More construction firms are planning to hire workers this year than are planning to make layoffs, according to the results of an industry-wide survey released today by the Associated General Contractors of America and Navigant.

The survey, conducted as part of the Construction Industry Hiring and Business Outlook, shows the industry may finally be emerging from a severe downturn.

�This won't be an easy year for most firms, but it will be better than last year,� says Stephen E. Sandherr, the association�s CEO. �If current trends continue, this industry will be in a much better position 12 months from now than today.�

Sandherr says that while 55% of firms laid off staff and only 20% of firms added employees in 2010, the outlook is more positive for 2011. He says 27% of construction firms report they plan to add staff in 2011 while only 20% report they plan layoffs. He says expanding firms plan to hire an average of 23 employees, while contracting firms plan to lay off an average of 16 employees.

But despite the improving employment outlook, more contractors expect the construction market to shrink in 2011 than expect it to grow. Contractors are most pessimistic about the private office market, where 56% expect activity to decline, followed by the retail, warehouse and lodging market, where 52% expect less activity. Contractors are most optimistic about the hospital and higher education market, where 32% expect growth and the power market, where 29% expect growth. However, even for those markets, 36% of contractors expect the hospital & higher education market to shrink and 32% expect the power market to contract.

The low expectations may be driven by the fact most firms expect stimulus-funded construction to decline this year. Clear majorities of firms (between 56% and 66%) expect stimulus spending in every market to decline in 2011. Meanwhile, only 30% of firms report they plan to perform stimulus-funded work this year, down from the 45% that reported performing stimulus-funded work in 2009 or 2010.

�The stimulus propped up many construction jobs the past two years,� says Ken Simonson, AGC chief economist, noting that firms reported one-in-five employees were involved in stimulus-funded projects during the past 12 months. �The stimulus is becoming a thing of the past in most contractors' minds.�

The dour market outlook also appears to be affecting demand for new construction equipment. Only 28% of firms report plans to purchase new construction equipment in 2011, down from the 34% last year. Investment levels among firms planning to buy equipment appear to be heading up, however. Firms report plans to spend nearly $900,000 on average for new equipment, up from $671,000 last year.

And then there are bid levels, which the survey indicates will remain competitive this year, with 29% of firms reporting that they plan to lower bid levels in 2011. That follows a year when 74% of firms reported lowering bid levels, including 7% who reported lowering bid levels to the point they lost money performing the work. Adding pressure to firms� bottom lines, 71% of firms report their health care costs are expected to increase in the wake of the new legislation enacted last year.

�In the face of tough market conditions, many firms are focusing on operating efficiencies and expense reduction to take advantage of a resurgent construction market,� says Michael Feigin, Navigant�s managing director for construction. �Firms are doing this, in part, by adopting technologies and techniques like BIM and lean construction.�

Growing numbers of firms plan to embrace BIM this year, says Feigin. While only 8% of firms currently use the technology, 55% expect that number to increase in 2011. Demand for green construction also continues to grow, with 15% of firms reporting working on LEED projects in 2010 and 53% expecting that number to grow this year.

More firms also plan to work on public private partnerships. Companies report working on an average of 5.2 PPPs in 2010, while 70% expect that number to increase this year. In contrast, use of integrated project delivery contracts that include incentives for collaboration among parties involved in a project, does not appear widespread. Firms reported working on an average of only 0.26 projects with IPDs last year, and 92% of firms expect that number to decrease this year.

Nearly half, 46%, of firms reported implementing lean construction concepts, a way of minimizing waste of materials, time and effort. Feigin suggests many firms have embraced lean construction concepts to cope with decreasing revenue and tighter margins.

The survey was co-sponsored by AGC and Navigant. It is based on survey results from nearly 1,300 construction firms from 49 states, the District of Columbia and Puerto Rico. Contractors from every segment of the industry answered more than 30 questions about their hiring, equipment purchasing and business plans.