While different industry groups have had mixed reaction to the Inflation Reduction Act’s prevailing wage provisions, on September 14 the New York State Department of Labor issued a proposed rule for prevailing wage for aggregate hauling. Public comments are being accepted until 60 days from the notice’s publication.

First, some background. As stated on the NYS Department of Labor website, “Under New York State Labor Law, contractors and subcontractors must pay the prevailing rate of wage and supplements (fringe benefits) to all workers under a public work contract. Employers must pay the prevailing wage rate set for the locality where the work is performed. Prevailing wage is the pay rate set by law for work on public work projects. This applies to all laborers, workers or mechanics employed under a public work contract.” (You can find the schedule of prevailing wages from July 1, 2022 to June 30, 2023 here.)

On December 31, 2021, Section 220(3-a) of the Labor Law was enacted regarding prevailing wage for aggregate hauling. As noted in the September 14, 2022 NYS Register Rule Making Activities, “The Governor’s Approval Memorandum to Senate Bill 255-B stated: ‘I have reached an agreement with the Legislature to clarify that prevailing wage will be paid only at the worksite itself and for travel between the worksite and a designated central stockpile where aggregate supply construction materials are delivered. Prevailing wage will not apply to out of jurisdiction deliveries of aggregate supply materials to the designated central stockpile.’”

A subsequent amendment to Section 220(3-a)(f) introduced new terms – including “worksites,” “aggregate supply of construction materials” and “central stockpile – leaving questions about the law’s application.

The proposed rule sets out to define these terms as follows: “(a) Worksite means the area in which the improvements associated with a specific project, as defined in the construction contract, and any surrounding areas supporting that specific project. (b) Central stockpile means a location of centrally stockpiled materials solely dedicated for use on a public work project that is not part of a worksite but intended to support the worksite. (c) Aggregate supply construction materials” means sand, gravel, stone, crushed stone, dirt, soil, millings, and fill.”

The proposed application is as follows: “For the purposes of Section 220 of the Labor Law: (a) Prevailing wage shall be paid for work performed at a worksite involving the delivery of aggregate supply construction materials to such worksite. (b) Prevailing wage shall be paid for work performed involving the hauling of aggregate supply construction materials from a worksite to a central stockpile, as well as any return hauls, empty or loaded, time spent loading or unloading at a worksite, and time spent loading or unloading at a central stockpile related to hauls from or to a worksite. (c) Prevailing wage shall be paid for work performed within a 50-mile radius of a worksite involving the delivery of aggregate supply construction materials from a vendor of aggregate supply construction materials, such as a plant or quarry, to a worksite, except prevailing wage shall not be paid to direct employees of a supplier of aggregate supply construction materials, when making a single delivery in a given day.”

To obtain text of the proposed rule, as well as required statements and analysis, or to comment on the rule, write to Jill Archambault, Department of Labor, Building 12, State Office Campus, Room 509, Albany, NY, (518) 485-2191 or email: regulations@labor.ny.gov.

While RBT CPAs is not an expert in labor law – you’ll have to consult your legal counsel for that – we do know accounting, audits, bookkeeping, and taxes. If you need some extra time to stay up to speed on all the laws and changes governing wages, you can depend on RBT CPAs to handle your accounting and related needs with the highest levels of professionalism and ethics. We’re proud to have served businesses and municipalities in the Hudson Valley and beyond for over 50 years. To learn what we can do for you, give us a call.

Will there be a recession? Are we already in one? How will construction be impacted? While the debates rage on, it’s prudent to prepare your business, just in case.

Starting with some basics, Investopedia says, “A recession is a significant, widespread, and prolonged downturn in economic activity.” While construction is not typically a recession-proof industry, there are steps construction companies can take now to strengthen their ability to withstand economic uncertainties.

