Construction work, by its very nature, is a high-risk type of business. It usually isn’t a matter of if a loss occurs, but when and how much. When a loss does occur, such as an electrical wiring fire, all the parties involved with the project generally point the finger at the other parties. Read more
Everyone struggles to keep up when business really takes off. Projects come all at once. You may hire additional field workers to meet the demand. Payroll is stretched because payments which come in on your new projects lag months behind the large sums you lay out weekly to pay your workers. Read more
By Justin Gipp and Jason Dudas, CPA
In December 2017, Congress signed the Tax Cuts and Jobs Act. There are many changes in the new tax bill that will cause varying effects on businesses and individuals. As the dust starts to settle on the new tax bill, most businesses expect their income tax expense to decrease. However, a general understanding of the new tax law is necessary to effectively make tax planning decisions for your business. Business owners can start strategizing their plan by reviewing the five most significant changes that are expected to affect construction contractors. Read more
By Jody Hillenbrand and Luis Torres
Jan. 1, 2019, is quickly approaching. For most privately held construction companies, this is the implementation deadline for the new revenue recognition standard, Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. The time to act is now, especially for contractors with projects lasting over 12 months. A contract that starts now, but extends into 2019, will be subject to the new standard. Read more
Builders and contractors who buy commercial general liability (CGL) insurance policies with the impression that they will keep them safe from allegations of inadequate or faulty work must be aware of what their policies cover. It’s important to know that a CGL policy does not provide coverage for work that is faulty.
In order to qualify for payment under a CGL policy, there must be a specific type of occurrence that causes property damage. The terms in these policies define an occurrence as an accident. This includes repeated or continuous exposure to conditions that result in bodily injury or property damage. The damages or injuries must occur during the policy period in order to qualify for coverage. These injuries or damages must not be intentional. Read more
The IRS continues to zero in on what it calls the “tax gap” — the amount between the taxes that are voluntarily paid and the amount the tax agency believes is actually due.
To this end, the IRS has issued a series of documents to provide better understanding of the tax code. One example is specifically directed at the construction industry.
The tax agency emphasizes instances where taxpayers failed to report, or under-reported, income from construction activities. This applies to individual workers as well as contractors and subcontractors. Following are the highlights: Read more
By Jason Dudas
Contractors are often dependent on the price of materials and labor when planning and completing a project. As the August Bureau of Labor Statistics (BLS) data showed signs of a general decrease in inflation rate, pricing for final demand construction has been deviating from that of the overall economy. The accelerating rate of construction inflation is evidenced not only in the overall trend of specific products and materials, but also in the producer price index (PPI) for completed building types.
By Ian Shapiro
Technology has been a disruptive force in most industries and sectors over recent years. But in the real estate and construction (REC) sector, widespread adoption of new technologies has lagged somewhat. Indeed, the adoption of technology in property – or ‘PropTech’ – has fallen a little short of its anticipated take-up. For example, in the U.S., the construction industry is several years behind many other industries with regards to technology with many companies still using manual systems for project planning and management. That’s why construction remains far behind in reaping the benefits of advanced data and analytics, drones, automation and robotics.
However, 2017 is set to be the year the floodgates open for PropTech in the global REC sector, and we’ve looked at some key technologies you should be keeping an eye on in the industry this year.
Every construction company, regardless of whether they are a general contractor, subcontractor, or something in between, must be able to win and complete jobs efficiently. Business owners and project managers need information to accurately bid and estimate projects. It is imperative that the company generates accurate and timely reports. While some project managers rely solely on experience, the most successful project managers know how to best utilize the job schedule. The job schedule tells the story of construction projects at a point in time by providing a summary of all contracts the company has in process or has completed on a contract by contract basis. The job schedule relies on several factors, however, the most important is proper job costing. Proper project costing leads to better profitability, project estimating, management decisions, and timely financial reporting.
Two central cost trends remained consistent in January compared to one year ago. Low energy prices and a sluggish global economy continue to push down the prices of many building products and materials while, at the same time, scarcity of skilled workers in key trades pushes labor costs higher. The net effect of these opposing forces has been that finished construction costs are increasing at a pace that is slightly higher than overall producer inflation and slightly lower than in 2015.
Evidence of the former trend came in the February 17 report on January’s inflation from the Bureau of Labor Statistics (BLS). The producer price index (PPI) for inputs to construction fell 0.4 percent for the month and 2.7 percent from January 2015. The PPI for all goods used in construction fell 0.6 percent and 2.7 percent. A sub-index for energy declined 9.0 percent from December and 21 percent year-over-year. The BLS report also covered inflation for final demand, which includes goods, services and five types of nonresidential buildings that BLS says make up 34 percent of total construction. The PPI for final demand construction decreased 0.3 percent for January and increased 1.2 percent for the full year. That compares to a year-over-year hike of 1.8 percent from January 2014 to 2015.
Significant 12-month price changes in the costs of materials important to construction include a 35 percent drop in the price of diesel fuel, a 19 percent decline in steel mill product and copper and brass mill shape prices, an 18 percent decrease in aluminum mill shapes, and a 12 percent drop in lumber and plywood prices. Among the few costlier materials, cement rose 5.6 percent and flat glass 5.9 percent over the previous January.
Year-to-year changes in labor costs varied significantly by trade and were reflective of the relative supply of skilled craft workers. Costs declined two percent for plumbing contractors, but increased 1.2 percent for roofing contractors, 3.7 percent for concrete contractors and 5.4 percent for electrical contractors. According to the chief economist for the Associated General Contractors (AGC), Kenneth Simonson, the large increases in concrete and electrical subcontractors’ rates are consistent with the September 2015 AGC Workforce Survey, in which 63 percent of respondents said their firms were having trouble filling positions for concrete workers and 60 percent for electricians.
Procurement professionals seem to have factored the trends in construction costs into their plans for 2016. Consultancy IHS and the Procurement Executives Group (PEG) reported on February 24 that the current IHS PEG Engineering and Construction Cost Index fell to 41.3 at year’s end, down from 43.3 in November. A reading lower than 50 represents a downward pricing trend. The headline index has been below the neutral mark for 14 months. The current materials/equipment price index fell from 39.6 in January to 36.9 in February, which is the lowest mark in the fur-year-old survey’s existence.