If you bid on or provide services for a public works project, you need to be aware of how prevailing wage and an amendment related to the hauling of aggregate supply construction materials (a.k.a. the 50-mile radius provision) may impact your business effective July 1.

Prevailing Wage

New York’s labor law requires contractors and subcontractors to pay prevailing wage for employees working on a public works project, based on the locality where the work is performed. Public works include construction, maintenance, and improvement projects funded and executed by a federal, state, or local government.

The NYS DOL sets the prevailing wage based on hourly wage and fringe benefit data for similar jobs and distinct job classifications in a region. It equals the sum of a base hourly wage rate plus a fringe benefit rate. 2024 prevailing wage schedules by county for general and residential projects were released July 1 and can be found here.

Prevailing wage applies regardless of union status, although it is usually equivalent to union wages and benefits.

The New 50-Mile Radius Provision Effective July 1

New York’s 50-mile radius provision of 12 NYCRR 222.2(c) took effect July 1. Contractors and subcontractors must factor this into their labor costs on all public works projects solicited on or after July 1.

Of particular note is an amendment related to the hauling of aggregate supply construction materials. The amended rule reads:  “Prevailing wage shall be paid for work performed on a public works worksite pursuant to this section for any work involving the delivery to and hauling from such worksites of aggregate supply construction materials, as well as any return hauls, whether empty or loaded and any time spent loading/unloading.”

Visit the NYS DOL website and scroll down to “Hauling of Aggregate Supply Construction Materials” for more information. Please note that RBT CPAs is not a law firm. We are sharing this information to ensure you are aware that the provision took effect on July 1. Additional guidance is supposed to be forthcoming. In the meantime, if you have any questions or need direction or advice, we strongly suggest you contact your legal counsel.

On a Related Note…

During the New York legislative session that had just ended, a new bill was introduced regarding prevailing wage and the delivery and supply of construction materials. It would expand existing prevailing wage requirements in Nassau, Suffolk, and Westchester counties to include the delivery and supply of concrete and asphalt, and would take effect immediately upon its passage. While the legislative session ended with the bill in the Senate’s Committee Assembly, we just want to make sure you’re aware of it in case it moves forward in the future.

As you focus on the many aspects of running a successful business, including compliance,  remember that RBT CPAs is always here to support your accounting, advisory, audit, and tax needs. Contact us any time to learn how we can be Remarkably Better Together.

Please note: RBT CPAs is not a law firm and this article is for informational purposes only. Should you need legal advice, contact your legal counsel.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial information.

The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) Improve Tracking of Workplace Injuries and Illnesses reporting rule takes effect January 1, 2024. As a result, more employers will be required to submit detailed data about workplace injuries and illnesses.

The final rule was issued July 21, 2023. It reverts from provisions adopted in 2019 largely to what was effect in 2016. OSHA is hoping this helps reduce workplace injuries and illnesses in high hazard industries. It will use the data for strategic outreach and enforcement. It also intends to make the data collected available online to the public.

According to the Department of Labor (DOL), “This will enable the agency to interact directly with these establishments, through enforcement and/or outreach activities, to address and abate the hazards and improve worker safety and health. These same data will also allow OSHA to better analyze injury trends related to specific industries, processes, or hazards.”

The DOL also asserts that by making injury and illness data public, potential customers, employees, and others will have more information to make decisions about health and safety at a particular establishment.

Under the final rule, once a year, establishments – meaning a physical work location, not a company as a whole – with:

• 100 or more employees in certain designated industries* must electronically submit information from OSHA Forms 300 and 301.
• 20 to 249 employees in certain designated industries* will continue to electronically submit information from 300A annual summary to OSHA.
• 250 or more employees, regardless of industry, are required to keep records under OSHA’s illness and injury regulation and electronically submit Form 300A information.

*Industries are defined in Appendix A and Appendix B in the Final Rule.

March 2 is the deadline for submitting prior year data. So, data from 2023 must be submitted by March 2, 2024. Covered establishments will submit data via OSHA’s Injury Tracking Application.

It’s important to note that the rule directly applies to OSHA states, but not state plans (although state plans are required to adopt similar requirements within six months of the Final Rule). New York does operate an OSHA-approved state plan, but it only covers state and local government workers. Private sector employers and their workers are covered by federal OSHA.

