We all know government actions have a direct impact on our operations. For the asphalt contractor, it is important to know the facts: how government rules and regulations impact your bottom line and your ability to sustain and grow your company. At the National Pavement Expo in Fort Lauderdale, we were able to spend an entire session looking at how some of these challenges may impact the asphalt industry going forward. Let’s take a brief look at some the issues facing our industry.
Labor Challenges
The challenges we are facing from a labor perspective come primarily from two areas: 1) Safety and health compliance and 2) Health care reform. On safety and health, the Occupational Safety and Health Administration (OSHA) from the U.S. Department of Labor presents unique challenges to the construction industry, and asphalt contractors are not immune to these hurdles.
OSHA has been focusing more and more on whistleblower protection programs and inspections, and recent budget actions highlight this shift. The Obama administration’s FY14 budget increased funding for whistleblower protection by roughly 37% over FY13.[1] Additionally, the construction industry continues to make up over half of all of the 40,000+ inspections performed annually by OSHA, not to mention the thousands of state inspections performed annually. Given this, it is important for every asphalt contractor to develop and maintain a safety program within their company to meet OSHA requirements and improve the health and safety of their workforce.
On the health care side, the industry is continuing to grapple with the implementation of the Affordable Care Act (Obamacare). The implementation challenges have been well documented, but there are several aspects of the law that are of importance to the asphalt pavement industry. Under Obamacare, companies of 50 or more full-time equivalent employees will be required to provide insurance to their employees. Additionally, insurance companies providing group coverage plans to small businesses under 50 employees must bring their insurance plans into compliance with the minimum “essential health benefits” requirements of the law. The demographics of the construction industry, particularly as it relates to age and gender, point towards higher health costs in the future as a result of these features of the law.
Not only is the construction industry a majority male workforce, but 31% of employees are between the ages of 16-34.[2] This is significant when considering that the most likely individuals to not only not have insurance, but to not take it EVEN if it is offered, are males between the ages of 18-34. Thus, the financial penalties associated with the insurance mandate for companies of 50 or more poses a potentially greater risk to the construction industry than others.
For those companies unaffected by the employer mandate who choose to provide insurance, a majority male workforce means potentially higher costs in the short term as insurance companies bring their plans into compliance with the law. Before Obamacare, insurance companies could charge higher premiums based on gender. This option goes away with Obamacare, meaning group plans covering primarily male employees, particularly young ones, could see higher monthly premiums.
Material Issues
On the material side, an important trend to monitor for the asphalt pavement industry is the growth in coal tar sealant bans and/or restrictions across the country. There are two states, Minnesota and Washington, which have banned the use of coal tar. Eight more states have local bans, and fifteen have some sort of local restriction placed on coal tar applications. Additionally, legislation has been proposed – though not passed - in the U.S. House of Representatives to ban coal tar throughout the country.
Growth in these bans and restrictions is important for asphalt pavement contractors throughout the country because they are not isolated to particular regions or along political Red state/Blue state lines. Rather, we see restrictions being placed in California and Texas, Massachusetts and Kansas, and so on. For the asphalt contractor, this may mean setting aside some time throughout the year to monitor the actions taking place by representatives in local municipal governments and state courthouses, as well as any voter referendums that may pass and prohibit or limit the use of coal car sealants in your area.
Equipment Purchases Going Forward
Lastly, asphalt contractors need to review how government actions may be impacting their equipment, particularly in regards to purchasing decisions in 2014 and beyond. By the end of 2015, all new equipment produced for the industry must meet the Tier 4 regulatory guidelines as established by the US Environmental Protection Agency (EPA). Given the complexity of the equipment being produced, many contractors are looking at alternatives to purchasing new equipment in the short term. In Pinnacle CCID’s own conversations with equipment manufacturers and distributors, many of them expressed concern over sales going forward due to uneasiness on the part of contractors with Tier-4 compliant equipment.
For the asphalt contractor, this may mean opting to maintain what you have for longer than you are comfortable with, purchasing used equipment, or renting. In fact, in our seminar at the National Pavement Expo, many contractors in attendance expressed an increased interest in buying used equipment in the next 2-4 years due to Tier 4.
Concluding Thoughts
Recent economic indicators point towards continued growth in 2014, with the construction industry beginning to pick up steam. While we look forward to continued growth in our industry, it is important to continue to monitor government actions that may be impacting every company’s bottom line. From labor to materials to equipment, every asphalt contractor needs to be aware of the challenges being presented in order to adjust to them.
Additionally, examining industry challenges provides an opportunity for forward-thinking leaders to anticipate market trends. Moving towards a proactive stance, rather than a reactive one, could provide an opportunity for asphalt contractors to get a leg up on the competition in the years to come.
Colby Humphrey is senior director of the Center for Construction Innovation and Development (CCID), a “focused research source” designed to meet contractors’ needs for greater economic, commercial, and competitive intelligence to grow market presence, stability, and profitability. In addition to general industry and market research, CCID offers market growth analysis, competitor benchmarking, trend identification and analysis, and survey development for customers including customer satisfaction surveys, leadership assessments, and more. Contact Colby at [email protected]; phone 913-904-4970.
[1] US Department of Labor. 2014. “FY 2014 Congressional Budget Justification.” Occupational Safety and Health Administration
[2] US Department of Labor. 2014. “Labor Force Statistics from the Current Population Survey.” US Bureau of Labor Statistics.
[3] Luhby, Tami. 2013. “Who Will Pay More Under Obamacare? Young Men.” May 14. CNN Money
[4] Koch, Wendy. 2013. “Toxic Driveways? Cities Ban Coal Tar Sealants.” June 20. USA Today
