by Daniel Kittell | Accounting News, Industry - Construction, News, Newsletter, Small Business
The Trump administration enacted new tariffs on lumber and kitchen cabinets, adding pressure to construction budgets. The tariffs apply a 10% duty on softwood lumber and a 25% levy on imported kitchen cabinets. By 2026, the cabinet tariff is set to double to 50%. As a result, we could be looking at higher construction costs, project delays, and a housing market ripple effect that could ultimately hit renters and homebuyers. Read on as we discuss the impact of these tariffs on the construction industry and the responsive steps to take now.
Why These Tariffs Matter
The construction industry relies heavily on imported materials. Lumber, cabinets, steel, and other staple building materials often come from global suppliers because domestic supplies fall short of meeting demand.
Canada is the top supplier of softwood lumber, making up about 40% of lumber imports. This is followed by China, Brazil, Mexico, and Germany. Tariffs on these imports raise prices for consumers.
Unfortunately, there is no quick fix. With a limited domestic production base, builders can’t just “buy American” and move on. That means higher costs get passed along the chain, from developers to consumers.
The Impact on Builders and Developers
When it comes to construction projects, a 10-25% spike in material costs can throw off budgets, delay construction timelines, or force design changes. Some of the hardest-hit sectors include multi-family housing, affordable housing projects, and areas rebuilding after natural disasters. For example, Los Angeles developers were already paying a premium for lumber after the wildfire damage. Now, added tariffs could stall rebuilding efforts and new construction.
An Industry in Flux
Developers are looking for new suppliers in countries not affected by tariffs, and they’re exploring alternatives such as engineered wood like LVP, laminate cabinets, and open shelving. But making these changes when projects are already underway can lead to longer lead times and further delays.
And while tariffs are enacted to protect U.S. industries, there is no quick way to ramp up domestic production of lumber and cabinetry. So builders are caught in the middle.
What Construction Firms Can Do
Here’s how construction businesses can respond to these tariffs:
- Review your material suppliers. If you rely heavily on imported lumber or cabinets, check lead times.
- Start having conversations with clients about possible price fluctuations.
- Make sure new bids for projects account for potential increases.
- With new projects moving forward, build in flexibility for longer timelines.
- Explore U.S.-made materials or products from countries not affected by tariffs.
Tariffs could significantly impact the construction landscape as builders and developers face higher costs, tighter timelines, and growing uncertainty. For now, and especially next year when tariffs on lumber rise further, the cost is likely to trickle down to consumers and local economies. The construction industry will need to adapt quickly, or fall behind.
by Daniel Kittell | Accounting News, Construction, Industry - Construction, News, Newsletter
Understanding how economic trends influence construction can provide valuable insights for businesses and professionals in the field. For instance, high interest rates and slower economic growth will put increasing pressure on construction and manufacturing this year. Here’s a comprehensive look at how the current economic landscape is likely to impact construction in 2024.
Inflation and Interest Rates
The economy is still experiencing inflation pressures from energy prices, wages, and consumer spending, which impacts project financing.
Additionally, with interest rates playing a pivotal role in construction financing, the Federal Reserve’s actions this year regarding cutting interest rates hold significant sway. Lower interest rates will stimulate borrowing for construction projects, reducing overall borrowing costs for businesses and clients. This creates incentives for investment in construction ventures, particularly in the residential sector.
Supply Chain
Late last year, construction companies were still facing supply chain issues, but construction firms can expect supply chain improvements as the year progresses, which will help reduce delays in construction projects. The pandemic changed communication methods between the construction industry and suppliers, with construction firms adopting communication technologies to streamline material ordering workflows. With access to more complete and speedy information, construction firms are empowered to keep projects on track.
Labor Market
The construction job sector experienced growth last year. However, construction job openings have decreased recently, even though wages have increased by 4.9%. This highlights the importance of competitive pay and innovative training programs to attract and retain employees.
Recession Worries
Higher employment and higher wages create more spending power and add to the supply and demand issues perpetuating a potential recession. With interest rates stalling and contributing to a decrease in project financing power, an economic recession is still top of mind for businesses. While signs at the moment are pointing to a soft landing, the construction industry should still be preparing for economic shifts.