If you have any questions about the Final Rule or its implementation, it’s in your best interest to contact legal counsel. RBT CPAs is not a law firm; we specialize in accounting, tax, audit, and business advisory services. Interested in learning more? Give us a call today.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

It’s always interesting for an accountant who specializes in the construction industry to deep dive into trending topics. I’ve come to learn that when you Google a research topic, the first five screens of search results paint one picture that almost feels like marketing to get a new trend to catch on. Moving further into search results and asking different questions usually uncover a flip side to stories that often challenge or raise questions about mainstream messaging. To be honest, this is the case when taking a deep dive look at what’s happening with prefab and modular construction.

I was surprised to learn prefab and modular construction have been around for quite some time. Some claim its roots were planted in the 1600s, while others say it really started to take off in the early 1900s when Sears started selling prefab homes. Fast forward to 2014 and we can see how far the industry has come when the first prefab hotel was built in New York City. Still, it’s not a new concept; it has been around for a while and is taking time to gain traction and momentum.

The continuing labor shortage, escalating climate issues, and a growing housing shortage provide solid reasons to explore how to do construction differently. Prefab and modular building seem to be finding its footing when it comes to multi-family housing, healthcare and education facilities, and more. While there’s no doubt prefab and modular construction will have its place, it’s hard to tell exactly how much of a role it will play in the future.

On the plus side, many sources point out that prefab and modular construction can lower costs, reduce project timelines, increase worker safety, deliver higher quality, reduce waste, and be more environmentally and climate-friendly. They also have a role to play when responding to crisis, like when additional hospital spaces were needed quickly as the COVID emergency ramped up. Plus, there’s an opportunity following severe weather or climate events like hurricanes or fires to help hasten rebuilding efforts at reasonable costs. Add the reduced noise, dust and neighborhood impact while constructing, plus the ability to use more newer materials put together in a controlled environment, and prefab and modular seem hard to beat.

Still, a number of questions remain. For example, the lack of standardization and regulations may increase costs and time associated with putting prefab and modular units together, pretty much eliminating any time or cost savings. There are extra steps involved in quality control, with pieces needing to be inspected both before and after transport, not to mention once the construction is done. Apparently, connecting utilities can present issues, as can the upfront coordination between all of the parties that need to be involved. Requirements to pay prevailing wage on public projects may automatically exclude prefab and modular options. Plus, last minute requests and changes can be difficult to accommodate.

Even in the face of these and other questions, prefab and modular building appear to have a growing role to play in the industry. When it comes to North America, Modular Building Institute’s 2023 Modular Construction Industry Annual Report’s executive summary notes permanent modular construction reached $12 billion in 2022 and accounted for 6.03% of new construction starts. According to Global Market Insights, the “Modular and prefabricated construction market size surpassed USD 147 billion in 2022 and is anticipated to register  6.5% CAGR  from 2023 to 2032.”

As you consider what prefab and modular may mean to your business and future plans, you can count on RBT CPAs to keep an eye on your accounting, tax, audit, and business advisory needs. Interested in learning more? Give us a call.

RBT CPAs is proud to say all of our work is prepared in the U.S.A. – we never offshore. As a result, you get peace of mind that your operation’s financial and confidential information is handled by full-time, local staff who have met our high standards for quality, ethics, and professionalism.

As you make summer plans for your business, consider adding ESG assessment, measurement, and management as a priority.

ESG stands for environmental, social and governance – three areas growing in importance to investors, project owners, lenders, customers, suppliers, regulators, employees, insurers, and communities. This October, the Security and Exchange Commission (SEC) is expected to issue rules to standardize how companies assess, measure, manage and disclose ESG related risks, including emissions resulting from assets not owned or controlled by a reporting organization. So, even if you aren’t subject to SEC rules, someone may be asking for your ESG measures for their own reporting purposes. Now is the time to prepare.

Construction is recognized as a key industry for driving ESG progress globally, especially since it uses over 30% of the world’s natural resources, and is responsible for 30% to 40% of greenhouse gas emissions, and 40% of energy use. (Linstroth, Tommy. Growing Demand for ESG Reporting in Construction. November 4, 2022. Forconstructionpros.com.)

