Posted on Oct 4, 2019

You know how hazardous construction sites can be for crews. That’s why you require workers and supervisors to adhere to strict safety guidelines in work zones.

But what about safety issues involving motorists who enter your work sites, usually unintentionally? Every year, about two-thirds of construction businesses experience at least one vehicle intrusion into a workzone, according to a recent survey by Associated General Contractors (AGC) of America. When this happens, the vehicle’s driver and passengers risk injury or death — and the vehicle endangers the safety and lives of workers. The AGC survey found that 28% of workzone crashes resulted in injured workers and 8% resulted in a fatality.

Make a Plan

When it comes to protecting workers in construction zones, the tone at the top matters. Make sure workers and clients know that you value and prioritize safety — even if it means jobs run longer or a bit over original estimates. Another big part of promoting a safety-first culture is educating workers about potential workzone hazards. Don’t forget to include part-timers in training sessions.

To address roadway hazards specifically, create a written safety plan. Your plan should consider worksite variables — including different traffic conditions, types of roads, the weather, and project scopes and durations — and spell out procedures for protecting workers.

8 Steps: Several best practices can also help keep everyone safe on construction jobsites near roadways.

Consider including these in your safety plan:

1. Operate off-peak. If possible, work near busy roads should be performed during off-peak hours on weekdays and on weekends. Consider detours, temporary roads or bridges to navigate traffic away from workers.

2. Inspect workzones daily. Yes, daily. Note any maintenance issues, drop offs, uneven pavement or other risky conditions and address them immediately. Also check signage every day and assess whether signs are as effective as they could be.

3. Show your colors. Require everyone in the workzone to wear high-visibility vests and hard hats at all times — even if they’re only on site for few minutes. When working at night, crews should wear reflective clothing and hard hats with lights.

4. Put up barriers. Concrete barriers reduce risks for both workers and motorists. Attenuator trucks can also absorb the impact of a crash. But while you should be proactive about providing protection, don’t overdo it. Placing barriers everywhere can increase the danger that workers installing them will get hurt.

5. Monitor motorist speed. Reducing the speed limit in workzones lowers fatality rates, no doubt about it. But setting speed limits too low may lead some drivers to refuse to slow down at all. If one driver slows to the posted limit and another doesn’t, the vehicles could collide. Or the speeding driver may instinctively turn the wheel upon braking and crash into your workzone.

6. Observe federal guidelines. Adhere to the Federal Highway Administration’s Manual on Uniform Traffic Control Devices standards. This includes providing clear guidance to motorists entering a workzone. Be sure to give drivers sufficient warning by placing signs farther from the worksite when there are hills, curves or other visibility issues.

7. Provide “back-up” support. When trucks and other equipment back up, it creates hazards for workers in the vicinity. Even though these vehicles blast back-up alarms, some workers may ignore them. Consider placing “spotters” in areas where people are working or walking. And develop an internal traffic control pattern so that workers know where trucks are coming in and leaving.

8. Rely on new technology. Use motion-sensing intrusion detection alarms to notify workers when a vehicle has crossed into a workzone. You might also employ variable message boards or warning signs based on sensor data to notify motorists of any delays. This way, drivers can choose to take different routes to their destination. Portable rumble strips can help alert distracted drivers that they’re entering a workzone.

Putting People First

Given the availability of safety-related technology, there’s no excuse for letting work crews take unnecessary risks. Even if safety costs shave your profit margin, you know how important it is to put people first.

Posted on Aug 4, 2019

The Trust Fund Recovery Penalty (TFRP) is one of the harshest tax provisions on the books. Under the TFRP, a company owner, officer or other employee may be held liable for 100% of the company’s unpaid payroll taxes — which is why the assessment is sometimes called the “100% penalty.” Contractors beware: The TFRP can severely damage, if not destroy, your construction business and threaten your personal financial security.

Broad Interpretations

The TFRP may be applied to any person who’s: 1) responsible for collecting or paying withheld income and employment taxes or for paying collected excise taxes, and 2) willfully fails to collect or pay those taxes. Be aware that the IRS has broad interpretations of these two requirements.

For example, a “responsible person” is any person — or group of people — who has the duty to perform and the power to direct the collection, accounting and paying of trust fund taxes. This person might be:

  • An officer or employee of a corporation,
  • A member or employee of a partnership,
  • A corporate director or shareholder,
  • A member of a board of trustees of a not-for-profit organization,
  • Another person with authority and control over funds to direct their disbursement, or
  • Another corporation or third-party payer.

Similarly, the IRS broadly interprets the requirements for a “willful failure.” The failure doesn’t have to be intentional. For instance, the TFRP may be applied in situations where the responsible person knew, or should have known, about the taxes that should have been paid but, in fact, weren’t.

If the IRS determines that you’re a responsible person, it will mail you a letter stating that it plans to assess the TFRP against you. You have 60 days (75 days if this letter is addressed outside the United States) from the date of the letter to appeal. The letter will explain your appeal rights. If you don’t respond to this communication, the IRS will assess the penalty against you and send a Notice and Demand for Payment.

