2- Thirdly, the group that was hardest hit was the subcontractors, many of whom were small, inexperienced, and poorly financed. More of this group would have failed except for a relatively good market for used equipment. Fourthly, while the small contractors still account for the greatest proportion of failures, there was a surprising increase in failures among those contractors whose liabilities were in excess of $100,000. Declining profits and rising failures, particularly in the face of the increasing demand and relatively stable costs, are not symptoms of a completely healthy industry. Since the contractors cost changed very little and in many fields his volume actually expanded, the principal cause of lower profits was a shrinkage in gross margins. Consistent with the trend that has prevailed since the end of World War II, the contractor simply charged less for his services and the risks that he undertook. With your permission I would like to suggest some of the conditions in the industry that contributed to this situation. First, there are too many contractors, many of whom are inexperienced and inadequately financed. The increase in the number of firms in the construction industry has been at a rate over 5 times that of the increase in the number of firms in other industries. According to a recent survey the average age of all firms in the construction industry was only 3-1/3 years and only 17% of the firms were as much as 7 1/2 years old. Only about 60% of the new companies lasted for 2 years or more but during their brief existence they can and have had a very disturbing influence on the profit margin picture. The second difficulty is that a large portion of the construction industry was actually faced with a declining market for its services and this brought about intensified competition. If we eliminate from the 1954 picture the construction volume attributable to private residential construction those types of construction closely associated with it - sewers, water works, streets, schools, churches, and stores - the volume of the construction