Designed for you and your executive team, RKL's new quarterly "Next-Level Insights" features the latest guidance on tax, accounting, cybersecurity, technology, human resources and more. Count on our advisors to provide a full spectrum of ideas and solutions to help your company on its path to “what’s next.”
INDUSTRY OUTLOOK
2026 Construction Industry Outlook: Navigating Caution, Costs and Change
The construction industry is experiencing stable growth amid heightened caution, as firms closely monitor market conditions, volatile material costs, labor shortages and uncertain tariffs. While demand remains strong in data centers, power and healthcare projects, sectors like retail and commercial are seeing reduced activity. Firms are responding by reassessing project pipelines, adopting advanced technologies—such as cloud-based ERP systems and AI—to optimize resource management, and seeking more strategic financial planning. Overall, success in this environment hinges on navigating ongoing labor challenges, policy uncertainties, and leveraging technology to drive efficiency and informed decision-making
Navigating Financial Decisions to Maximize Bonding Potential
For today’s contractors, every major financial decision affects a range of stakeholders—owners, banks, government (taxes) and your surety company. Sureties, which provide the necessary bonding for your projects, play a key role in your ability to win new work. If a surety reduces your bonding capacity, it can limit your growth, so it’s important to understand how your transactions will impact their analysis.
What Do Sureties Evaluate?
Sureties review several key financial metrics, including working capital, net worth, debt-to-net-worth ratio, profit margins, cash flow, backlog-to-equity, under- and overbillings and administrative costs as a percentage of revenue. Additionally, they may adjust your balance sheet to exclude assets like accounts receivable over 90 days or loans to related parties, which they do not count towards bonding capacity.
Strategies to Enhance Bonding Capacity
Contractors can strengthen their bonding position by refinancing short-term debt to long-term debt, securing additional third-party indemnitors and prioritizing balance sheet strength over short-term tax savings.
When to Get Professional Advice
Consult your CPA and surety before taking on new debt, making significant asset purchases, considering large owner distributions or planning loans to related parties. Proactive discussions can help you make informed decisions that protect and potentially boost your bonding capacity.
If you have questions about how your financial decisions impact your bonding or are planning upcoming changes, we're here to help!
GAAP Presentation of Conditional Retainage Receivable on Financial Statements
For construction businesses, it’s important to correctly classify retainage receivable as either conditional or unconditional under GAAP and ASC 606. Only unconditional amounts are reported as receivables, while conditional retainage is shown as a contract asset until all project terms are met. Accurate reporting and clear disclosures not only support compliance but also provide valuable transparency for lenders and sureties.
Why were you drawn to technology consulting for the construction and real estate development industries?
I grew up in a family that was actively involved in the construction, building materials and real estate development industry. I remember being around construction job sites from an early age with my dad and helping out at the building materials retail store that was part of the family business (before the day of the “big box” hardware stores!). Once I decided to study accounting and become a CPA, it was a natural fit for me to seek out opportunities to serve clients in Construction and Real Estate Development.
What do you think are the greatest opportunities for construction contractors and real estate developers in 2026? Since I spend most of my time working with clients on tax planning issues, most of my discussions center on major federal tax law changes stemming from the passage of the One Big Beautiful Bill Act (OBBBA) last year. Specifically for the Construction and Real Estate Development industry, there are several changes that apply to many taxpayers:
Accelerated depreciation and expensing: 100% bonus depreciation is back and enhanced and immediate expensing returns for certain research and development costs.
Interest expense deductibility limitations: OBBBA modified the rules to increase the limitation amount, which allows affected taxpayers to currently deduct more interest expense.
State income tax implications: For multi-state contractors, this can be a huge issue. Many states do not conform to federal law or the OBBBA changes, and there are patchwork rules in place regarding state income tax deduction work-arounds like the PTET (Pass-through Entity Tax) that may apply depending upon the structure of the business.
These issues require proactive analysis and planning to mitigate tax exposure and maximize tax savings opportunities.
What’s one piece of advice you find yourself giving your clients in 2026? I work primarily with closely held businesses, so the advice we discuss often relates to succession and estate planning issues. These issues are not a “one-time” or “check-the-box” discussion. It takes intentionality and effort over time to craft and test a strong succession plan. These issues are often easy to defer, and it takes discipline to make the time needed to address them. I encourage clients to start early and to lean into the process.
Oppidan Investments Reaches New Heights with Sage Intacct
Oppidan strategically expands its footprint and refines its approach to real estate development through constant growth. As the company’s portfolio diversified, its financial systems needed to evolve alongside it.
Webinar: Built to Be Digital: Tools for Today’s Contractor
If you are ready to transform outdated accounting and finance processes and technologies that may be holding your construction company back, join us for General Building Contractors Association's first webinar of 2026. RKL eSolution's experts Ben Hofferman and Mark Severance will be presenting.