Once the TFRP is assessed, the IRS can take collection actions against your personal assets. It may, for example, file a federal tax lien or take levy or seizure action.

U.S. v. Samango

A recent Pennsylvania court case illustrates how easily a construction company owner can be found negligent. The defendant in U.S. v. Samango was the sole shareholder and president of a concrete construction company. As president, he supervised all aspects of the business, including reviewing and signing all federal and state tax returns. In addition, he was a minority shareholder and president of a framing company. In this capacity, he approved, signed and submitted various tax forms and documents to federal and state tax authorities.

Both companies had the same business address and phone number. They also shared top-level management and employees. In 2008, the concrete business subcontracted with the framing company to help on a construction project.

While the owner was president of both businesses, he signed checks from the concrete construction company’s account to pay the framing company’s liability for state unemployment compensation insurance. He also approved, signed and submitted to the IRS the Federal Unemployment Tax Act (FUTA) form for the framing company.

Subsequently, the IRS assessed the TFRP against the owner, claiming he was a responsible person who failed to pay trust fund taxes for the four quarters during which the framing company worked with the concrete construction company as a subcontractor. But the owner objected. He argued that he was only a minority shareholder; had no knowledge of the company’s finances, operations or general decision-making; and held no power or authority to pay its taxes.

Court’s Ruling

However, when the case came before a Pennsylvania district court, it found that the owner was a responsible person who willfully failed to pay taxes. The court rejected the owner’s claim that he wasn’t responsible because he had no oversight or control of the framing company’s finances. After all, the court reasoned, he signed and certified government forms on the company’s behalf. He also paid taxes owed by the framing company with funds from the concrete company’s account for which he had signatory authority.

The owner admitted at trial that he didn’t take any steps to ensure that the framing company’s taxes were being paid. This hurt his case. As president, he should have known that there was a grave risk that the taxes weren’t being paid. And he could have easily found out whether they were being paid. In the end, the owner was ordered by the court to pay $900,000 in unpaid employment tax.

High Stakes

With the TFRP, the stakes for tax compliance are high. To protect your construction business and personal assets, ensure that payroll tax deposits are made to Uncle Sam in a timely manner.

Posted on Apr 23, 2019

Drones have been used extensively by military units, governments and private enthusiasts. Now drone use is being adopted by companies, including construction businesses. Technically called “unmanned aerial vehicles,” drones offer contractors many practical uses. But before jumping on the bandwagon, identify a drone’s best uses for your construction company. You’ll be more likely to get a good return on your investment should you decide to buy one.

Survey Sites

Instead of relying on traditional resources to develop an overview of a job site, you can use a drone to quickly survey the area and draw up maps. Typically, drones enable you to do the job faster, at a lower cost and more accurately. So, you may be able to allocate workers typically involved in conducting surveys to other tasks.

When surveying sites, drones provide a simplified method for data collection and organization. Piloting drones remotely, you can transmit data quickly and transfer it to a cloud-based storage solution instantaneously. Authorized users of this information can then access it easily via the Internet.

Share Data

Drones with high-resolution technology, including 3D models, allow users to share data by sending a link to clients. The client can log in to the system, view the data and export it to other entities. It’s an easy way to enable multiple users to view sites. A digital surface model can indicate areas requiring special attention — for example, spots where water needs to be drained. 3D models also provide an orbital view of the entire site. Variations in the dirt patterns might show where drainage is working well or causing problems.

Clients can’t always visit sites regularly, but mere photos don’t necessarily do enough to display progress. With drone footage, clients can better view building, renovation and inspection efforts. What’s more, aerial visuals are more revealing — and appealing — than photos from the ground.

And it’s not just offsite clients who can benefit. Drones also help stakeholders track projects that haven’t yet begun. Designers and architects who your construction company often works with may use drone-collected data to develop concepts for future structures.

Monitor Jobs

When you must travel between sites, a drone can help you monitor developments at each location. Project managers want to ensure that their crews are productive. But you can also use drones to detect problems such as missing equipment or special accommodations that may be required.

Drones are flexible monitors. You can easily raise or lower their altitude based on your needs. If, for instance, a drone is flying too low to assess safety issues, simply adjust to a higher aerial view.

Conduct Inspections

Don’t put boots on the ground for inspections when drones can do the “leg work.” They enable you to check in real time the stability of structures, aesthetic issues and possible deviations during construction — all without leaving your office.

Drones can also make annual (or other regularly scheduled) inspections of completed projects easier. Instead of climbing buildings with scaffolding or harnesses, deploy a drone to safely and quickly do the job.

Improve Safety

With eyes and ears in the sky, your business may be in a better position to improve safety conditions. Drones can hover over locations that are too difficult or dangerous for workers to access. Instantly relayed images can help you identify issues that might lead to injuries.

Take construction companies that use prefabrication or modular components. Drone imaging provides data on erection sequences, crane locations and perimeter security so you’re able to pinpoint bottlenecks and forecast hazardous situations. Also, a drone can help you make more informed decisions regarding weather and other environmental concerns.

Track and Budget

In general, the more information you have for analysis, the better you can manage a construction site cost-effectively. Delays and overruns can be extremely expensive. If you use drones to look for parts of a project that aren’t working as planned, you can then act to limit the impact on your budget.