Construction Dive’s recent article “What a Recession Would Look Like for Construction” (Obando, Sebastian. August 16, 2022) says preserving cash, building backlog, and going after Federal contracts is a winning game plan according to a few sources.  In addition, we’ve identified seven tips repeatedly mentioned by a variety of sources to help construction companies prepare for and ride out a recession. Here they are:

1. Stick to what you know, what you do really well, and what’s profitable, and then focus on that.
2. Keep a close watch on your business’ finances and have a financial plan. Focus on managing projects to promote profitability and do what you can to ensure contracts protect your interests. Know your costs and look for opportunities to reduce expenses. Hold off on large purchases. Preserve cash (see our prior post on “Tips to Help You Manage Cash Flow During Volatile Times.”) Build emergency funds to help cover expenses for at least three to six months. Pay down debt while you have the money so you can also build credit worthiness should you need to tap into additional resources in the future. Also, be smart about financing and loans – make sure you know what’s available through the Small Business Administration, the state, and the Federal government.
3. Do not rely on backlog. Have a strategy for consistently drumming up new business over the next six to 18 months and focus on a long sales cycle.
4. Keep your best workers. While downsizing is a typical reaction to a recession, the construction industry is in a unique situation because of the labor shortage plaguing the industry. If possible, hold onto your best employees – and even look for new ones – to adequately staff jobs and be in a better position after the downturn.
5. Look for Federally funded and local municipalities’ projects – there are plenty of them (including new opportunities from the Inflation Reduction Act) and they can serve as a lifeline.
6. Stay close to customers. Build and maintain open communication and strong relationships. By keeping the conversation going and seeing what you can do to support your customers, you build positive relations and garner information to help you strategize.
7. Do some scenario planning. Gather your top people around a table to speculate about what may happen. Then, proactively develop a plan for how you’ll respond, so you can act quickly.

And perhaps we’re a bit biased but one other thing you can do is partner with RBT CPAs for all of your accounting, tax, and audit needs. For over 50 years, we’ve worked with businesses across the Hudson Valley and beyond to deliver professional, quality, and ethical services that deliver peace of mind. That way, our clients can focus on what they do best. To learn more, give us a call.

Isn’t it ironic? Just when prospects for record-setting spending in construction lay on the horizon thanks to the infrastructure law, you’re likely short on workers due to a labor shortage that is hitting the construction industry harder than most. What can you do?

While construction has been facing labor shortages for decades, the number of construction workers ages 25-54 decreased 8% in the last ten years alone. With an average retirement age of 61 and nearly 20% of current construction workers over age 55, the gap between the number of jobs and workers available is likely to widen.

According to a model created by the Associated Builders and Contractors, this year the construction industry will need to attract almost 650,000 new workers – that’s in addition to regular hiring demands.  Shortages are reported to cause project delays, quality issues, worker safety concerns, productivity decreases, and higher payrolls. Even though spending on construction is currently sluggish, the talent shortage remains the industry’s top challenge.

As reported by McKinsey & Company, construction companies must proactively address the labor challenge on three fronts: productivity; talent attraction and retention; and senior leadership engagement.

Productivity

Focus on new ways to approach project planning and delivery, with an eye towards reducing labor required by rethinking project design and reinventing how work gets done.

• Off-site and modular construction offers numerous benefits.
• Digital technologies and analytics can help identify the best way to work and keep projects moving.
• Adopting lean construction practices can shrink waste while driving sustainable improvements.

Talent Attraction and Retention

Every step in the talent attraction, acquisition, and retention process presents opportunities to improve.

• Know where to find talent, with targeted job sites like iHireConstruction.com; CareersinConstruction.com; and ConstructionJobs.com.
• Accelerate recruiting, interviewing, hiring, and onboarding by reducing timelines, cutting out extra steps, and automating with technology (the longer the process takes, the more likely you’ll be ghosted – a.k.a. blown off – especially by the younger generation).
• Strengthen retention by finding out what your employees want beyond competitive pay – there’s growing interest in autonomy, flexibility, support, and upward mobility. Focus groups and surveys can help you gain insights into what matters most.
• Build a talent pipeline with programs that support and promote skill development. Build relationships with high schools, trade schools, and colleges to create pathways to careers. Mentoring and apprenticeships are growing in popularity.
• Consider non-traditional talent pools like veterans or formerly incarcerated individuals or returnships for people looking to return to the workforce after retiring. Diversify with more women and under-represented groups.