Shifting Geopolitical Landscape
The Israel-Hamas conflict heightens concerns about the possibility of broader tensions in the Middle East, which could potentially impact energy and other raw material prices. U.S. sanctions on Iran might exacerbate these issues, while ongoing tensions between the U.S. and China could contribute to inflationary pressures.
by Daniel Kittell | Accounting News, Construction, Industry - Construction, News, Newsletter, Small Business
The Occupational Safety and Health Administration (OSHA) plays a vital role in ensuring the safety and well-being of construction workers, and violations of OSHA regulations can lead to significant fines. Obviously, you want to protect your employees from harm, but you also want to avoid serious consequences for your business. To avoid increasing OSHA violations and fines, here are some essential tips that contractors and construction companies should consider in order to reduce risk and protect employees as well as their businesses.
Stay Informed About OSHA Regulations
The first step is to be aware of OSHA’s regulations and safety standards for the construction industry. Keep in mind that these regulations aren’t permanent – they periodically evolve to address new hazards and improve worker safety. Safety standards include topics such as fall protection, trench safety, personal protective equipment (PPE), use of scaffolding and aerial lifts, and the safe operation of vehicles. The construction industry is subject to some different standards than other industries, so be sure you’re aware of the safety issues that apply to your specific jobsite.
Prioritize Training
The best way to keep workers safe and prevent OSHA violations is to ensure that all employees receive proper safety training and education. You need to keep informed of the types of training required and how frequently the trainings need to be repeated. Additionally, administer regular safety meetings and training sessions to reinforce safe practices, raise awareness of potential hazards, and keep everyone informed about the latest OSHA regulations. OSHA offers a variety of training and resources to help companies comply with training requirements.
Check in with Workers
Keeping up with required training is a start, but in order to create an environment where workers feel safe and supported while expecting to hold to proper safety regulations, make sure you’re having regular check-ins with employees. Discuss any safety issues they might be encountering, and double check they’re using the appropriate safety gear.
Regularly Inspect and Maintain Equipment
Faulty equipment and machinery are common causes of accidents in construction. Regular inspections and maintenance will help identify and rectify potential issues before they lead to accidents. Ensure that all equipment, tools, scaffolding, etc. is in good working order and that safety features are functioning correctly. Keep a list of inspection dates, including the last inspection and when something will need to be inspected again. It’s important that safety inspections don’t become an exercise in checking off boxes. They need to be thorough to ensure the highest level of safety.
Document Safety Procedures and Incidents
Maintain thorough records of safety procedures, training sessions, and safety incidents. This documentation can serve as helpful evidence in case of disputes or OSHA inspections.
Take Advantage of OSHA Consultation Services
OSHA offers no-cost, confidential consultation services to small businesses as a resource for improving safety compliance. The service will help identify and address potential safety issues and establish or improve safety programs.
If you have more questions about OSHA regulations or are seeking guidance on how to learn more about improving your construction site’s safety measures, please don’t hesitate to contact me. We’re here to assist you whether you need more information or wish to schedule an appointment. Safety is a shared responsibility; let’s work together to uphold it.
by Daniel Kittell | Accounting News, Construction, Industry - Construction, News
Construction firms are catching on to the value that drones – or unmanned aerial vehicles (UAVs) – add to construction projects. In this article, we’ll explore some of the benefits of construction firms using drone technology.
Enhanced Accuracy
Drones have the capability to collect detailed, high-resolution images of construction sites, equipping construction firms with a level of accuracy that may not be feasible with traditional methods. This can be especially useful for surveying and mapping sites. Creating and updating topographical maps are traditionally expensive and time-consuming tasks that require critical attention to accuracy. By employing drones, which can map large areas of land, construction firms can create more precise and detailed maps, which can help with planning, design, and overall project management.