Review Projects Now

Construction companies are just starting to realize what drones can do for them. You don’t want to be left out. Scrutinize current and upcoming projects now to determine where a drone might help your business boost speed, efficiency and cost savings.


Posted on Mar 14, 2019

The construction industry is well known for having a high physical injury rate. Perhaps less well known is its elevated risk for mental illness — specifically, high suicide rates. Recently, the Centers for Disease Control and Prevention (CDC) studied more than 22,000 individuals working in different market sectors. The CDC found that construction workers had the highest suicide rate, at roughly four times the national average. Clearly, this is an issue that construction company owners and managers need to know about so they can take steps to prevent loss of life on their own crews.

Small Company Blues

Construction businesses face several challenges when it comes to their employees’ well-being. First off, most are small companies. More than 90% employ fewer than 20 workers, and only about 1% employ more than 100 employees. These smaller operations typically don’t have the HR staff to, for example, mediate disputes, direct disciplinary actions or provide crisis management resources. What’s more, owners and managers of smaller companies usually don’t have the training — not to mention the time — to handle HR functions.

What’s the owner of a smaller business to do? Implement an effective suicide prevention program, which may be relatively easier and less expensive than you might think. The key to success depends on fostering a friendly and supportive environment.

Here’s where small construction companies may have an advantage over their larger peers. With a compact team, your leaders are more likely to interact frequently with workers and get to know their personalities and work habits. An owner who regularly visits jobsites and participates in safety training with crew members opens the door to conversation. Even if an employee doesn’t feel comfortable approaching the boss about his or her problem, other workers may be more willing to discuss coworkers who seem to be in trouble.

Proactive Actions

Of course, being personally supportive of your workers isn’t enough. You also need to provide benefits. Make sure your employee health insurance plan provides adequate mental health benefits. With many plans, mental health coverage (including copays and deductibles) is less generous than coverage for physical maladies. Some plans also require more stringent referral requirements and place limits on the number of office visits and lengths of hospital stays. Try to ensure that,
if one of your workers needs mental health services, he or she can afford the cost. Otherwise, a suicidal worker may go without.

Research mental health services in your geographic area. Contact providers about whether they accept your employee medical insurance and whether they’re taking new patients. Then create a directory of these qualified providers and give employees a copy. They’ll be more likely to take advantage of such services if they have a list of vetted providers handy.

Also post community counseling and local crisis services information (provided, for example, by your city or county) in a public area, such as a break room or in the job trailer. National suicide prevention hotlines, such as the National Suicide Prevention Lifeline (800-273-7255) and Crisis Text Line (text 741741), give employees someone to talk to any time, day or night.

Know the Warning Signs

Would you recognize the warning signs of a potential suicide? These types of employees could be at risk:

A star employee who’s suddenly underperforming.
A usually reliable worker who starts making mistakes.
A careful crew member who experiences several near accidents.
An individual with perfect attendance who begins missing work.
A former “team player” who’s suddenly uncooperative or disgruntled.
Any worker who has recently experienced a disruptive life event such as a divorce, death in the family or big financial setback.
Any employee who appears to have an alcohol or substance abuse problem.

Do Good and Do Well

An effective suicide prevention program doesn’t have to be elaborate or expensive. Cultivating a supportive “family” atmosphere and making yourself available to workers can go a long way to preventing tragedy.

Of course, establishing your program isn’t just the right thing to do, it’s also good business. When workers feel respected and cared for, they’re more willing to work hard and remain loyal over the long haul. And investing in good health care — both physical and mental — can reduce absenteeism and disability claims.

Posted on Feb 12, 2019

There’s a construction business commodity that’s incredibly important but often in short supply. Despite needing more of this resource, companies can’t buy it because it’s not for sale. It’s time.

Busy owners often have trouble managing time properly. In fact, the ultimate failure of some construction businesses can be traced to poor time-management habits. Even if you think you allocate time effectively, there’s probably room for improvement. After all, when you can’t get more of something, you need to make the best use of what you have.

4 Best Practices

Review these four simple and practical time-management practices and consider adopting them:

1. Delegate, delegate, delegate.

Delegation is the most important theme in time management and is, therefore, worth repeating. Letting go, especially if you tend to micromanage every aspect of your business, is hard to do. But if you allow others to pitch in, you can focus your time on the most important aspects of the job.

Delegation isn’t simply a matter of assigning crew managers to knock off tasks on your to-do list. It also involves training and mentoring so that both you and the managers feel comfortable when responsibilities are handed over.

The risk of poor delegation is that tasks won’t be performed to your expectations and you’ll be tempted to claw them back. Not only is this demoralizing for managers, but it’s a waste of your time. Try to set aside the mantra “if you want something done right, you’ve got to do it yourself,” and recognize that different people may accomplish goals differently.

2. Set priorities.

It’s not always easy to identify what’s truly “urgent” and what can wait. Often, what seems to be extremely important at first glance can be postponed, at least for a while. Consider establishing a system to label activities that warrant your immediate attention and those that are important, but not critical.