Investors want information about it. Clients are looking for it. Lenders and credit rating agencies may consider it and it’s becoming a growing part of insurance and regulatory conversations. Communities judge by it, as do employees and recruits. It can impact business valuations and capital raising, and increase interest from larger organizations looking to grow through mergers and acquisitions.

Some say it’s about risk management, while others assert the focus is environmental and resiliency. There are those that say it’s about current and future performance and sustainability. It’s broad, measured and defined in multiple ways encompassing hundreds of data points.  According to an issue of Mckinsey Quarterly published in August of 2022, more than 90% of S&P companies publish some form of ESG report, as do 70% of Russell 1000 companies. Progress is being reported using different frameworks like the  Stakeholder Capitalism Metrics, the United Nation’s Sustainable Development Goals, MSCI ESG Focus Indexes Methodology, SASB Standards, and more.

Perhaps the best explanation we came across was on Groundbreakcarolinas.com, which reported: “Many project owners and financiers are now requiring construction companies to report on ESG measures because activities completed by contractors are considered part of the owner’s value chain and must therefore be incorporated into their own ESG reporting. In addition, ESG aspects of projects are increasingly becoming part of the project financing evaluation process. While ESG reporting is growing in significance, contractors are still learning how to track, measure and report ESG metrics across their organization.” (Gallagher, Brian and Palys, Michelle. What Construction Firms Need to Know About ESG. January 23, 2023. Groundbreakcarolinas.com.)

Overall, it promotes environmental sustainability, social responsibility, and good governance which can enhance reputation, mitigate risks, ensure regulatory compliance, and create value for all stakeholders. To learn more, check out:

• com’s ESG in the Construction Industry (Adoor, Craig and Ryan, Lynn. February 15, 2023.)
• An ESG framework for North American Building by Green Builder Media.
• Contractor’s Commitment. (Melton, Paula. “Contractors Pledge Greener Construction in New Commitment.” com.)

If you need time to focus on ESG plans and other work, remember, you can count on RBT CPAs to handle your accounting, tax, audit, and business advisory needs. We believe we succeed when we help our clients succeed. To learn more, give us a call today.

RBT CPAs does not outsource work to any other country. All of our work is prepared in the U.S.A. 

Depending on the type of construction your company does, it’s always valuable to understand what’s going on with real estate so you can consider implications on your strategy and business and make adjustments to plan accordingly.

Norada Real Estate Investments recently issued its 2023 New York Housing Market: Prices, Trends & Forecast for 2023. Comparing February 2022 to 2023, closed sales decreased by 34.3%. Median sales prices dropped 6.3%. New listings were down by 15.8%. Pending sales were down by 8.1%. Home inventory was down by 8.2% (the 40^th straight month of a decrease). Days on the market went up by 4.7% (to 67 days).

Then, the New York State Association of Realtors® (NYSAR) released a report on April 20, providing insights through March of this year. The report indicates the housing market was slowing even further when for the 41^st consecutive month, year over year comparisons showed inventory dropping across the state. Inventory decreased 12.4%. Closed sales were down 28.4%. Pending sales decreased 11.2%. New listings were down 22.9%. The 30-year fixed rate mortgage was up from February’s 6.5% to March’s 6.54%. Median sales price was down 6.1%.

According to the Norada report, “The New York State housing market is likely to continue struggling in 2023 due to the low inventory of homes and rising mortgage interest rates. However, as the interest rates start to decline, they can increase demand for real estate and raise home prices. The National Association of REALTORS® predicts that interest rates will gradually decrease in the coming months, reaching around 5.0 percent by the end of 2023. This could help boost the housing market by making it easier for buyers to obtain mortgages and increasing demand for homes.”

So far, interest rates aren’t cooperating. According to FinTechBuzz.com, “The slowdown in residential construction is the result of myriad factors, including labor and materials shortages and lingering red tape from Covid-19. But also, interest rates work like gravity; as they rise, they pull asset values back down. Lower asset values translate to lower profit margins. Thus, many investors and buyers are holding onto their money as opposed to pursuing slim profit margins on a single-family build.”

