IBISWorld Industry Report 23411b Road Highway ... Road Highway Maintenance in the US October 2013 1 IBISWorld Industry Report 23411b Road Highway Maintenance in the US

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<ul><li><p>WWW.IBISWORLD.COM Road &amp; Highway Maintenance in the US October 2013 1</p><p>IBISWorld Industry Report 23411bRoad &amp; Highway Maintenance in the USOctober 2013 Maksim Soshkin</p><p>Speeding up: Industry demand will rise, supported by state and local outlays</p><p>2 About this Industry2 Industry Definition</p><p>2 Main Activities</p><p>2 Similar Industries</p><p>3 Additional Resources</p><p>4 Industry at a Glance</p><p>5 Industry Performance5 Executive Summary</p><p>5 Key External Drivers</p><p>6 Current Performance</p><p>8 Industry Outlook</p><p>11 Industry Life Cycle</p><p>13 Products &amp; Markets13 Supply Chain</p><p>13 Products &amp; Services</p><p>15 Demand Determinants</p><p>16 Major Markets</p><p>17 International Trade</p><p>18 Business Locations</p><p>20 Competitive Landscape20 Market Share Concentration</p><p>20 Key Success Factors</p><p>20 Cost Structure Benchmarks</p><p>22 Basis of Competition</p><p>23 Barriers to Entry</p><p>24 Industry Globalization</p><p>25 Major Companies</p><p>27 Operating Conditions27 Capital Intensity</p><p>28 Technology &amp; Systems</p><p>28 Revenue Volatility</p><p>29 Regulation &amp; Policy</p><p>30 Industry Assistance</p><p>31 Key Statistics31 Industry Data</p><p>31 Annual Change</p><p>31 Key Ratios</p><p>32 Jargon &amp; Glossary</p><p>www.ibisworld.com | 1-800-330-3772 | info@ibisworld.com</p></li><li><p>WWW.IBISWORLD.COM Road &amp; Highway Maintenance in the US October 2013 2</p><p>This industry comprises contractors involved in the maintenance, repair or renovation of existing highways or streets; construction management operations; and those that operate as special trade contractors engaged in </p><p>performing subcontract work in the maintenance of highways and streets (e.g. surface repair, road clearing, guardrail repair, drainage repair). The industry does not include services from government establishments.</p><p>The primary activities of this industry are</p><p>Highway and street maintenance</p><p>De-icing and snow clearing highways and streets</p><p>Sweeping and cleaning highways and streets</p><p>Road pavement repairs (including potholes)</p><p>Road signage repair and replacement</p><p>Road markings repair/repainting</p><p>Landscape maintenance</p><p>23412 Bridge &amp; Tunnel Construction in the USEstablishments in this industry are primarily engaged in constructing bridges, tunnels, pedestrian bridges, and elevated highways.</p><p>23832 Painters in the USEstablishments in this industry are involved in traffic lane painting.</p><p>23811 Concrete Contractors in the USEstablishments in this industry are engage in constructing private driveways and private sidewalks.</p><p>23411a Road &amp; Highway Construction in the USEstablishments in this industry are primarily engaged in constructing new highways and streets.</p><p>23411c Road &amp; Highway Services in the USEstablishments in this industry are primarily engaged in the provision of specialist highway and street construction services for new construction, maintenance, and renovation.</p><p>Industry Definition</p><p>Main Activities </p><p>Similar Industries</p><p>About this Industry</p><p>The major products and services in this industry are</p><p>Litter control</p><p>Maintenance to road fixtures</p><p>Pavement management</p><p>Seasonal maintenance</p><p>Vegetation management</p></li><li><p>WWW.IBISWORLD.COM Road &amp; Highway Maintenance in the US October 2013 3</p><p>About this Industry</p><p>For additional information on this industry</p><p>www.transportation.org American Association of State Highway and Transportation Officials</p><p>www.enr.com Engineering News Record</p><p>www.fhwa.dot.gov Federal Highway Administration</p><p>www.reedconstructiondata.com Reed Construction Group</p><p>www.artba.org The American Road and Transportation Builders Association</p><p>Additional Resources</p><p> IBISWorld writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com</p></li><li><p>WWW.IBISWORLD.COM Road &amp; Highway Maintenance in the US October 2013 4</p><p>% c</p><p>hang</p><p>e</p><p>8</p><p>2</p><p>0</p><p>2</p><p>4</p><p>6</p><p>1806 08 10 12 14 16Year</p><p>Government funding for highways</p><p>SOURCE: WWW.IBISWORLD.COM</p><p>% c</p><p>hang</p><p>e</p><p>12</p><p>6</p><p>3</p><p>0</p><p>3</p><p>6</p><p>9</p><p>1905 07 09 11 13 15 17Year</p><p>Revenue Employment</p><p>Revenue vs. employment growth</p><p>Products and services segmentation (2013)</p><p>70%Pavement </p><p>management </p><p>10%Maintenance </p><p>to road fixtures</p><p>10%Seasonal </p><p>maintenance </p><p>5%Litter control</p><p>5%Vegetation </p><p>management</p><p>SOURCE: WWW.IBISWORLD.COM</p><p>Key Statistics Snapshot</p><p>Industry at a GlanceRoad &amp; Highway Maintenance in 2013</p><p>Industry Structure Life Cycle Stage MatureRevenue Volatility Medium</p><p>Capital Intensity High</p><p>Industry Assistance Medium</p><p>Concentration Level Low</p><p>Regulation Level Medium</p><p>Technology Change Medium</p><p>Barriers to Entry Low</p><p>Industry Globalization Low</p><p>Competition Level Medium</p><p>Revenue</p><p>$42.5bnProfit</p><p>$2.8bnWages</p><p>$5.0bnBusinesses</p><p>9,224</p><p>Annual Growth 13-18</p><p>1.8%Annual Growth 08-13</p><p>-0.1%</p><p>Key