For example, you might allocate tasks to lists labeled “top priority,” “second priority” or “third priority.” Pay attention to where you’re spending precious time. If you find yourself continually diving into the third group while the top priority list is full, you’re probably not using time efficiently. You may even be harming your company.

3. Don’t procrastinate.

Are you the type of person who waits until the last minute to accomplish tasks? Maybe this behavior has worked for you in the past, or you believe that you work better under pressure. For most procrastinators, however, such bad habits eventually catch up with them and harm the quality of their work.

Look deep inside to understand what drives your procrastination. It may not simply be laziness. It’s possible you’re afraid of disappointing clients, workers or other stakeholders. Or perhaps you’re in the wrong business.

Be honest about the reasons for your procrastination and then try to fix them by setting small goals. For instance, aim to cross off three items on your top priority list each day. Gradually increase the number of items until you feel you’re using your time productively.

4. Block out distractions.

Distractions can also trip up contractors trying to make the most of their time, for example:

  • Technology in the form of email, texts and social media accounts. Consider dealing only with work-related communications during business hours, and forward less-important messages to your managers to handle. Let friends and family members know when they shouldn’t contact you (unless there’s an emergency).
  • Meetings that waste time and are counterproductive. Before you sit down, ensure that the meeting is, in fact, necessary, set a firm agenda for it and conclude the meeting as soon as you’ve covered the agenda items.
  • Recreational habits such as watching TV or playing video games. Everybody needs occasional breaks, but you should restrict sports-watching and gaming to 15 or 30 minutes stretches, then force yourself to get back to work.

Thanks to new technologies, it’s possible to automate some tasks — such as allocating costs to your accounting system and getting job-site status reports — so that they don’t take up as much of your time.

Find What Works for You

For most people, effective time management is personal. What works for one construction business owner might not be effective for another. But if you’re struggling to meet completion dates and your habits are negatively affecting clients, you owe it to your yourself and your company to tackle the time-management issue head-on.


Posted on Jan 16, 2019

In the current politically charged environment, construction owners must continue to meet financial challenges, including tariffs on products frequently used in their industry. Notably, tariffs have been imposed on aluminum and steel, among other commodities. What’s more, the situation is fluid and constantly evolving. How can you navigate through this minefield? Calmly deal with the tariffs in your typical businesslike manner, guided by your professional advisors.

How Tariffs Work

A tariff is akin to a tax on imported goods. Generally, it is paid directly by the importer, not by the exporting country. When the United States imposes a tariff on goods from a foreign country, it is paid to the U.S. Customs and Border Protection Service at the border by a U.S. broker representing an importer.

President Trump has aggressively instituted tariffs. After authorizing a 30% tariff on solar panels and a 20% tariff on washing machines, the president imposed a 25% tariff on steel and a 10% tariff on aluminum imported from most countries. On June 1, 2018, these tariffs were extended to Canada, Mexico and the European Union. (Only Australia and Argentina remain exempt). Five days later, the Trump administration announced a 25% tariff for hundreds of categories of goods imported from China.

Questions to Ask

With that in mind, here are the answers to several questions that construction firm owners may have about the recent introduction of tariffs.

Q. How can you best manage construction projects started before the tariffs went into effect?

A. It depends on the contract and the application of state laws. Generally, with contracts executed before the tariffs are effective, the tariffs may be part of the cost of the work for “cost-plus” contracts. However, the tariffs may cause you to exceed the guaranteed maximum price. If a delay is due to a shortage, you may be granted some relief under the contract.

If the contract calls for a lump sum and a fixed price, the contractor generally assumes the risk of subsequent price increases. Any relief would have to be found in other provisions in the contract. Unfortunately, tariffs haven’t been specifically stated in these contracts.

A firm might assert that they may be protected from tariffs because they are “taxes” under certain clauses. However, most legal specialists believe this argument lacks merit in the courts.

A force majeure clause may provide relief, based on the theory that the tariffs cause a delay beyond the contractor’s control. These clauses relieve the parties from fulfilling their contractual obligations when certain circumstances arise that can’t be changed or influenced by either party.

If you’re operating under one of these theories, be careful to observe the requirements for filing claims and providing notice.

Q. How can you best manage construction projects under the current situation involving tariffs?

A. Keep in mind that the imposition of tariffs can change at a moment’s notice, they currently are real and they pose a potential threat to your business.

When you’re presented with tariff-related problems, check the status of court opinions, regulations and orders before developing a strategy to counteract tariffs. Confront the issue head-on in any contracts you are negotiating and aim to include tariffs in the language.

In a best-case scenario, the force majeure clause would clearly cover all tariffs — not just aluminum and steel — and include broad language for other actions by government authorities. Ideally, you would also make sure this language is included in the terms of a cost-plus contract.

Finally, remember that time is a critical factor. Not only should the contract reflect considerations for an increased price, it would preferably give you more time to complete the work.

Q. How can you best plan for construction projects in the future?

A. As contracts and their interpretation fall under state law, it’s essential to incorporate this into negotiations.

Typically, firms and contractors in the construction industry will want to rely on provisions where subcontractors will be granted additional money and time when tariffs are imposed on the general contractor.

