Project Stress Index FAQ

The Project Stress Index is a rolling measure of preconstruction projects delayed, abandoned, or placed on hold over the last 30 days. The Index is an early indicator of possible headwinds for the U.S. construction market. 

The data used to calculate the Project Stress Index composite includes the count of projects that have experienced a delayed bid date, have been placed on hold, or have been abandoned in the last 30 days. The data for calculating the Index and the calculation of results are exclusive properties of ConstructConnect.

The underlying data collectively monitor nonresidential building, heavy engineering (civil), and multifamily residential projects in the preconstruction stage. The data does not include single-family home construction and maintenance contract work.  

Each component has been seasonally adjusted and then indexed against its 2021 average weekly reading.  

Project status definitions:  

Bid Date Delayed The bid date has been pushed back, but all indications are that the project will otherwise proceed. Many events, such as a delayed permit, can prompt a bid date delay. This is the most common but least severe form of a project stress event.  

On Hold The timeline has been delayed for an unspecified amount of time. The project could be re-engaged next quarter, next year, or even further out. This is the second most severe form of project stress, occurring in approximately 1 out of every 6 stressed projects. 

Abandoned There is no further expectation that the project will advance through its preconstruction stages or into physical construction. Fewer than 1 in 20 stressed projects are abandoned. 

The combined use of a 30-day rolling count and weekly data measurements allows the PSI to give rapid notice of a change in market conditions while also reducing the volatility or “noise” typical with high-frequency metrics.  

The independent tracking of each status type gives unique insights into the amplitude, or severity, of market conditions up to and including the possibility of a severe market correction.  

Projects in the preconstruction planning phase have not yet gone to bid/tender and may be in any design phase, from pre-design to schematics to construction documents. Projects in the PSI data are in the planning through the bidding stage of preconstruction.

Each month ConstructConnect sums the number of projects in each stress category (bid date delayed, on hold, abandoned). Each sum is then seasonally adjusted and indexed to a 2021 ‘baseline’. The average of these three series provides the Composite reading value.

The PSI answers many important preconstruction questions, including: Are more or fewer projects reaching vertical construction? Which types of projects are more frequently failing to reach construction? Using this information can help firms anticipate unexpected revenue disruptions, keep their crews busy, and keep their company profitable.

An independent Harvard University analysis found statistical evidence of the following correlations: 

As the PSI increases: 

• The dollar level of construction activity decreases. 

• Construction unemployment increases.  

• The average hours worked by construction laborers decrease.  

• Construction wages decrease. 

The raw count of delayed, put on hold, and abandoned projects each exhibits an annual seasonal pattern. (The following description of the seasonal movement in the count of bid date delayed projects can be used generally to depict the movement of on-hold and abandoned project counts as well.)  

The count of bid-date delayed projects typically rises quickly during the first two months of the calendar year until reaching a climax near June. Afterward, the count of impacted projects begins a slow descent through the third quarter. In the final weeks and months of each year, the count of delayed projects falls in accordance with slowing construction activity, often caused by winter weather conditions. 

All PSI results are seasonally adjusted before publication, providing a clearer view of nonseasonal trends and cyclical data that would otherwise be overshadowed by seasonal differences. 

No, the Index tracks nonresidential, heavy engineering, and multifamily construction without distinction. The underlying Index data only allows for breakouts of public and private-sector projects; however, these sector results are not seasonally adjusted.  

No. All PSI figures and analytics are historic-looking. 

Historically, for every identified abandoned project, ConstructConnect identifies approximately eighteen delayed bid projects and four projects on hold.

The PSI and its three components are only descriptive and do not explain the causes of recent market volatility. 

However, the relative movements between on-hold and abandoned activity changes suggest there may be a lead-lag relationship. This lead-lag relationship makes logical sense to our team as projects in a degrading financial environment would likely be put on hold as owners try to assess alternatives before having no choice but to abandon a project.  

The PSI numbers reflect activity over the past 30 days and are seasonally adjusted. This means that users of the PSI can compare monthly figures against one another keeping in mind that all values are calculated against a 2021 baseline (2021 = “100”).

During COVID, it was interesting to see that abandonments changed relatively little compared to the soaring number of projects put on hold or delayed. This shows that the industry shrewdly took a “wait and see” approach to the unprecedented events of 2020. As the government’s largess unfolded and stimulus funds were released, many projects were able to find a path forward and avoided being abandoned.  

In contrast, today’s high level of abandonments might show that, at least for some industry segments, the path forward is much harder to discern. For example, in the office segment in late 2023 and early 2024, the combination of high vacancy rates, falling existing office building prices, and banks’ fear of underperforming commercial real estate impacting their profitability, if not survival, made it harder for owners and developers to finance forthcoming office projects.  

Under such austere conditions, the path forward to vertical construction was far narrower, resulting in elevated counts of abandonments.  

Federal, state, and municipal agencies, like their private sector peers, must also make cost-benefit analyses when deciding when and what to build. Municipalities and states may be able to raise funds through levies and or municipal bonds; however, these may require voter approval which is not guaranteed.  

Additionally, the rapidly rising cost of construction work since COVID may mean that the current price of construction work may simply be beyond the ability of the agencies to afford nonessential work.   

Having said that, many civil projects must be constructed. Necessary projects may include water/sewer and road/bridge projects that are necessary for the public's safety and security. Although such essential projects cannot be abandoned, they can be put on hold or have their bid dates delayed, and these later events are captured in the PSI. 

First, contractors should have a diversified revenue strategy, seeking work across multiple verticals and, if possible, both the public and private sectors. The second measure, and an extension of the first idea, is to be wary of allowing a construction firm to become too reliant on any single project or client.  

No firm should be so dependent upon a third-party firm that the loss of that relationship poses an existential threat to the company as an ongoing concern. Firms should perform their due diligence on key customers and partners and beware of working with those who may be financially unstable. 

The Project Stress Index is geared towards construction industry leaders who must make forward-looking decisions, the outcomes of which are highly dependent upon the future state of the construction industry. It cannot be assumed that all projects in their preconstruction phases will make it through to vertical construction.  

The fact that some projects will unexpectedly fail to reach physical construction can negatively impact a firm’s capital flows, equipment and labor deployment and positioning, and inventories. However, the use of the PSI to anticipate such unexpected events can help firms maximize their operational and financial performance, specifically: 

The PSI can provide insights into the future direction of the construction market. Armed with this information, firms can make more informed and successful choices related to deploying capital and assets. 

Hiring decisions often require finding and onboarding new laborers in a process that can take up to several months. Investing in labor before a market expansion will help a firm to be ready to perform the forthcoming increase in work.  

The PSI can help firms estimate the transition rate of projects from preconstruction to physical construction. A firm's strong sense of this transition rate will help it know how much extra work to bid on to ensure its crews stay optimally productive and profitable.