The 2024 Election’s Effect on Construction Backlogs

The presidential election is almost here, and the impending results are generating a feeling of uncertainty across the construction industry.

Both candidates have their own policy plans and, regardless of who wins, the one thing that’s guaranteed is there will be a direct impact on your business and backlog.

With that in mind, I’d like to review a few of the relevant policies from both sides of the aisle as well as current trends impacting the economy. We’ll consider potential implications and discuss strategies that’ll keep your company afloat even during this tide of unpredictability.

Protecting the Right to Organize (PRO) Act

The PRO Act was originally developed in 2021 with the intention to make union organizing and bargaining easier. Please note, the bill has not yet passed as it still needs approval from Congress before being signed into law by the sitting president.

If the PRO Act was to become law, union contractors would see a significant uptick in their backlogs because it would mark a continuation of the current status quo, which heavily favors union contractors for federal projects.

However, on the other hand, there’s a concern that the PRO Act would harm non-union contractors — especially smaller contractors — by giving unions excessive power.

According to Associated General Contractors of America (AGC), the Pro Act poses a “threat to the viability of the commercial construction industry, its long history of offering advancement and opportunity to all workers and its ability to rebuild our economy.”

Either way, this bill, if passed, will have some influence over how federal and state projects are awarded.

Changing Interest Rates

The Federal Reserve (FED) cut rates by 0.5% in September, marking the first reduction since 2020. This cut is expected to lead to more project opportunities in 2025, according to industry experts.

“With rate decreases, we expect demand for new projects to begin to increase gradually throughout 2025,” said Anthony Johnson, president of the industrial business unit at Clayco, a Chicago-based construction firm. “However, these projects will take time to get through planning and design and start construction in the field.”

If demand increases, many contractors should be able to maintain a healthy backlog throughout the year regardless of who holds the office.

Tax Shifts

Changes in tax rates would have a significant impact on the construction industry because 84% of building firms are taxed as pass-through entities, meaning that the companies are taxed via their owners’ personal income tax.

The Trump-Vance ticket wants to permanently lower tax rates for personal income, whereas Vice President Harris aims to cap these tax benefits at households making less than $400,000.

Personal income tax cuts could help construction owners invest their savings back into their business by growing their workforce, equipment selection and adding more projects to their backlog.

Fossil Fuels vs. Renewable Energy

By 2030, the federal government is expected to invest nearly $400 billion in federal funding for clean energy. This means new projects and additional opportunities for contractors looking to steady their backlog.

The Harris-Walz campaign has publicly supported the federal government’s current clean energy policies. Whereas Trump has expressed interest in shifting the focus to fossil fuels.

Even though Trump’s change could lead to federal contracts being put on hold, both candidates are looking to offer more resource-based commercial projects throughout their terms.

Optimistic Financial Indicators

Before any panic ensues, it’s also important to consider the current state of the economy, which is currently trending upward.

There are several key performance indicators that point toward cautious optimism for 2025. One of which is ABC’s most recent construction backlog indicator, which increased to 8.6 months in September. This marks a 0.4 increase from August.

Marcum LLP, a national accounting and advisory services firm that focuses on a variety of industries including construction, conducted a recent survey about the construction industry that returned positive results.

“Our survey reveals that despite the challenges facing the construction industry, the overall outlook remains positive,” said Joeseph Natarelli, Marcum’s national construction industry leader. “…I encourage leaders to explore [tax incentives and programs] and [opportunities] created by new technological advances to future-proof their business and brace for potential changes in the outlook.”

A Contractor’s Approach to the Coming Months

The possible results of the upcoming election paints two very different pictures, which is why contractors must remain nimble heading into 2025.

I have a few pieces of advice than can help you prepare your business for anything during these uncertain times:

• Create a Plan for Your Backlog: Review the types of jobs in your current backlog, the potential impact policy changes could have on these jobs and develop a plan to reduce negative effects on your business.
• Implement Strict Cash Flow Management: With drastically different outcomes on the horizon, it’s imperative to keep a close eye on your cash flow by tracking your expenses and avoid overspending.
• Increase Educational Opportunities: As policies shift, future project opportunities change. It’s important to have a well-rounded workforce that’s educated about multiple construction project opportunities to ensure your business is prepared.
• Leverage Technology: There are a range of software and services designed to address the complexities of the construction industry. During times of uncertainty, it’s important to have as much information as possible, and these tools are designed to improve visibility into your business and empower you to make more data-driven decisions.

The election will influence your backlogs. But if you take these steps now, you’ll have more agency over how much of a direct impact your specific business will experience.