Practically speaking, much of this is best left to the attorneys, so make sure you have a reputable practitioner on your side who is experienced in construction matters. With the benefit of foresight, take the time to research the situation and address these issues well before your crews begin working on the job.

Give yourself enough time to negotiate the key terms into the contract for your satisfaction.

Potential Impact of Tariffs

It will still take some time for the recent tariffs to play out, but here are some possible implications:

  • Higher costs for aluminum and steel could cause construction to slow down and affect infrastructure spending.
  • According to the Trade Partnership, an economic consulting group, around 30,000 jobs would be lost in the construction industry as a direct result of the tariffs.
  • Price volatility may ensue, meaning it may be uncertain what you will have to pay for materials if you use existing suppliers.
  • If you can’t import what you expected from an existing supplier, you may be forced into using a new supplier that could charge more for materials.
  • Contractors and subcontractors will have to factor higher prices and price risk into their bids. This could cause a spike in bids.
Posted on Jan 4, 2019

Technology made significant inroads in the construction industry in 2018. Don’t expect that trend to change or abate in the upcoming year. In fact, as competition grows stiffer, more companies are likely to embrace the latest technological advances.

Practically speaking, it’s better to be a leader than a follower. Keeping that in mind, here are 10 high-tech construction trends to watch for in 2019.

1. Virtual Reality

Virtual reality (VR) isn’t just for video gamers and science geeks anymore. It has practical applications in the real world — notably, the construction field. In the not-so-distant past, VR was the exclusive domain of a handful of firms operating on the cutting edge. However, it’s becoming more mainstream as potential buyers crave and sometimes demand this option.

Besides the “wow factor,” VR can improve safety and efficiency, while helping to deliver a high-quality product. And by walking clients through a full experience at inception, users can present solutions for distinctive designs or unusual conditions. Expect to see increased use of VR in construction during the planning and design stages for major projects.

2. Augmented Reality

With augmented reality (AR), a close cousin of VR, users can “walk” through 3D and 4D models without moving their feet. Doing so enables them to collect valuable information about the environment in real time.

New applications on the market, including an iOS app called MeasureKit, allow users to aim their smartphone or iPad at an object or building component and interact with it through the screen. More products are expected to debut or gain traction. For example, Autodesk’s BIM 360 Glue software enables subcontractors to point a device at a component and obtain information from the 3D models laid against the image framed in the device.

3. Robotics 

Construction industry leaders are constantly looking for ways to improve efficiency, streamline procedures and promote greater safety. Not surprisingly, use of robotics is on the upswing. A robot effectively can scan a building, plan for its demolition and remove it with minimal human interaction. Other comparable functions should be implemented this year.

4. Wearable Technology 

New wearable devices continue to make their mark in the construction industry. Products range from smart glasses that add data to smart clothing such as heated jackets and cooling vests, to sensors in helmets, belts and shoes that sense fatigue or extreme stress.

These innovations may provide several benefits, including: 

Efficiency. Wearable devices can track movements and determine where resources are being best used or wasted.

Safety. Technology-based gear reduces workplace hazards, such as excessive heat and cold, and minimizes the impact of injuries that do occur by providing earlier warnings of danger.

Productivity. When workers have greater protection and feel safer, they’re more likely to be productive.

5. Smart Machinery

Not only is worker clothing becoming smarter, but machinery is doing much more than breaking  rocks or cutting wood. Today’s smart machinery is designed to collect data from job sites and analyze it for various purposes, including quality, tracking and safety.

Products such as drones can be use by crews to assemble photos, videos and other visual data so changes may be made or safety violations avoided. The built-in software can tag items by location, too. This enables supervisors to quickly identify and react to visual data on a specific job site. It also creates marketing opportunities based on the provided visuals, which can be added to a company website or brochures.

6. Prefabrication

Prefab is hardly new, but technology is refining this approach to construction and making it more accessible to a greater number of project owners and contractors. 

For instance, ManufactOn is an Internet-based platform that allows project participants to view the prefab process remotely or on-the-move. This means that anyone involved in the job can see the manufacturing process, get status updates and receive delivery notice of the assets in question. Similarly, Autodesk’s BIM 360 Docs makes it possible to view information in a single workflow spanning the entire prefabrication process. 

7. Predictive Analysis

Risk is a necessary evil for construction businesses. And how you identify and manage risk can make or break your company.

To help predict and address potential threats, new products can analyze data from subcontractors, suppliers, designers and even your crew. This provides a means for identifying project elements that need immediate attention as well as long-term strategic and industry issues. Over time, you can continue to receive updated analyses that allow you to more proactively address specific risks.

8. 3D Printing

3D printing was initially thought to primarily benefit architects and designers. They could create disposable models and reprint them often while perfecting a design. But 3D printing has also found a home in the construction industry.

This innovation has already been used in full-sized construction projects — even in the building of bridges. Now construction companies are beginning to use 3D printing to create the components of full-sized homes. The possibilities seem endless.

9. Green Building

Green (or “sustainable”) building refers to practices and procedures that are environmentally sensitive and that use resources efficiently. It encompasses the entire life cycle of a building, from design and construction through operation and maintenance to renovation and, finally, if necessary, demolition.  

