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J. Brett Williams
President
Construction
From OBBBA to AI: The Real Power Tool Is Data
We in the construction business love our acronyms, and there’s a new one we should probably get used to: OBBBA.
This refers to the One Big Beautiful Bill Act signed by President Trump in July. The new law will have several implications for our industry, and we’ve highlighted several of those for you in this quarter’s update. We also have the latest on U.S. tariffs, providing insights into when to expect those to affect prices for you (and us) moving forward.
When you throw all this together, you have an industry in the throes of change. In this update, we spotlight another shift with the potential to dramatically disrupt our industry: AI. As the ongoing labor challenge continues in construction, AI has emerged as a solution, making jobsites more efficient, increasing productivity and helping alleviate the labor crunch, or so the thinking goes. But what needs to happen to make this a reality? Jeff Danley tells us why technology is the easy part when it comes to capturing the benefits of AI. Much more challenging is having a solid data strategy in place. It’s a compelling piece, and I encourage you to give it a read.
There’s a ton of change, or the potential of change, happening out there. As always, we’re hustling to keep up, as I’m sure you are, too. Don’t hesitate to get in touch with us if you need help sorting through the chaos.
Live Safer,
Brett
OBBBA
The One Big Beautiful Bill Act (OBBBA), signed in July 2025, contains several provisions that will affect the construction industry:
- 100% bonus depreciation made permanent. This allows businesses to fully deduct capital expenses in the first year, rather than spreading the expense over multiple tax years, which reduces taxable income and increases cash flow (used by the construction industry when purchasing machinery).
- New 100% bonus depreciation for manufacturing facilities. Construction of manufacturing facilities now qualifies for bonus depreciation. Construction must start before Jan. 1, 2029, and leased facilities do not qualify.
- Restores R&D expensing. Businesses can once again expense domestic research and development costs.
- Permitting reform. Several modifications to the National Environmental Policy Act are designed to speed up the permitting process. A separate provision allows for expedited permitting for certain natural gas projects.
- $156 billion in mandatory defense spending. Includes funding for the Golden Dome missile defense system and other defense programs, as well as $7.5 billion for critical minerals.
- Phaseout of solar and wind energy tax credits. To qualify for tax credits, wind and solar energy projects must start construction within 12 months or be placed in service by the end of 2027. Projects that start after 2025 will be subject to provisions limiting the percentages of materials from certain nations, such as China.
There will be a push to start projects over the next year. In the longer term, tax credit changes and tariffs could make solar and wind projects more difficult and costly, but given the demand for new energy, solar and wind projects will continue to be built. Credits for battery storage were not changed.
Tariffs & Prices
With reciprocal tariffs in force, the average effective tariff rate for U.S. imports is now 17.4%, up from 2.4% at the start of the year and higher than any time since the 1930s. That rate does not include new guidelines that apply the 50% steel and aluminum rate to hundreds of types of finished products using those metals. The 50% rate applies to the steel and aluminum content of the good, with reciprocal and any other tariffs applying to the rest of the good.
So far, consumer prices have not seen a large jump, but prices for producers and the construction industry have gone up. The Producer Price Index (PPI) was up 0.9% in July. While monthly PPI figures are volatile, this is the highest single-month change since 2022 and could signal that a rise in consumer prices is coming.
For construction, the PPI for inputs to nonresidential construction was up 0.5% in July and has increased 2% since January, largely driven by copper, steel and aluminum prices. Spot prices for steel and copper have come down recently, but reciprocal tariffs apply to a broader set of construction imports.
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USMCA = United States-Mexico-Canada Agreement
*As of Oct. 1, 2025. Commodity tariffs are not stacked with country reciprocal tariffs, though preexisting tariffs may be added to the above rates.
Industry Outlook
Private nonresidential construction spending fell 1.6% over the first half of 2025. Construction spending in most sectors has been level (power, healthcare, education, water) or down (commercial, manufacturing, office). Data centers have been the only source of strong growth, with moderate growth from highways and streets, sewer and waste, and chemical manufacturing.
Employment in nonresidential construction has been flat since March. Job openings in construction are down nearly 40% since January.
Industry surveys and projections have shown major swings this year in response to the changing policy landscape:
- The Associated General Contractors Confidence Index has trended down since January but remains slightly higher than a year ago. The Backlog Index is trending up for Commercial & Industrial and for Infrastructure; heavy industrial has fallen more than 50% over the last year.
- The FMI Nonresidential Construction Index improved to 49.8 in the Q3 2025 report (above 50 indicates expansion). Executives are feeling better about the economy and the industry but worrying more about the cost of materials.
- After plummeting to a -12 net rating in the second quarter amid peak market volatility, sentiment in the engineering industry rebounded to a +12 net rating in the third quarter, according to the ACEC Engineering Business Sentiment Study.
- ConstructConnect projects 4.9% growth in nonresidential construction in 2025, but a 6.7% decline in 2026, with a major falloff in manufacturing.
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Source: U.S. Bureau of Labor Statistics, Producer Price Indexes