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ABC’s Construction Backlog Indicator Up, Contractors Remain Confident

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

The Associated Builders and Contractors report that its Construction Backlog Indicator increased to 9.3 months in July 2023, according to an ABC member survey conducted July 20 through August 4.

The reading is up by 0.6 months since July of 2022. The South remains the U.S. region with the highest level of backlog, despite being the only region with lower backlog compared to a year ago in July. Backlog gains in July were concentrated in the commercial and institutional category.

“Nonresidential construction backlog continues to expand, which is precisely what contractors had predicted six months ago,” said ABC Chief Economist Anirban Basu. “For many months, contractors have been signaling an exception that demand for their services would continue to expand despite high and rising interest rates and a spate of regional bank failures.”

That said, Basu adds, backlog declined in both the infrastructure and heavy industry categories. “This is possibly because the current administration is striving to reserve many large-scale projects for unionized firms,” he said.

ABC’s Construction Backlog Indicator quantifies the previous month’s work under contract based on the latest financials available.

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Contractors Decry Amended Davis-Bacon Rule

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

The U.S. Dept. of Labor’s final rule, issued August 8th, revamps its Davis-Bacon Act procedures for determining prevailing wage levels – in favor of workers – on federally funded construction projects.

Expected to go into effect in approximately 60 days, the rule is being hailed by construction unions yet criticized by contractors and their associations. The revised rule reverts to pre-1983 methodology for determining whether a wage rate is prevailing, also referred to as the “30 percent rule.” Under the 30 percent rule, contractors must use the wage rate paid to a majority of the workers; if no such majority rate exists, they must use the wage paid to the largest number of workers on the job, as long as it was paid to at least 30 percent of that workforce.

The wage rule solidifies as $1.2 trillion in Infrastructure Investment and Jobs Act funding is propelling the start of a deluge of federal construction projects as well as projects that are stemming from the Chips and Science and Inflation Reduction Acts.

AGC of America CEO Stephen Sandherr says the more than 800-page ruling lowers the threshold of reporting required from the Dept. of Labor.

“This final rule appears to make it easier on the Dept. of Labor itself to set prevailing wages with less of the data it already collects, or lack thereof,” says Sandherr.

The Associated Builders and Contractors says this regulatory notice will annually affect an estimated $217 billion in federal and federally assisted construction spending for about 1.2 million construction workers.

“Unfortunately, the DOL’s final rule disregards the feedback of ABC contractors, construction industry stakeholders and thousands of small businesses urging the withdrawal of this unnecessary, costly and burdensome regulation,” says ABC Vice President of Regulatory, Labor and State Affairs Ben Brubeck. “Instead, the DOL is moving forward with dramatic changes to prevailing wage regulations, reversing much-needed reforms that were established nearly 40 years ago, and unlawfully increasing the regulatory burden on small businesses, new industries and public works projects.”

For more information about the ruling, see www.dol.gov/agencies/whd/government-contracts/construction/rulemaking-davis-bacon.

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Commercial Construction Spending Dips First Time in Nearly a Year

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

According to the Associated Builders and Contractors, national nonresidential construction spending shrunk for the first time in 11 months. The slight decrease comes on the heels of an 11-month record of commercial and industrial construction spending increases, propelled by robust manufacturing construction.

ABC Chief Economist Anirban Basu says although overall nonresidential construction spending is up more than 17 percent since August 2022, manufacturing-specific construction activity accounted for most of that increase.

“Excluding the manufacturing segment, nonresidential construction spending is barely outpacing inflation, up just 6 percent over the past year,” Basu said.

Spending in the manufacturing sector, according to Construction Dive, edged up 1 percent in May and remains up 76 percent year over year. Meanwhile data center construction – a subset of office construction – also inched up 1 percent in May and remains up 6.7 percent year over year.

Yet despite these increases in private-sector, nonresidential construction spending, most other categories are lagging behind, says Ken Simonson, Associated General Contractors of America chief economist.

“Our analysis of federal industry data indicates that public construction spending posted mixed results, as the largest infrastructure categories declined for the month and education spending flattened,” said Simonson. “Highway and street construction dipped 0.4 percent from April and public spending on transportation facilities – such as airports, transit and passenger rail – decreased 0.8 percent.”

Commercial construction spending including warehouse and retail builds also dipped 1.8 percent in May.

“The data for May show there has been no letup in the feverish pace of manufacturing construction but a very mixed picture for other project types,” Simonson said.

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