Although green building is increasingly taking new forms, the main shared objective is still to protect the environment. This may be accomplished through elements such as:

  • Lessening use of energy, water and other resources,
  • Preventing pollution and chemical spills that can harm public health,
  • Improving productivity to run quicker, more efficient projects, 
  • Reducing waste and general deterioration, and
  • Increasing a building’s sustainability over the long term.

10. Connectivity

Delays caused by lack of communication or miscommunication between a job site and home office — or between a trailer and design office — can be frustrating and costly. This is especially true when you’re working on a razor-thin profit margin.

Fortunately, the technology for connecting remote sites is speeding up all the time. Mobile devices and the latest apps enable you to access the latest drawings and documents more quickly while handling Requests for Information (RFIs) and other issues. Miscommunications can be greatly reduced using videotelephony, web-based meetings and instant messaging. You can also prevent the need for rework and, if a change order does arise, document the circumstances more thoroughly so you’ll get it approved more easily.

Exciting Year

In summary, 2019 promises to be an exciting year for technological innovation and improvement in construction. Take steps now to put your construction company at the forefront. 

Posted on Mar 9, 2018

How IPD is slowly altering the construction process.

It’s not a stretch to say that the construction industry didn’t change much for decades before technology started making inroads around the turn of the century.And the forces of change are clearly at work in the current environment, encompassing the use of new and  improved tools, revised methodologies, and faster approaches to the jobs at hand.

Arguably, first and foremost for many construction firms is the transformation to an integrated product delivery (IPD) system. This approach emphasizes innovation and collaboration to reduce waste, cut costs and boost productivity. Leading professional associations such as the American Institute of Architects and the Associated General Contractors are spearheading the movement, creating standards and guidelines to be used in the process.

Team Effort

The main goal of IDP is to initiate a “team effort” of the owners of construction firms, architects, engineers, managers and subcontractors. Unlike traditional construction projects, where these individuals and groups generally act independently, IDP incorporates joint planning from the outset.

This approach to construction projects leverages knowledge and expertise that each team member brings, guided by these principles:

  • Trust
  • Transparency
  • Information sharing
  • Mutual objectives
  • Shared risk
  • Shared reward
  • Collaborative decisions
  • Total use of technological capabilities
  • Early involvement Early goal definition

Each team member’s skills are maximized and the focus shifts from meeting individual expectations to collectively achieving goals. The upshot: Success is measured by the degree to which those shared goals are achieved.

Traditional contracting and construction work is based on separate silos of responsibility. Practically speaking, transferring from one silo to another often results in inefficiency. The notion of breaking down silos of responsibility and requiring cooperation among all the main participants is a sea change in the construction industry.

Five Essential Stages

Although the details will vary from project to project, there are generally five critical stages to the IPD process:

1. Information-gathering and conceptualization.

A meeting of the minds must occur before the first shovel hits the ground. This requires brainstorming sessions about objectives and ways to avoid potential problems. There’s a heavy emphasis on minimizing the risks and mistakes that can typically plague a construction project.

2. Design.

The next logical step is to incorporate decision from the first stage into the design process, taking into account regulations and other applicable laws. Involving all team members at this stage helps reduce waste and provide overall savings.

3. Project execution.

When the design is complete, the project can be executed using computer modeling and design data analysis. Frequently, digital representations using Building Information Modeling (BIM) will be included, helping to predict outcomes. (See The Expanding Role of BIM below.) Be aware that any data generated from proposed projects must be analyzed and virtually tested to help ensure the desired results.

4. Actual construction.

In the past, this was typically the first step for a construction company. But, when using IDP, ground-breaking begins after the general contractor and perhaps certain subcontractors have already been involved in first three stages. Typically, this is the stage where the benefits of the integrated model are realized. The project should run smoothly without delays and design conflicts; change orders and waste should be avoided; and, most importantly, the job should come in on time and on budget.

5. Operations.

If initial objectives are met, operations will continue successfully, with reduced costs and maintenance expenses. This is likely to impress surrounding neighbors, potentially prompting additional projects.
Big Benefits on Tap

For many participants in IPD, the favorable results can’t be ignored. Among the benefits are:

  • Risks and rewards can be predicted.
  • Construction results can be assessed and analyzed.
  • Higher standards can be achieved.
  • Regulations can be more easily observed.
  • Construction procedural issues can be detected and accommodated quickly with minimum distraction and delay.
  • Contracts can be prepared for all team members, filling in gaps that can appear when parties work independently.
  • Cost estimations can be more precise.

The times, they are a-changin’. New technology allows for significant advances in efficiency and accuracy that translate into upgrades in delivery methods. To be successful, however, an IPD project requires all team members to tackle new roles. This dramatic cultural change is slowly evolving.

Adapt and Embrace

Don’t be left behind in the dust. Start adapting to the IPD framework now and embrace the shift that’s slowly changing the industry.

The Expanding Role of BIM

Building Information Modeling (BIM) is a powerful tool that can be used in a collaborative process.

When BIM is incorporated into integrated project delivery, it can create a solid visualization of the project and identify actual construction behavior, performance and other relevant data. It facilitates the process by clarifying intent and recording and sharing accurate information.

