Architecture Billing Index (ABI)

As I've written before (See October 2010 posting), I enjoy following the markets and economic data.  Over the years we've all heard that when the architects are busy, that bodes well for contractors down the road.  With that, it makes sense for us to keep an eye on the Architecture Billing Index (ABI).  Basically, if that index is above 50.0 it indicates an increase in architect's billings.  Conversely anything below 50.0 indicates a decrease.  

The American Institute of Architects (AIA) has stated that there is an approximate 9 to 12 month lag between architects billings and non-residential construction spending.  The index was created in 1995 and is widely believed to be a strong leading indicator of construction activity.  It is based on data from a monthly "Work on the Boards" survey and is created by the AIA Economics & Market Research Group.

This index has strengthened in recent months (despite a 3 point drop from March, when it was 50.5, to 47.6 in April 2011 on a nation-wide basis).  See this chart for a history of this index back to January 1996.  Note the sharp drop from January 2008 to the bottom at January 2009.  Next you'll see the strong rebound in the next two years through January 2011.  Even though the index increased quite a bit over those two years, all that meant was that things were "less worse" than the were before, but still not good.  Keep in mind, any number under 50 for the ABI means a contraction in architects billings.

Please note the chart linked to above is on a national basis.  I was able to locate regional data which shows the West is the weakest in the nation.  Regional February 2011 ABI data shows the following:

Midwest: 51.15, South: 48.3, West: 47.7, and Northeast 51.2.  We can see weakness; a decline in billings, in the West and the South, with relative strength in the Northeast and Midwest.  The West region has ranged between 47.3 and 49.7 over the last 6 months, never signaling an increase in architects billings in that time frame.

CONCLUSION

When reviewing the last few years of this ABI metric, although things are not as bad as they were across the nation and here in the West over the last few years, they are still not strong and it will take perhaps a few more years, perhaps 2013/2014, to get back to times of meaningful growth and strength.  Those contractors who have created an efficient, lower overhead operation and do the basic blocking and tackling; selective, smart bidding and strong project management will survive to see the better times down the road.

How to Manage the Software Selection Process

The link right below will take you to the complete article along with a checklist to help you better control the software selection process...both the article and the checklist contain useful information to better assure a successful decision and approach to choosing the best fit software for your company...As always, enjoy the information and let me know if you have any questions or require additional information...Glenn

So you've decided to consider getting the proper financial accounting and reporting package for your construction business...for the complete article and checklist click here

Looking for Work? Martin Luther King, Jr. Medical Center

Clark Construction is looking for subcontractors to bid on the Martin Luther King, Jr. Medical Center - Multi-Service Ambulatory Care Center/Ancillary Project.  Click on this link to obtain details regarding the project.  If you require further information or need assistance, contact Davis Blue Print at 323.225.7483.  Final Scope Letters will be due on June 7, 2011 and Final Price Proposals are due on June 14, 2011.

Clark Construction requires all subcontractors and suppliers to complete a Qualification Application.  Click on this link to get to that form.  Subcontractors are required to provide 100% Payment and Performance Bonds for contracts greater than $100,000 as well as including bonding qualifications in the written bid proposal.

There will be a Pre-Bid meeting on May 10th, details still forthcoming.  It is suggested that  subcontractors call Clark Construction at 714.429.9779 and talk with the estimator who is assigned to your specific trade.

Good luck in sourcing new work!

1099 Expanded Reporting Requirements Repealed

Last year, as part of the health care reform legislation, the 1099 reporting requirements were expanded to include all payments from businesses $600 or greater in a calendar year to a single payee including corporations (except tax-exempt corporations).  This would have proved onerous on most businesses and individual taxpayers (those receiving rental income and making payments to vendors, service providers, etc.).

Last Thursday, President Obama signed a repeal of these expanded 1099 reporting requirements.   Essentially the requirements are back to where they were before the rules were expanded within the health care reform legislation.  It is important to note that this repeal did not affect the increased reporting penalties as well as penalties for failure to provide correct payee statements mandated by the Small Business Jobs Act.  These increased penalties are already in effect for 2011.  Those penalties were increased significantly per information return including calendar year maximum penalties.  These maximum penalties can be up to $1,500,000 ($500,000 for small business filers).

The repeal is good news as many in the business community were fretting about having to comply with the greatly expanded 1099 reporting requirements.

California to Allow LLCs for Contractors

Our friends over at Atkinson, Andelson, et. al. circulated a nice brief outlining this development taking place over the next year.  For years the question of whether a contractor could operate within an LLC has been answered in the negative and this appears to be changing.  There are a number of reasons to choose an LLC but it may not be the right entity choice for all.

The best course of action is to consult with your legal counsel, CPA and other trusted advisors and discuss your particular circumstances and objectives.  The Atkinson article follows:




As always, please let me know if you have any questions...

Glenn

Help For Those Who Use Check Cashing Services

Many of our contractors have labor forces who do not have bank accounts.  When pay day comes, these hard working men and women are regular customers of check cashing services that can charge up to 3% to cash the employee's payroll check when valid ID is presented.  That is essentially another tax on wages that the employee can ill afford.

Last week I was made aware of a product US Bank offers entitled "US Bank AccelaPay Card Program".  The bank issues prepaid Visa debit cards to a company's employees and then funds the card via the ACH system.  I'm unaware at this time of other banks offering a similar product, however as always please check around.  The benefits of this product are numerous and are summarized here.  This can also be marketed to prospective employees as a benefit should they not have a bank account.  When I read through the document summarizing the benefits including the "additional features" section at the end, I was pleased with all it had to offer.

It's tough enough for these employees who in most cases are living paycheck to paycheck; having to face a 3% fee to have access to their pay seems unconscionable.  This product provides an attractive alternative.  

As always, I do not receive any compensation for any third party products/services mentioned in this blog...

Glenn

Checking Your Credit Score

Every year or two it is a good idea to check your own credit score.  You are permitted, by law, to obtain your credit reports for free once every 12 months.  In addition to looking for unusual/unknown activity, it's always advisable to close out unused, open accounts to enhance your creditworthiness.  It is also a good idea to keep at least one or two of your oldest accounts open as the age of a clean open account will also enhance your score.  When you look to your bank for a credit facility for your business, your personal credit situation will also be considered.

Per the Federal Trade Commission website "Annual Credit Report.com is the only authorized source for the free annual credit report that's yours by law."  Although there may not be any cool commercials with the jingles, it seems that this is the site that will achieve the objective you seek and will not try to upsell you any additional services.  The process from this site involves you choosing one or more of the 3 major credit reporting agencies and providing answers to a few multiple choice questions to ensure identity.  I went through the process in about 15 minutes for all 3 agencies and printed my reports to PDF for future reference.  I put the date in the filename of each report so I'll know when I can next check my credit for free.