large projects can give smaller contractors opportunities to increase revenue, gain experience, and enter new markets. However, a project that is large relative to the company can also put significant pressure on labor, supervision, cash flow, procurement, and administrative support.

The risk is not limited to one project. When a large job consumes a disproportionate share of the company's resources, problems with productivity, billing, procurement, or schedule can spread to the remaining projects and threaten overall financial stability. Without consistent productivity tracking, those problems often surface only after they have already spread.

Before taking on large work, smaller contractors should evaluate:

Whether available labor has the capability, not just the capacity, the project requires
Whether supervision and project management can support the job
The effect on existing customers and committed backlog
Cash flow requirements created by mobilization and material purchases
Payment timing, retainage, escalation, and schedule exposure
Whether the expected return is proportionate to the organizational risk

For a smaller contractor, a large project is a sound opportunity only when the company can absorb its demands without compromising existing work or financial stability. Sustainable growth comes from selecting projects that fit the contractor's ability to manage risk, keep commitments, and support the business as a whole.

Turning Industry Pressure Into Action

Changing market conditions require contractors to be more deliberate about the work they pursue and how they prepare to execute it. Growth must be supported by clear processes, reliable information, and an understanding of the company's ability to perform the work.

Each of these pressures comes back to the same question: does the company know what its work requires and how well it is performing? Many contractors look to software for that answer, but software can only report on the information it receives. The process has to come first, starting with codifying the work. Cost and labor codes should be defined and applied to every project, and scope should be broken into manageable, measurable tasks. With that structure in place, software supports the process instead of standing in for it. Once consistent data is collected, results can be compared across jobs, crews and markets to identify where recurring issues exist and which opportunities align with its demonstrated strengths.

Consistent labor data, performance tracking and a clear view of capacity versus capability gives contractors the information needed to make timely decisions. Teams shouldn’t wait until a project is complete to learn how it performed. Instead, they plan, measure, and adjust on short, repeating cycles, which keeps productivity, procurement, cash flow, and project risk visible while the work is still underway. Issues come up early enough to adjust field and management support before they affect the outcome. Over time, those results give contractors a better basis for backlog decisions. They can weigh work against what their crews have shown they can execute, not just the number of workers available, and direct training, crew assignments, and supervision where they are needed most. The same discipline applies whether a company is pursuing new markets as data center demand shifts or evaluating a project that is large relative to its size.

More work, more people, and more software will not resolve these pressures on their own. Sustainable performance depends on codifying the work, developing capability, maintaining process discipline, and using reliable productivity information to guide project and organizational decisions.

Publications

Transforming a Company: Spheres of Influence

Sustainable growth depends on more than market opportunities; it requires systems that preserve knowledge, align strategy, and support consistent execution. A framework built around organizational learning, corporate memory, and repeatable processes can help companies reduce reliance on individual expertise while improving resilience through leadership transitions and long-term growth. Read more: Transforming a Company: Spheres of Influence

Using Software to Enable Your Processes — Not Control Them

Creating sustainable improvement requires more than new tools; it requires processes that connect strategy, planning, execution, and measurement. When technology is designed to support those processes, organizations gain better visibility, stronger coordination, and greater ability to continuously improve operational performance. Read more: Using Software to Enable Your Processes — Not Control Them

The Continuum: Keeping Project Information Connected

As organizations grow, information often becomes fragmented across people, departments, and systems. Establishing a connected flow of project data from estimating through closeout improves visibility, supports better forecasting, and creates the organizational memory needed to continuously improve performance and future project outcomes. Read more: The Continuum: Keeping Project Information Connected

Additional Articles – Want to Learn More?

Research

Workforce Planning, Increasing Labor Demand, & Productivity

As demand continues to grow from data centers, AI infrastructure, and related construction activity, workforce capacity and capability are increasingly becoming constraints on what projects can be built, where they can be built, and when they can be delivered. The industry's challenge, however, has evolved beyond simply finding more people to put on jobsites. MCA, Inc. recently completed a workforce and market analysis examining the impact of this unprecedented growth on labor capacity and project execution.

The study found that while demand for electrical construction continues to accelerate, workforce constraints will increasingly limit the industry's ability to deliver projects on schedule and within budget using traditional staffing models. Long-term success will depend not only on recruiting additional workers, but also on increasing workforce capability through improved training, prefabrication and offsite construction, industrialized work processes, and more effective deployment of skilled labor. In an environment where labor remains the primary constraint, productivity, workforce planning, and execution strategy are becoming critical competitive advantages.