Similarly, BIM provides reliable data that reduces the need for requests for information, change orders and rework.

Practical advice: Require all the parties to use BIM and to share the information electronically.

Posted on Feb 12, 2018

Early reviews are mixed on how the Tax Cuts and Jobs Act (TCJA) will affect the residential and commercial construction markets.

Here is a review of how the new tax law could affect the construction industry:

Residential Commercial Construction

Growth in residential construction has been fueled, in part, by the tax breaks associated with home ownership. For decades, homeowners have relied on deductions to make the costs of acquisition and maintenance more affordable. Beginning this year, the TCJA waters down or eliminates the tax breaks for some taxpayers. Combined with other tax law provisions, this may have a dampening effect on the residential market.

These three key provisions of the TCJA are expected to strongly affect residential construction:

1. Individual tax cuts. The TCJA replaces the graduated tax rate structure with one featuring lower rates and wider bracket ranges at the upper levels. While this revised structure may lower tax liability for many taxpayers, it also reduces the benefit of offsetting deductions.

In conjunction with the tax cuts, the new law essentially doubles the standard deduction while eliminating or reducing certain itemized deductions. The net result is that a significant number of taxpayers who have itemized deductions in the past will be claiming the standard deduction instead in the future.

2. Mortgage interest. Generally, a homeowner can deduct mortgage interest paid on a loan for a qualified residence, including a principal residence and one other home such as a vacation home. Before the new law, the deduction was limited to interest paid on the first $1 million of acquisition debt such as that incurred to buy or build a home and $100,000 of home equity debt.

For loans after December 15, 2017, the TCJA reduces the acquisition debt threshold to $750,000, while the mortgage interest debt deduction is completely eliminated after 2017. Homeowners with existing acquisition debt are grandfathered. These changes could discourage home buying.

3. Property taxes. Previously, a homeowner could deduct the full amount of state and local property taxes paid during the year, in addition to state and local income taxes or sales taxes. But the new law imposes an annual limit of $10,000 on these deductions. This, too, may lead to more homeowners claiming the standard deduction rather than itemize.

This provision is especially damaging to residents of states where property taxes are high, such as California, New York and New Jersey. Because the full $10,000 deduction wasn’t available until 2018, and isn’t available at all to those who don’t itemize, this cutback is expected to result in declining home values.

There’s no denying that these changes cumulatively hurt homeowners. Current house prices reflect current tax breaks because homebuyers generally factor taxes into their decisions. The reduced tax benefits will translate into lower housing prices.

Some reports say that the new tax legislation will also hit housing through higher mortgage rates. Specifically, at the peak of the new law’s impact on housing prices in 18 to 24 months, reports estimate that national house prices will be 4% lower than they would have been without any tax legislation.

Commercial Construction

The TCJA generally is seen as an overall boon for big business with some concessions to small businesses (see box below, Tax Incentive for Small Businesses). Many provisions are designed to stimulate business growth and expansion, so the commercial construction market appears primed for an upward trend. Generally, the business tax breaks are effective in 2018, but, unlike the individual provisions, which are scheduled to sunset after 2025, these changes are permanent.

Here are three provisions likely to affect commercial construction:

1. Corporate tax cuts. The new law replaces the graduated tax structure for C corporations with a flat rate deduction of 21%. Previously, the top rate was 35%, so this change represents a significant reduction for larger companies. With corporations able to reduce the tax cost of doing business, they likely will be looking to spend more, including making building acquisitions and improvements.

2. Business expensing. Due to two related changes, business entities will be able to realize instant tax gratification for expenditures on qualified business property:

  • Section 179 deduction. Effective in 2018, the maximum expensing allowance for business property is doubled from $500,000 to $1 million and the threshold for phasing out the deduction is raised from $2 million to $2.5 million. Note that the Section 179 deduction is still limited to the amount of business income.
  • Bonus depreciation. The previous 50% bonus depreciation allowance is doubled to 100% for qualified property placed in service after September 27, 2017. This 100% deduction is gradually reduced to zero over five years, beginning in 2023. The definition of “qualified property” is expanded to include used property (this already was allowed for Section 179 property).

Because companies will frequently be able to write off the entire cost of equipment and machinery in one year, they may be looking to expand their physical space or find larger quarters.

3. Real estate depreciation. Under the previous law, business buildings were generally depreciated over 39 years. A 15-year cost recovery was allowed for qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property. The new law consolidates certain provisions to provide the faster, 15-year write-off period and makes the changes permanent.

The commercial market is expected to benefit overall from these changes, spurring growth for construction firms. Of course, other developments and extenuating circumstances could have an impact and shift trends one way or another. We will continue to monitor the industry in the wake of this monumental new law.

Tax Incentive for Small Businesses

The new law doesn’t just benefit big business.

One key provision creates a deduction of up to 20% for pass-through entities such as S corporations, partnerships and limited liability companies, as well sole proprietors. The deduction is phased out for most service businesses and may be reduced for other entities under a complex set of rules.

With this tax break in hand, smaller businesses may jump on the building bandwagon, resulting in more revenue for construction firms.