Increased Efficiency
Drones can quickly and easily capture data and images of construction sites, offering firms the ability to swiftly evaluate progress and identify any issues that may need to be addressed. This use of drone technology saves time and resources compared to more traditional approaches such as manual inspections or using manned aircraft. And because drones can cover vast areas in a shorter amount of time, construction firms are able to gather more data and make informed decisions faster.
Improved Safety
Drones provide an effective and economical way to monitor safety. Because drones can be used for site inspection and monitoring, the need for workers to engage in more physical tasks, like climbing scaffolds or ladders, can be reduced, thereby avoiding potential falls or other accidents. Additionally, drones can monitor hard-to-reach areas, capturing real-time information without risking health and safety of personnel. Drones can also help determine possible hazards and unsafe conditions, enabling workers to address them before they become problematic.
Better Communication
Construction firms can use drones to capture aerial footage, providing a visual representation that communicates site progress in a way that is easy to understand and keeps all parties, including clients and investors, on the same page. Drones can also help project leaders quickly identify malfunctions and breakdowns and communicate with equipment owners, who can take speedy action to assess issues, which can cut down on delays and added costs.
Cost Savings
Drones can help construction firms save money in many ways. Two significant money-saving attributes this technology provide are:
- Labor costs: By using drones for tasks such as inspections and mapping, firms can reduce the need for workers to physically visit sites.
- Problem identification: Drones can help identify issues promptly, which can prevent costly delays or rework later on in the project.
Increased Competitiveness
Construction firms can stay ahead of the curve by using drone technology. The construction industry is becoming progressively technology-driven, so the sooner firms embrace new tools and technologies, the better positioned they’ll be to succeed in the long run.
by Stephen Reed | Accounting News, Construction, Industry - Construction, News, Technology
The construction industry isn’t known for its willingness to embrace change, so it’s no surprise that, generally, the industry’s been slow to accept technology. Enter the Covid-19 pandemic and subsequent economic turmoil and labor and material shortages, and many business owners are now looking to technology-based solutions to drive productivity and keep costs low. Below are five examples of how modern construction technology can help control project costs.
Make More Accurate Cost Predictions
Every construction project is unique, and for some projects, budgeting can be vague and inaccurate, rendering cost prediction difficult. Faulty cost prediction can lead to the need for rework. 3D modeling software like BIM allow businesses to shift from the design-bid-build model to a more effective design-build model. Project managers can use the software to:
- Digitize the construction site
- Help make better design decisions
- Improve predictability, productivity, and profitability of workflows
- Share plans and designs with trades and contractors to increase efficiency
- Compare supply and financial needs of different building techniques
Cut Down on Rework with Project Management Software
There are typically at least a few changes that need to be made to the scope of a construction project throughout the course of the job. In fact, approximately 30% of the work done by construction firms is actually rework. Project managers are constantly needing to change course, adjust budgets, and communicate changes to their teams as quickly as possible. When project managers take advantage of project management software, they can increase project visibility, improve communication and respond quickly to project changes, and streamline task management with real-time insights from the field. All of this helps to curtail unnecessary rework.
Stay Informed of Market Fluctuations and Identify Areas of Inefficiency
Construction companies are no strangers to the challenges that come with inflation, shifting labor costs, and irregular supply prices. Though these factors are typically observed during the early planning stages, by the time the project gets rolling, project managers could be working off of outdated market information. AI-based software can help project leaders stay informed of adjustments in regulations or costs, while construction budgeting software can help pinpoint inefficient processes within the project.
Prevent Inefficiencies with Real-Time Jobsite Data
Real-time on-site data is necessary to boost efficiency and improve projects. With construction management software, project leaders can collect real-time jobsite data such as daily reports, production tracking, and safety compliance. Daily data collection helps project managers spot and prevent expensive inefficiencies as they arise.
Communicate Through Digital Technology to Ensure Project Success
Construction companies can shorten turnaround time and operational expenses by strengthening on-site efficiency and output. This is why a large number of construction companies have started to invest in connected technologies, which use sensors and tags to connect job sites, machines, and workers, allowing for real-time visibility and adjustment capabilities for project leaders. Benefits of connected technologies include improved communication and transparency, more accurate timelines, and minimized risk.
