1 Value of Construction Put in Place Series (VIP) Conducted by The U.S. Census Bureaus Construction Expenditures Branch

2 What Is Value of Construction Put in Place (VIP)? The VIP series provides monthly (preliminary and 2 months of revision) and annual estimates of the value of construction work done on all projects underway during a given time period.

3 What Does the VIP Take Into Account? The value of the construction is based on: 1.Cost of materials installed or erected. 2.Cost of labor (both by contractors and force account) and a proportionate share of the cost of construction equipment rental. 3.Contractors profit. 4.Cost of architectural and engineering work. 5.Miscellaneous overhead and office costs chargeable to the project on the owners books. 6.Interest and taxes paid during construction (except for state and locally owned projects).

4 About the VIP Statistics… Estimates are developed from nationwide surveys of construction projects as well as from indirect estimates and statistics from secondary sources such as regulatory agencies and trade associations.

5 About the VIP Statistics… Classifications of construction are based on ownership and/or primary use of structures on a property. Data are shown in current dollars, unadjusted and seasonally adjusted terms.

6 The VIP Series Total Construction –Private Construction Private Residential –New Single Family –Multi-family (C-700) –Improvements (monthly series not shown separately) Private Nonresidential –Private Nonresidential (C-700) –Farm Construction –Regulated investor owned utilities –Public Construction State and Local (C-700) Federal (C-700)

7 Private Construction Methodology Private Residential –New Single Family Monthly construction cost of new single family houses are estimated using housing starts and sales data from the U.S. Census Bureaus Survey of Construction (SOC). Estimated cost is distributed into monthly VIP by applying fixed patterns of monthly construction progress as shown below. Total cost = (# of units started) x (average construction cost).

8 Private Construction Methodology –Multi-family A subsample of new residential building projects with two units or more is selected from SOC. Upon selection, monthly construction progress reports (C-700 form) are requested until completion. VIP estimates = Σ [(final weight) x (reported value)] Final weight = (basic weight) x (unit adjustment factor) x (adjustment factor for architectural, engineering, and miscellaneous costs). –Basic weight is the reciprocal of the probability of selection. –Unit adjustment factor is the ratio of the unbiased estimate obtained from the Census Bureaus Building Permits Survey to the unbiased estimate from the Multi-family survey of the number of multi-family units authorized in a month. –Adjustment factor accounts for the architectural, engineering and miscellaneous costs that are not accounted for on monthly reports. The adjusted factor is defined as the ratio of the total estimated value to the estimated construction cost.

9 Private Construction Methodology –Improvements Estimates on owner-occupied properties are based on data from the Consumer Expenditure Survey (CE) conducted by the Census Bureau for the Department of Labors Bureau of Labor Statistics (BLS). Data are collected through a rotating panel survey design. There are three panels interviewed per quarter. Data collection for expenditures in a particular month will be completed three months later and an estimate based on all the data will be available five months later. Estimates for owner-occupied residential improvements are based on reported data and forecasts. Improvement estimates are subject to substantial revisions due to necessity of forecasting. Time series techniques with the X-12-ARMIA program are used to remove the irregular effect.

10 Private Construction Methodology Private Nonresidential Construction –The Census Bureau conducts a monthly Construction Progress Reporting Survey for estimating the value of private nonresidential construction in the U.S. using two sources of information for identifying projects. Data from McGraw-Hill Construction (MHC) on projects valued at $75,000 or more in the U.S. Projects in a sample of areas not covered by building permit systems or reported by MHC. –Once a project is selected, monthly construction progress reports (C-700 form) are requested until project is complete.

11 Private Construction Methodology

12 Private Construction Methodology Private Nonresidential Construction –Data from MHC are stratified by type of construction and construction value and each stratum is assigned a sampling rate. Out of 66 strata, 16 are certainty and have a sampling rate of 1-in-1. The remaining 50 have sampling rates seen below. –Projects from nonpermit areas are selected with virtual certainty.