Posted on Jan 16, 2018

Typically, construction firms have worked in the field while manufacturers stayed put, cranking out products in centralized factories. One of the exceptions to the rule were diners. They crossed the barrier by being fabricated off-site in their familiar narrow and elongated style, which facilitated transportation to the restaurant’s ultimate site. In fact, buildings have been built in one place and then reassembled in another throughout history, with early uses being for new settlements and hospitals. But now, the distinction between on- and off-site constructions is becoming increasingly blurred. Offsite construction — also called prefabrication or modular construction — has been rapidly growing in popularity.

According to a recent report published by Technavio, a global technology research and advisory firm, the global prefab construction market is expected to rise at a compounded annual rate of between 6% and 7% during the next few years. The report, which valued the prefabricated construction market at about $79 million in 2015, expects the amount to scale the $110 million mark by 2020. Now, even contractors who were initially hesitant are looking to get on board.

Simple Concept

The concept of off-site construction is relatively simple. Essentially, building components or completed structures are manufactured in a factory. Typically, this method utilizes all the bells and whistles of modern manufacturing, including ultra-precise design software, robotics and logistics-based delivery. This helps to create uniform pieces that can be built quickly and transported efficiently to the jobsite, where they’re assembled.

Proponents of off-site construction point to two major reasons for its growing popularity:

1. Reduced construction costs, and

2. Improved quality.

Producing components or buildings in the factory ensures complete control of the building process. Notably, there are no deviations in quality due to a shortage of skilled workers, a problem that has been plaguing many on-site crews in the past decade.

What’s more, construction firms and contractors don’t face the usual disruptions because of inclement weather, especially during the winter months, or accidents caused by human error. As a result, schedules can run seamlessly and few, if any, unexpected expenses are incurred.

But that doesn’t mean off-site construction is being universally embraced. Some long-time contractors and others in the construction industry bemoan the cookie-cutter nature of prefabrication. They maintain that computers and robots in the factory can’t readily duplicate distinctive touches and true craftsmanship.

Whether off-site construction is beneficial or not, or somewhere in between, is a matter of opinion. Nevertheless, the industry is leaning in this direction.

Five Key Factors in Off-Site Construction

Several developments are fueling the increase in off-site construction as we head into 2018. Contributing to the trend are these five key factors:

1. Lack of skilled labor. The continuing skilled labor shortage is making off-site look attractive to many construction companies. For example, in a 2017 survey conducted by the Associated General Contractors (AGC) of America, a leading construction association, 73% of the construction company owners said they’re still having difficulty finding qualified workers.

As finding and retaining good workers remains a challenge, it becomes harder to stay on schedule and on budget. Off-site construction can help ease this problem.

Of course, prefab doesn’t eliminate the need for skilled labor. Skills are needed both for the installation and inspection of the modular structures and the actual fabrication. Modular construction does, however, mitigate some of the labor requirements needed for initial construction.

2. Technological advances. Technology is a driving force behind the growth of prefab. Businesses and consumers are accustomed to whipping out their smartphones and ordering whatever they want on-demand and instantly. Off-site builders are making this a reality.

For example, software giant Autodesk recently partnered with San Francisco-based Project Frog to create a cloud-based connected system linking architectural designs to industrial fabrication facilities. As a result, you can order up a building as easily as you can buy something on Amazon or eBay. Corporate giants like Starbucks and Marriott have already used this sort of high-tech approach to build drive through coffee outlets and prefabricated hotel rooms.

3. Collaborations and alliances. The Autodesk-Frog partnership is just one example of the increased collaboration and cooperation between firms. These alliances aim to satisfy both the prefabricators and traditional construction firms and contractors. Previously, the construction industry operated in a virtual vacuum.

Collaboration and communication at the outset is critical to success. Once prefabrication begins, it’s more difficult and costly to make changes, especially at the rapid pace of off-site construction. It pays to get it right from the start.

4. Objections and education. As more construction firm owners and their workers learn about the benefits of off-site construction, objections gradually will likely diminish. In addition, education will be enhanced by the successful completion of projects. Some of the most effective promotions of modular construction come from Marriott, Starbucks and Google, who bought 300 modular units for Silicon Valley employees.

5. Eco-friendliness. Besides saving time and money and improving quality, off-site construction presents another advantage: It’s friendlier to the environment than traditional construction.

Construction typically requires extra materials that lead to increased waste. However, the extra materials from sub-assemblies in a factory can be recycled in-house rather than sending them to a landfill. Moreover, the controlled environment of a factory allows for more accurate construction, tighter joints and better air filtration. In turn, this can result in better wall insulation and increased energy efficiency. Prefabrication and “going green” may work hand-in-hand.

No Worries for Tradition — Yet

Although great strides are being made in prefab buildings, they aren’t expected to eliminate the need for “boots on the ground” construction companies. The model tends to suit certain types of projects — such as health care facilities and modular housing developments — where uniformity and repetition of design is standardized.

However, as the popularity of off-site construction continues to grow, it may soon affect your market — if it hasn’t already. Take a look around and, if necessary, take action to help ensure your firm won’t be left in the dust.