External DriversGovernment funding for highwaysLocal and state government investmentTotal vehicle milesYield on 10-year Treasury note</p><p>Market ShareThere are no Major Players in this industry</p><p>p. 25</p><p>p. 5</p><p>FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31</p><p>SOURCE: WWW.IBISWORLD.COM</p></li><li><p>WWW.IBISWORLD.COM Road &amp; Highway Maintenance in the US October 2013 5</p><p>Key External Drivers Government funding for highwaysFederal, state and local government authorities contribute the vast majority of funding for road and highway maintenance; therefore, this industry is particularly sensitive to cyclical fluctuations in government budgetary finances and allocations to road infrastructure. This driver is expected to increase during 2014, representing a potential opportunity for the industry.</p><p>Local and state government investmentLocal and state governments are major investors in fixed assets such as structures, equipment and software. Part of this investment is allocated to road network maintenance, which means that climbing investment shows that governments have the resources to fund road maintenance. Local and state government investment is expected to remain stagnant in 2014, representing a potential threat to the industry.</p><p>Executive Summary</p><p>The Road and Highway Maintenance industry had a bumpy ride in the five years to 2013. Road network owners (primarily federal, state and local governments) hire firms in this industry to provide maintenance services, such as pothole repair, rubbish removal and snow clearing, for their roads and highways. During the recession, budgets on all levels of government came under pressure and funding for road maintenance, and thus demand for industry services, dwindled. However, massive stimulus spending by the </p><p>federal government and other funding programs provided enough support for road maintenance to temporarily offset industry revenue losses. Therefore, over the five years to 2013, IBISWorld expects industry revenue to decline at an annualized 0.1% to $42.5 billion, with a 1.4% decline in 2013 as stimulus spending wears off.</p><p>During the recession, falling incomes and a housing downturn caused state and municipal tax receipts to decline. As governments at this level have cut spending to balance their budgets, local </p><p>and state government investment has fallen every year since 2008. Road network maintenance was one of the expenses cut, which caused demand for industry services to drop. In response to the recession, Congress passed a stimulus package that provided enough funding for maintenance to boost industry revenue by 7.9% in 2009. However, federal spending was a temporary measure and spending on road maintenance eventually started to decline. Facing lower demand and tougher competition, industry firms cut wages and began to mechanize their operations, causing wages to decline at an annualized 0.5% to $5.0 billion over the five years to 2013.</p><p>Over the five years to 2018, industry revenue is forecast to climb at an annualized 1.8% to $46.6 billion. Growth will be led by increased use of roads, which causes wear and tear, causing further subcontracting of government maintenance responsibilities and rising demand from private sector road owners. Nevertheless, while government spending on roads and highways will climb, continued budget pressure on the local and state level and uncertainty surrounding future federal spending on infrastructure will greatly diminish revenue growth.</p><p>Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage</p><p> Increasing use of roads and highways will eventually push demand</p></li><li><p>WWW.IBISWORLD.COM Road &amp; Highway Maintenance in the US October 2013 6</p><p>Industry Performance</p><p>Current Performance</p><p>The five years to 2013 have been rocky for the Road and Highway Maintenance industry. Firms in this industry carry out road maintenance work such as pavement repairs, signage replacement and rubbish removal. Because the public sector controls most road networks, it is the primary buyer of industry services. Consequently, the industry was exposed to stagnant government funding for highways, as the public sector dealt with the recession and widening budget deficits. In particular, local and state government </p><p>investment plummeted as governments at this level attempted to balance their budgets. However, the federal government was able to partially fill in the funding gap through temporary stimulus spending and other programs. Therefore, in the five years to 2013, IBISWorld expects industry revenue to only decline an annualized 0.1% to $42.5 billion. Nevertheless, continued budget pressure and spent stimulus funding will reduce spending on maintenance, with industry revenue estimated to decline 1.4% in 2013.</p><p>Key External Driverscontinued</p><p>Total vehicle milesAs the total miles driven by all motor vehicles (including cars, trucks, motorcycles and buses) increases, roads and highways deteriorate. As a result, demand for road and highway maintenance increases. Total vehicle miles is expected to increase during 2014.</p><p>Yield on 10-year Treasury noteMost funding for road maintenance </p><p>comes from the government, and the interest rate at which they borrow influences the amount of money the government can spend on industry services. Increasing interest rates raises costs for the government and worsens the state of its budget. This in turn, means that there is less money available for road network maintenance. The yield on 10-year treasury note is expected to increase in 2014.