Senior Leadership Engagement

Protecting income and profits is a senior leader priority so getting them involved in supporting talent acquisition and retention shouldn’t be hard because of the direct link between the two.

• Invite a senior leader to sponsor talent acquisition and retention as a strategic priority.
• Work with leaders to establish Key Performance Indices (KPIs) to track and measure progress specifically related to talent and addressing labor costs across the value chaing.
• Work with leaders to create a culture employees want to be part of and contribute to.
• Invite leaders to celebrate and recognize talent.

What About the Fourth Way?

That’s only three ways – the title says four. We know, we’re accountants. We’re taking liberty to add the fourth category: technology. While it’s inherent in the first three, it bears having its own discussion, because beyond solutions that can help drive productivity, streamline recruiting and retention, and track KPIs, there’s big perception value around having state-of-the-art technology.

Up-and-coming workers don’t know a world without it. They understand how to use it better than anyone else to streamline communications, processes, intelligence gathering and sharing, project management, and more. If you want to show new workforce entrants that your company is a place where they can leverage higher skillsets and continually develop knowledge, the latest in technology is like food, water, and air to them – they can’t live without it.

While focusing on your staffing challenges, why not partner with RBT CPAs to handle all of your accounting and tax challenges? We’re the largest CPA firm in the Hudson Valley and recognized as a Great Place to Work. You can trust that we’ll do everything right the first time, so you can focus on other priorities – like labor. Find out what we can do for you — give us a call.

While waiting for Infrastructure Investment and Jobs Act (IIJA) projects to get underway, it’s a good time to consider whether your construction company can and should get bonded for upcoming projects and, if so, to get your financial statements in order.

The construction industry is facing one of the most challenging and exciting eras in its history. It’s challenging as a result of supply chain issues, material shortages, increased cost of materials, project delays, and the tight labor market. It’s exciting because of the coming building boom thanks to the Infrastructure Investment and Jobs Act (IIJA). (Even firms not interested in IIJA jobs will no doubt benefit from the sheer volume of jobs competing for limited construction resources.)

Construction companies interested in bidding for federal and state projects (per the Miller Act/Little Miller Act of NY) – and even a growing number of private jobs – should be getting their financial statements ready to secure the bonds that can help them be eligible to apply for and win new work.

Construction bonds are issued per project and protect the project owners from financial losses (whereas insurance protects the construction company). Typically, the cost of securing the bond is passed on from construction companies to project owners, and can add an estimated 1% to 3% to final bills. Although a construction company may feel like this makes it less competitive, bonding actually provides project owners with added peace of mind that work will be completed and comply with federal, state and municipal regulations, while mitigating risks.

What kinds of risks? There are a variety that can impact a job, from companies walking off a project or going out of business to not paying vendors so timing and supplies are delayed, or not having enough funding to complete a project.

When your company applies for a bond from a surety company, that company is going to do rigorous prequalification checks on licenses, past work, current workload, and finances to ensure your company can deliver what it promises and is a good risk. Because of this screening, project owners get an added level of confidence that they have the right contractor for the job. (Not being bonded can be inadvertently construed as a sign of weak finances, an inability to complete jobs, poor performance, and more.)

There are different types of bonds, with two main ones being for performance (delivering what was promised on time and in budget) and payment (ensuring suppliers, laborers and subcontractors get paid). Others include bid, maintenance, public works, site improvement, and more. The premium for a bond is typically 1% to 5% of the total value of the bond, but can be as high as 20% if a construction company has bad credit.

So, what do you need to have in hand to apply for a surety bond? A bonding company will typically look for your annual financial statement for each of the last three years, including balance sheet, income statement, and cash-flow statement. They’re interested in factors like profitability, net worth, cash flow, billing, debt, and more.

If you need help getting your financial documents ready to secure a bond, give RBT CPAs a call. We are a leading accounting and tax firm in the Hudson Valley and have extensive experience supporting businesses in the construction industry. Plus, we like to bond with our clients, and help them grow.