Growing Disparity Between Utilization of Small and Large Construction Firms

The pipeline of work between large and small firms highlights a growing disparity between small and large contractors. Small firms with less than $100 million in annual revenue have seen a contracting pipeline, while large firms with more than $100 million in annual revenue are facing growing backlogs of work.

Two different realities

The backlog for firms with $50-100 million in sales, backlog has decreased. In February 2025, it was sitting near 9 months and 27 days , down from approximately 10 months and 15 days in 2024. Resulting in net change of roughly -10 days.

Larger firms with over $100 million in sales are expanding their project pipeline and taking on more work, thus extending their backlog and executives at larger firms have disregarded policy and tariff concerns. These executives cited the growing demand for large infrastructure, energy projects and data centers.

In February 2025, the backlog for larger firms was near 12 months and 10 days, up substantially from 10 months and 10 days in 2024. Resulting in a net change of +2 months.

Executives at large firms remain bullish, citing federal infrastructure funding, reshoring of manufacturing, and the rapid pace of data center construction—especially in Sun Belt and Midwestern states—as key drivers. Concerns over tariffs and policy volatility are being largely ignored in light of long-term public and private sector demand.

Growing disparity in utilization and market positioning

This disparity is also affecting firm utilization rates. Smaller firms are struggling with higher bid competition and tightening financing conditions, particularly as banks tighten credit standards. Meanwhile, larger firms are benefiting from repeat clients, design-build efficiency, and economies of scale that help them win longer-term contracts.

The divide is more pronounced in sectors like:

• Clean energy and utility-scale solar (dominated by large firms)
• Federal infrastructure and CHIPS Act–driven projects
• Warehouse and manufacturing builds related to reshoring

Cautious optimism within the industry

Despite the growing disparity between large and small firms, profit margin expectations and sale expectations have stayed level, and the industry is confident that they will bounce back this year. Anirban Basu, Associated Builders and Contractors Chief economist recently said, “While many other economic sentiment readings have deteriorated in recent months, contractors remain optimistic that business conditions will improve through the first half of 2025.”

Hiring expectations have increased over the course of recent months despite a shortening backlog among smaller firms. In a survey by ABC, 60 percent of contractors plan to increase staffing levels over the next six months. With so many contractors planning on hiring making it the highest metric for contractors planning to add to their payroll in over two years. Anirban Basu also said, “these hiring expectations suggest that recent slowdown in industrywide employment is largely confined to the residential segment.”

Short-term outlook

The construction industry is expecting to stay busy over the next few quarters despite factors that may point to a slowdown, including a decrease of profit margin expectations and stagnant levels of sales. As indicated by the large expected increase in hiring among contractors, the industry appears ready to take on more projects.