Proposal activity across AEC firms rose to a Net Plus/Minus Index of +23.4 in July 2026, up from +20.4 a year earlier, while median backlog growth at A/E firms fell to 5.0% from 11.1%. Those numbers describe different moments. Read in sequence, they predict a capacity problem before they describe a market.
What the July 2026 Proposal Activity Number Says
PSMJ's Quarterly Market Forecast surveyed 290 AEC executives between July 6 and 23, 2026, putting its Net Plus/Minus Index for proposal activity at +23.4, against +20.4 a year earlier. The index runs from -100 to +100 and tracks how many firms report more activity than the prior quarter, so it reads direction, not volume. All 11 tracked markets came back positive, led by energy and utilities at +59.6, water and wastewater at +44.6, and heavy industry at +41.9. Proposals precede contracts, so this is what firms are chasing, not what they are billing.
Why the Backlog Number Comes From a Different Moment
The backlog figures come from a separate instrument. PSMJ's 2026 A/E Financial Performance Benchmark Survey collected data from 320-plus firms between February and April 2026, and reports on year-end 2025 performance. Median backlog growth of 5.0% against 11.1%, and backlog at 92.6% of annual net revenue against 103.8%, describe balance sheets as they stood on December 31, 2025.
So the honest framing is not "proposal activity is rising while backlogs fall." It is backlogs thinned first, and proposal activity climbed afterward. That sequence has a mechanism the simultaneous version does not.
Ken Simonson, chief economist at the Associated General Contractors, gave that mechanism to ENR directly. On the proposal number: "It may be a sign that more firms are bidding projects they might have ignored had their order books been plumper." He also noted that private nonresidential construction spending has decelerated for two years and has been declining year over year for the past twelve months. Order books thinned first, and firms widened what they will chase.
What Rising Proposal Volume Does to a Proposal Team
A rising proposal index is not a demand signal. It is a workload forecast.
If firms around you are bidding work they would previously have declined, two things follow. More firms compete for each solicitation, so your win rate per submittal falls even if your work is unchanged. And your own principals, facing the same thinner backlog, start saying yes to pursuits that would have been easy noes in 2024. The proposal team absorbs both at the same headcount.
That last part is the one nobody budgets for. Proposal capacity is how many submittals your team can produce at quality, and that number can be calculated rather than discovered in October when three deadlines land the same week.
The Selectivity Window Is the Part That Closed
Record A/E margins in the last cycle came from firms declining work rather than winning more of it. Selectivity requires a backlog fat enough to say no from.
The year-end 2025 data documents that condition weakening. Backlog below 100% of annual net revenue means the average firm no longer has a full year of work in hand, which is precisely when firms stop declining pursuits. Your go/no-go framework matters more in a thin market than a fat one, and is harder to hold.
Where Demand Is Moving, and Where It Is Thinning
Water and wastewater posted the second-highest reading of the eleven markets and still came in softer than a year earlier. Transportation did the same. The gap between level and direction is the signal.
For transportation, the softening is legible against a funding picture still unresolved. For water, it means the WRDA 2026 pipeline is a real lane but a maturing one. Neither is a reason to exit. Both are reason to know which qualifications are current before a client asks.
What to Do Before the Volume Arrives
- Compute your actual submittal ceiling rather than assuming it. Firms consistently discover it by breaching it.
- Tighten go/no-go before backlog pressure arrives. A framework written under pressure ratifies whatever leadership already wants to chase.
- Find out what qualifications you can produce on short notice. If the answer lives in one coordinator's memory of which shared drive holds the 2023 pump station sheets, rising volume will find that out.
A proposal workspace where staff, projects, and past content sit in one place turns that third item from a scramble into a lookup. It does not change how many pursuits you chase. It changes what they cost.
Rising proposal volume is a capacity question before it is a market question. The data says it is coming, not whether your team can absorb it. That is the number worth having before October.
Frequently Asked Questions
What is PSMJ's Net Plus/Minus Index?
It measures the balance of firms reporting more proposal activity versus less, on a scale from -100 to +100. A reading of +23.4 means substantially more firms saw activity rise than fall last quarter. It tracks the direction of change, not the volume of proposals in the market.
Does more proposal activity mean the AEC market is growing?
Not necessarily, and that is the point of the Simonson reading. Proposal activity can rise because demand grew or because firms with thinner backlogs began bidding work they previously ignored. The July 2026 data sits alongside twelve straight months of declining private nonresidential spending, which favors the second explanation.
Should we chase more pursuits when backlog drops?
Chasing more is the common response and the expensive one. A thinner backlog raises the cost of a bad pursuit because the capacity it consumes is capacity you needed elsewhere. The firms that held margins through the last cycle got more selective as conditions tightened, not less.
Sources
- New AEC Data Show Proposal Activity Holding Up as Construction Spending Slows, ENR, August 14, 2026
- 2026 A/E Financial Performance Benchmark Survey Report and Quarterly Market Forecast, PSMJ Resources