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Value of Construction Put in Place Series

(VIP) www.census.gov/constructionspending

Conducted by The U.S. Census Bureau’s Construction Expenditures Branch

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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.

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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. Contractor’s profit.4. Cost of architectural and engineering work.5. Miscellaneous overhead and office costs chargeable to

the project on the owner’s books.6. Interest and taxes paid during construction (except for

state and locally owned projects).

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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.

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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.

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The VIP SeriesTotal 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)

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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 Bureau’s 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).

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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 Bureau’s 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.

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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 Labor’s 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.

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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.

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Private Construction Methodology

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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.

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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.

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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 Bureau’s Annual Capital Expenditures Survey (ACES).

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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.

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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.

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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.

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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).

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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.

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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).

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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.

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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. www.census.gov/constructionspending

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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 2004.

– 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.