Overlooked Heavy Construction Segment Includes Significant Small Firm Opportunity

Louisiana, Washington Rank High for Heavy and Civil Engineering Construction Business

Within the broader construction industry sector, heavy and civil engineering construction (NAICS 237) is an often overlooked segment. Yet the segment generates more than $7.6 billion in all lines premium annually and is comprised of over 180,000 enterprises — a substantial number of which are non-employer (133,727) firms and small commercial enterprises (44,158).

The primary segments within North American Industry Classification System (NAICS) 237 include: utility system construction (NAICS 2371); land subdivision (NAICS 2372); highway, street and bridge construction (NAICS 2373); and other heavy and civil engineering construction (NAICS 2379).

On a number of accounts basis, other heavy and civil engineering construction dominates, representing nearly 58 percent of the firms classified within NAICS 237. Some 90 percent of firms in this segment are so-called non-employers (that is, firms making no payroll tax filings). These firms tend to be significantly smaller than their employer counterparts.

This segment comprises firms primarily engaged in heavy and engineering construction projects, but excluding highway, street, bridge and distribution line construction. NAICS 2379 includes specialty trade contractors if they are engaged in activities primarily related to projects of a similar type. Construction projects involving water resources (such as dredging and land drainage), development of marine facilities and projects involving open space improvement (such as parks and trails) are also included in this industry.

On a premium basis, it’s utility system construction (NAICS 2371) that leads the pack at nearly 46 percent of the overall sector’s premiums, although this class is substantially smaller in total number of accounts (23,261). Small commercial sized accounts dominate the class (about 64 percent). Highway, street and bridge construction (NAICS 2372) follows closely behind with nearly 35 percent of the overall premium in the utility system construction category. This class (NAICS 2372) has even fewer accounts (17,705) with small commercial and non-employer firms equally dominant.

The utility system construction classification includes firms involved in construction of distribution lines and related buildings and structures for utilities (water, sewer, gas, petroleum, power and communications). All structures integral to utility systems (storage tanks, pumping stations, power plants, refineries) are included in this industry group.

The highway, street and bridge construction class comprises firms engaged in construction projects suggested by the classification name. Specialty trade contractors are included in this group if engaged in activities primarily related to highway, street and bridge construction (such as installing guardrails on highways; sign erection on highways, roads, streets or bridges; pothole filling and painting traffic lanes or parking lots).

Not surprisingly, oil and gas pipeline and related structures construction (NAICS 23712) has been the fastest growing class within the NAICS 237 sector, both in terms of employment and sales (81.5 percent and 79.8 percent, respectively). The class is forecast to have continued strong employment growth of over 10-plus percent, and solid sales growth of 6.3 percent through 2010.

The highway, street and bridge construction class also experienced very strong growth in employment (15.6 percent) and sales (20.9 percent) from 2002-2006. The forecast for this class is for essentially flat employment growth, but healthy, if comparatively unremarkable, sales growth of 3.9 percent.

States with the strongest growth in sales and employment between 2002-2006 include: Idaho, Alaska, Louisiana, Arkansas, Montana, South Carolina, Washington, New Mexico, Utah and Wyoming.

When viewed in a context that also includes the available number of firms and premium, in addition to employment and sales growth history, only Louisiana and Washington stay on the list of highest ranked markets for heavy and civil engineering construction business.

Topics Louisiana Washington Construction