Much of the construction practice at Larkin Hoffman involves the civil construction industry. Our interest in the current state of civil construction in the U.S. was piqued by our review of a recent study by the national accounting firm, CliftonLarsonAllen LLP (CLA). We thought the study and findings would be of interest to you, so we asked Jon Weston of CLA to post a guest blog regarding its study and the current state of the civil construction industry. We hope you find this post as interesting as we do. Here’s Jon’s report:
The civil construction industry saw another very strong year in 2018. This was the third straight year of excellent operating results. While gross profit on most civil contractors were either flat or fell slightly, further controls over G&A expenses by management teams resulted in consistent results when compared to 2017 and 2016. Backlog industry wide continues to climb with almost a month more backlog in 2018 vs. 2017. With these great results owners of civil contractors were able to diversify their risk by pulling more cash out of their business via tax free distributions. Overall 2018 was a great year for civil contractors which is helping get 2019 off to a great start as well.
The 2019 Civil Construction Benchmark Report summarizes data from 173 civil contractors and categorizes them for comparison. The report offers key financial and non-financial information to assist civil contractors in comparing themselves to their peers. It also notes several issues at work in the industry today.
Top issues for the civil construction industry in 2019
- The new revenue recognition standard will not disrupt the construction industry as initially thought, but there will still be changes to consider and plan for.
- The new lease standard will likely be delayed one more year to December 31, 2021. Combined with increased equipment financing costs, this makes renting equipment possibly more attractive in the next couple of years. Companies should be proactive in tracking their leases and organizing all the needed documentation to properly implement these changes.
- With the political environment split so heavily, funding for needed infrastructure improvements to the United States’ roads, bridges, flood management, and other areas is uncertain. The improvements appear to be supported by both sides in Congress, but political differences may cause funding shortages.
- Green and other environmentally friendly production and construction methods are the wave of the future. Consider investing or developing these methods to be on the leading edge of this shift and possibly take advantage of the research and development tax credit.
- With the import and export market affected by changing tariffs, forecasting costs continues to be difficult, and prices may change significantly after bids have gone out.
- Issues involving skilled labor and the next generation of management continue to be a challenge in the industry. Finding the next generation of workers is paramount to future success.
- Climate change is impacting jobs. Inclement weather is causing delays and affecting production. Contractors continue to look at more prefabricating in their shops instead of on the job site to help combat delays.
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