13 Private Construction Methodology Private Nonresidential Construction –Estimate of VIP are obtained by multiplying the final weight of each project by the monthly reported value and summing all projects. Note: Tabulation of private nonresidential, state and local, and federal surveys are similar. Final weight = (basic weight) x (outlier adjustment factor) x (adjustment factor for architectural, engineering, and miscellaneous costs) x.99 (frame duplication factor) –Basic weight is the reciprocal of the probability of selecting a project –Outlier Adjustment factor reduces the influence on the VIP of an extreme non-certainty observation. –Adjustment factor is computed the same as in the Multi- family survey (see slide 8) –Frame duplication factor adjusts for duplicated in the frames. Factor is.99 for private nonresidential projects.

14 Private Construction Methodology Private Nonresidential Construction –Imputations Imputations are made for projects that have not reported at the time of the monthly tabulations. –Based on estimated total construction value and month of start of the project. –Undercoverage Results are increased by 25% to account for undercoverage of construction projects not reported by MHC. –Adjustment for undercoverage results from comparison studies of Dodge reports with building permits for a sample of projects for which permits were issued. –Benchmarking The manufacturing category is further adjusted by benchmarking the tabulated estimates to the latest detailed structures data from the Census Bureaus Annual Capital Expenditures Survey (ACES).

15 Private Construction Methodology Private Nonresidential Construction –Farm Construction VIP estimates for new farm nonresidential construction are extrapolated from the annual U.S. Department of Agriculture (USDA) report, Income and Balance Sheet Statistics. Monthly or quarterly estimates are not available.

16 Private Construction Methodology Regulated Investor-Owned Utilities Construction Monthly estimates are published only for communication and electric, but estimates for other public utilities are included in the appropriate totals. –Communication Telephone –VIP estimates are based on reports of actual monthly construction progress. TV cable –Monthly estimates are based on annual forecasts from SNL Kagan.

17 Private Construction Methodology –Power Regulated Utilities –Gas and Electric Categories »Monthly estimates are based on annual forecasts from Edison Electric Institute and the American Gas Association. –Oil »Estimates are projections from the latest year of Federal Energy Regulatory Commission data. Nonregulated Utilities »Expenditures are gathered in the same method as private nonresidential construction (see slide 10). »These estimates are included in the appropriate utilities totals. –Railroad –Monthly estimates are obtained by distributing Surface Transportation Board quarterly construction expenditures estimates into monthly values.

18 Public Construction Methodology State and Local –Averages about 8,500 projects at any one time. –Information for creating the sampling frame is obtained from the same MHC data used for private nonresidential construction (see slide 10). –Projects are stratified by type of construction and value. There are 72 strata, 15 certainty and 57 non-certainty. Within each of the 57 non-certainty strata, a systematic sample of projects is selected each month (see table below).

19 Public Construction Methodology State and Local –Tabulation of data is the same as for private nonresidential construction ( see slides 13-14). –Undercoverage: State and Local Undercoverage Evaulation (SLUE) The results are then increased by the undercoverage adjustment factors to account for construction projects not reported by MHC. These adjustment factors result from a comparison study of projects provided to us directly from state and local agencies with the list of state and local projects from MHC.

20 Public Construction Methodology Federal –Averages about 700 projects at any one time. –Information for creating the sampling frame is obtained from the same MHC data used for private nonresidential construction (see slide 10). –There are 84 strata, 25 are certainty strata. From the remaining 59 non-certainty strata, a systematic sample of projects is selected (see table below). –Tabulation of the data is the same as for private nonresidential and state and local construction (see slides 13-14).

21 Public Construction Methodology Federal –Benchmarking Federal is further adjusted by benchmarking the tabulated estimates to monthly data, which with few exceptions, are supplied to the Census Bureau by each federal agency involved in construction activities. –Estimates from those exceptions may be obtained from federal budget documents. These budget totals are then prorated over the fiscal year to derive monthly estimates.

22 The Construction Spending Press Release The press release is issued on the first working day of each month 2 months after the reference month. –At 9:30 a.m. the press receives the release. –At 10:00 a.m. the press release, along with more detailed data are posted to our website.

23 In The Works –Wind Power Monthly estimates are based on Lawrence Berkeley National Laboratory and American Wind Energy Association. Currently wind is included in the total power category. Efforts are being made to include wind as part of the electric subcategory. –ACES This annual May release, private nonresidential manufacturing will use the 2008 ACES to benchmark back to –Residential Improvements Efforts are being made to revamp the residential improvements survey since the discontinuation of the Survey of Residential Alterations and Repairs (SORAR) in 2007.