Evaluating Market Shares and Pipeline & Backlog Using Existing Data

The labor shortage has elevated workforce planning from an operational concern to a strategic necessity. To support more timely market intelligence (knowing how big the market is, how much specific organizations control, and how that market share changes over time) and workforce forecasting (how many people were used previously and will be expected in the future), MCA, Inc. has implemented the first phase of a new API (Application Programming Interface) designed to automate the flow of project and labor information into the Pipeline & Backlog module within DCI Construction^®. This development reduces the time, cost, and effort required to maintain current market and project visibility while improving the frequency and accuracy of analysis.

The value of this effort extends beyond just data collection. Pipeline & Backlog provides visibility into upcoming work, market opportunities, and expected manpower requirements, allowing organizations to proactively address workforce needs before they become execution constraints. In a market where labor availability continues to influence project success, having earlier insight into future demand can improve planning, resource allocation, workforce development, and strategic decision-making.

A Local, Data-Driven Response to the Labor Shortage

Building on this workforce and market analysis, the Sacramento and Los Angeles-area NECA chapters and their IBEW Locals are moving from market insight to action. Through ongoing market share measurement, each Local can identify the work categories it needs to retain, the markets it wants to penetrate, and the areas where its contractors face the greatest competitive challenges. With data center development increasing demand for skilled labor, Locals must maintain their position in established markets without allowing major projects to draw too much labor away from other important work.

Using Pipeline & Backlog, local leaders can categorize upcoming work and forecast where and when labor will be needed. Labor code data can then reveal where productivity is weakest within targeted markets, allowing Locals and contractors to develop focused training and adjust policies, processes, crew assignments, and field support to increase productivity and reduce costs.

MCA, Inc. has completed similar analyses and improvement efforts with other contractors. In one example, JPAC^® data identified branch rough-in as a labor code representing a significant share of project hours but experiencing poor productivity. Contributing issues included assigning less-experienced workers to the activity, insufficient layout and planning, and excessive onsite material handling. The contractor used these findings to improve crew mix, layout, material preparation, training, and execution. Subsequent analysis documented measurable improvement in branch rough-in productivity.

Making this cycle routine, from market analysis and labor forecasting through targeted training and productivity measurement, will help each Local use available labor more effectively and continuously strengthen its ability to retain and grow market share.

Software Development

API Integration Efforts

We are expanding DCI Construction^® integrations by building on our existing APIs and evaluating connections with additional ERP, estimating, and construction platforms. These integrations are intended to reduce duplicate entry and keep project information current as data changes in connected systems. This will improve data quality and provide better visibility from estimating through project execution. With less manual data entry between systems, teams can focus on using the information to plan labor, monitor performance, and respond to changing project conditions.

Labor Needed Report

Our latest DCI Construction^® update adds a new output to the Pipeline & Backlog Time Report that converts projected labor hours into the estimated number of workers needed for each reporting period. The calculation uses an eight-hour workday, project-specific working days, and labor hours from backlog, pipeline, approved change orders, and pending change orders. Results can be viewed by month, quarter, or year in both the chart and table. This gives users an earlier view of upcoming labor needs so they can make more informed hiring, scheduling, resource allocation, and project selection decisions.

Historical TPAC^® SPR^® Creation

The TPAC^® module now allows users to create a historical Single Point of Review (SPR^®) report based on a selected report date. The report uses the TPAC^®, JPAC^®, and project data available at that point in time rather than only current values. This capability helps teams recreate prior reporting periods, evaluate changes in projected cost and productivity, and maintain a clearer record of project performance over time.

Upcoming Events

Agile User Group Symposium: October 14^th

Re-electrification and rapid data center growth are creating unprecedented demand for skilled electrical labor—and challenging contractors to deliver more with the workforce they have.

The Agile User Group Symposium will bring together leading contractors and practitioners to discuss gaining organizational support for Agile Construction^®, improving capacity and productivity without simply adding headcount, and responding to the labor and market trends reshaping the industry. Attendees will leave with practical strategies they can bring back to their organizations, making this a valuable opportunity for leaders and the teams responsible for planning and delivering work.

Click here to register.

IEC Spark: October 21^st – 24^th

Which approach is better suited to today’s construction environment: Lean Construction or Agile Construction^®?

This IEC Spark session will examine how the two approaches differ and show how Agile principles help teams respond to changing jobsite conditions, use labor more effectively and make faster, data-driven decisions. Practitioner insights and real-world applications will help leaders and their teams assess current practices, determine where greater flexibility is needed and identify opportunities to improve productivity and project outcomes.

Agile User Group: December 4^th

The December Agile User Group will show how Agile Construction^® can translate into measurable improvements in the field. Through real-world examples and lessons learned, the session will explore applications that improve labor efficiency, strengthen scheduling and make project delivery more predictable. Participants will also have the opportunity to exchange experiences with fellow practitioners, giving individuals and teams ideas for advancing implementation within their own organizations.

Click here to register.

Saturday, October 3, 2026

October 2026 State of the Industry Report Vol XI Issue 2

Table of Contents