</p><p>% c</p><p>hang</p><p>e</p><p>3</p><p>2</p><p>1</p><p>0</p><p>1</p><p>2</p><p>1806 08 10 12 14 16Year</p><p>Total vehicle miles</p><p>SOURCE: WWW.IBISWORLD.COM</p><p>% c</p><p>hang</p><p>e</p><p>8</p><p>2</p><p>0</p><p>2</p><p>4</p><p>6</p><p>1806 08 10 12 14 16Year</p><p>Government funding for highways</p><p>Local and state governments own the vast majority of the nations road network. In areas where government </p><p>transportation agencies do not carry out road maintenance work themselves, they typically hire industry firms to do it on </p><p>Potholes in local and state funding </p></li><li><p>WWW.IBISWORLD.COM Road &amp; Highway Maintenance in the US October 2013 7</p><p>Industry Performance</p><p>Federal spending attempts to fill in the pothole</p><p>Besides owning the Interstate Highway Systems, the federal government also distributes funding for road networks to local and state authorities. In response to the recession, Congress passed the American Recovery and Reinvestment Act (ARRA) in 2009. The ARRA is a stimulus package that included $48.1 billion towards transportation infrastructure spending. While not all of this money went directly to road maintenance, the stimulus was large enough to drastically increase funding for road network maintenance at the federal, state and local level. Consequently, industry revenue jumped 7.9% in 2009. Combined with other spending bills like the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users and the Moving </p><p>Ahead for Progress in the 21st Century Act, the federal government was able to partially offset declining spending on the state and local level. As a result, government funding for highways, which includes spending by all levels of government, actually rose at an estimated annualized rate of 0.1% to $225.1 billion over the five years to 2013. Yet, most of this money went towards construction and not maintenance, which meant that once the stimulus money ran out, maintenance spending began to drop again.</p><p>Privatization Over the five years to 2013, more and more states and municipalities have privatized parts of their road network. Not being able to afford the management and maintenance of their infrastructure, governments have increasingly entered into public-private partnerships (P3s). In a typical P3, the government leases out a road to a </p><p>private consortium for a set number of years. Either the consortium pays a large upfront fee to the government in exchange for the rights to revenue generated by the road (i.e. toll payments), or the consortium receives payments from the government in exchange for its management of the infrastructure. Because maintenance </p><p>Potholes in local and state funding continued</p><p>their behalf. Therefore, most work done by the industry is under contract, and revenue is closely linked with public spending. During the recession, dropping incomes and a housing market downturn severely reduced government tax receipts, while simultaneously increasing demand for welfare services. This in turn, caused states and municipalities to run budget deficits, which forced them to cut spending to balance their budgets. In fact, local and state government investment has declined every year since 2008, and road and highway maintenance spending was one of the </p><p>expenditures cut. Unnecessary work was also stopped and projects were delayed, resulting in reduced demand for industry services. Consequently, industry revenue began to drop.</p><p>Matters were made worse by the financing bias that municipalities and states have to new infrastructure constriction over maintenance. Governments on this level can only issue bonds for new capital investments like road construction, but not maintenance work. This creates a funding gap for upkeep, since there arent funds available to maintain the new roads that are built.</p><p> The economic stimulus package helped revenue grow rapidly in 2009</p></li><li><p>WWW.IBISWORLD.COM Road &amp; Highway Maintenance in the US October 2013 8</p><p>Industry Performance</p><p>Government spending remains subdued </p><p>While the economy will continue to grow in the next few years, local and state governments will still be recovering from the recession. Unemployment rates will stay elevated and housing market growth will remain subdued, which means tax receipts will rise, but remain relatively low. As a consequence, local and state government investment will only grow at </p><p>annualized 1.0% over the five years to 2018. Therefore, investment in road network maintenance will continue to rely on federal spending.</p><p>However, future federal spending is uncertain. The Highway Trust Fund, the primary source of funding for the Interstate Highway System, is expected to go insolvent in the near future, unless </p><p>Industry Outlook</p><p>The Road and Highway Maintenance industry will experience slow growth in the five years to 2018, as local and state governments continue to struggle with their budgets and federal spending remains uncertain. However, economic growth, increasing road use, government outsourcing of maintenance work, contracts with public-private partnerships (P3s) and the general need to care for the nations poorly maintained ro...</p></li></ul>