When it comes to the commercial market, FinTechBuzz.com reports, “Demand is also drying up in some corners of commercial real estate, while projects are taking 24 to 48 months longer to complete. A higher employment rate will manifest greater demand for office space, while greater consumer spending power results in more demand for hospitality and retail. Currently, retail and hospitality are seeing reduced demand, while projects like multifamily housing complexes and infrastructure remain promising. While higher rates will still reduce profit margins on such projects, they will likely become the core focus for commercial real estate and construction companies as the government attempts to stabilize inflation.”

As for the commercial market in New York, CostarNews.com reports: “Commercial property sales in New York, driven by a decline in Manhattan, slumped by more than half in the first quarter from the end of last year as higher interest rates and worries about a looming recession seized up lending and investment across the country. The plunge is setting the city up for its worst annual commercial property sales expected since 2009, according to a study from real estate firm Avison Young.”

All of this is underscored by growing concerns about pending commercial real estate debt coming due, with financial leaders sounding some alarms but the Fed holding fast to the position that regional and local banks are in a good position to handle what’s coming. Stay tuned…

While you focus on the myriad of factors impacting real estate and ultimately construction, you can depend on RBT CPAs to focus on your accounting, tax, audit, and financial advisory needs. We believe we succeed when we help you succeed. Learn more. Give us a call today.

In construction, year-end closing is a misnomer. That’s because the actions you take not only impact your 2022 books, business results, taxes, and financial statements. They can also inform your business strategy for the year ahead, while putting you in the best position for year-end close 2023 and beyond. What should you do to maximize the benefits your company can reap from year-end closing? Consider these seven factors:

1. Percentage of completion. Construction contractors’ financial statements should be prepared on a percentage of completion basis of accounting to comply with Generally Accepted Accounting Principles (GAAP). This requires contractors to list what jobs are open, the contract values of those jobs, and estimated total costs to determine estimated gross profit per job. This will be compared to total actual costs and billings at the balance sheet date, and income will be adjusted for any over and/or under billings.
2. Estimates for work in progress. Are there any open jobs where you are estimating you will lose money? What is driving those results? By analyzing what’s happening on a monthly basis, you and your project managers may be able to make course corrections to have a positive impact on 2023 income and future financial statements. If this is the result of low bidding or an estimate mistake, reviewing on a regular basis may help to pinpoint where additional costs were incurred and can be used to help avoid future profit swings and contract losses.
3. Profit fade. Reviewing project estimates and financials with project managers on a monthly basis can also be useful in that you are seeing profit fades or additional estimated income in real time. This allows any potential issues to be identified and addressed in a timely manner.
4. Bonding and insurance. The work you perform may require you to be bonded. Work with your insurance broker to find a surety for bonding purposes. Once your books are clean, look at your balance sheet to determine working capital (current assets minus current liabilities). A general rule of thumb is that 10x this number is your potential bonding capacity. Other factors to consider are business equity, profitability, and any outstanding loans between owners and/or affiliated companies and your construction entity.
5. Labor burden/workers’ compensation. Round up all insurance information from the year, including monthly invoices, policy premiums, audits, etc. to calculate actual insurance expense. Since labor burden is allocated to jobs, this number would have an effect on your over/under billings. Be sure to look at what is pre-paid versus payable, so you expense the right amount.
6. Break-even point. Do you know how much you need to sell to break-even? Calculate your break-even point using an average of your overhead for the year and an estimated total gross profit on jobs. Know how much in sales you must do to make money before the year even starts.
7. Backlog. By evaluating your open jobs at the end of the year, you can also determine how much profit is left that you’re going to realize for each job in 2023. Utilize this measure for the whole portfolio of your jobs to pre-determine an estimated gross profit for the coming year. You can use this to help figure out your breakeven, and any additional jobs may just be icing on the cake or backlog for 2024.

RBT CPAs has been a leading accounting, tax, audit, and business advisory firm serving construction companies in the Hudson Valley and beyond for over 50 years. If you’re already a client, you can trust your RBT CPA team will be addressing all the considerations previously mentioned when we meet with you for year-end closing. If you’re not currently a client but interested in learning how our CPAs specializing in the construction industry can support your 2022 year-end closing with a keen eye toward maximizing financials in 2023 and beyond, give us a call today.