A Comparison of the Value of Construction Put in Place
Series, the 1997 Economic Census, and the 1998 Annual Capital Expenditures
Survey
PDF Version Available!
Introduction
The Census Bureau has three different surveys that measure the construction
sector of the economy: the Value of Construction Put in Place series (VIP),
the Construction Sector of the Economic Census (CSEC), and the Annual
Capital Expenditures Survey (ACES). VIP collects expenditures by construction
project, CSEC collects establishment level statistics, and ACES collects
company capital expenditure data.
Each of these surveys plays an important role in the analysis of the
construction industry. Understanding the strengths, weaknesses, and interaction
among them assists us in making informed decisions regarding the construction
economy.
The methodologies and universes covered by these surveys differ significantly.
Because of this, they are not directly comparable as published. The reconciliation
process explained here details the estimates, assumptions, and adjustments
that are necessary before making an actual comparison.
Data from VIP and CSEC can be compared for years ending in two and seven,
the years for which the Economic Census is conducted. The ACES data can
only be compared in the years that detailed structures data are collected
(1992, 1994, 1998, and every five years thereafter). Historically we have
compared VIP and CSEC many times. A precedent for this procedure has been
established by joint work conducted by the Census Bureau and the Bureau
of Economic Analysis (BEA). This paper outlines the 1997 work and includes
a reconciliation of 1998 ACES and VIP data.
Value of Construction Put in Place (VIP) Background
The VIP is a monthly measure of the dollar amount of construction put
in place within the United States. The VIP data are used in the National
Income and Product Accounts produced by BEA. The current historical series
began in the early 1960's.
Published VIP data are compiled from: (a) a series of construction project
surveys, (b) estimates from other construction series, and (c) data from
secondary sources such as regulatory agencies. This approach is quite
different from the establishment or company-based survey methods used
by most economic surveys at the Census Bureau. Data collected through
the VIP approach represents an all-encompassing economic measure of construction
spending. The survey data are collected from the project owner's point
of view. All construction related expenditures are included, not just
contractor receipts.
The following types of expenditures are included in VIP:
- New buildings and structures
- Additions, alterations, major replacements, etc. to existing buildings
and structures
- Installed mechanical and electrical equipment
- Installed industrial equipment, such as boilers and blast furnaces
- Site preparation and outside construction, such as streets, sidewalks,
parking lots, utility connections, etc.
- Cost of labor and materials (including owner supplied)
- Cost of construction equipment rental
- Profit and overhead costs
- Cost of architectural and engineering (A&E) work
- Any miscellaneous costs of the project that are on the owner's books
The VIP excludes several types of expenditures, such as the value of
maintenance and repairs to existing structures and land acquisition.
Construction Sector of the Economic Census (CSEC) Background
The CSEC began on a regular basis in 1967. Data were collected for 1930,
1935, and 1940, but data from these censuses are not comparable to current
data.
The scope of CSEC covers construction establishments that have one or
more employees. It includes establishments classified as construction
per the North American Industry Classification System (NAICS). Establishments
operating as general contractors, operative builders, and specialty trade
contractors are included. Some establishments engaged in construction
are excluded, such as investment builders who build on their own account
and rent the building rather than sell it.
Construction establishments without employees are known as "nonemployers."
Nonemployers are typically self-employed individuals. They are not surveyed
in the Economic Census. Instead, administrative data are compiled from
other government agencies. The Census Bureau began releasing data annually
for these establishments in 1997.
The Census Bureau defines a "construction establishment" as
a relatively permanent office where business activities related to construction
work are conducted. This office usually manages more than one project
or job and the office is normally maintained on a continuing basis. Individual
project site offices are not construction establishments.
The CSEC is a survey, not a complete census. For 1997, the universe was
approximately 650,000 employer establishments. Of this, about 130,000
establishments were sampled. The sampling frame was compiled from the
Census Bureau Business Register, a file of all known U.S. companies. All
multiunit construction companies were sampled with certainty; single-location
companies were stratified by industry and payroll. The largest single-location
establishments were all included in the survey, smaller such establishments
were sampled (the minimum sample rate was 1 in 20).
Respondents (typically construction contractors) self-code their activities
into type of construction and ownership of projects (Federal, State &
Local, and Private). All work conducted by the establishment is included
in the survey.
Annual Capital Expenditures Survey (ACES) Background
The ACES collects capital expenditure data from a sample of nonfarm employer
and nonemployer companies, rather than establishments. All capitalized
construction work is collected as investment in "structures."
The survey began in 1992. Total capital expenditures by structures and
equipment are collected annually; detailed data on structures and equipment
are collected once every five years. The following expenditures for buildings
and other structures are included:
- Major additions, alterations, and capitalized repairs to existing
structures, whether performed by a contractor or completed in-house
- Gross additions during the year to construction-in-progress accounts
for projects lasting more than one year
- Machinery and equipment which are an integral or built-in feature
of the structure
- Expenditures for land development and improvements such as demolition
of buildings, site preparation, and land servicing
- Facilities which are built into or fixed to the land such as sidewalks,
streets, parking lots, airfields, piers, etc.
- Exploration and development of mineral properties such as drilling
gas wells, construction of offshore drilling platforms, digging and
shoring mines, mine shafts, and mine exploration
VIP/CSEC Reconciliation
The major difference between VIP and CSEC is that VIP measures the value
of construction currently being installed or erected, and CSEC measures
and provides information on the receipts, expenditures, and characteristics
of establishments performing the construction work. While both surveys
measure the value of construction work done, CSEC only covers a little
over three-quarters of the "construction" value that VIP covers.
Some areas of "construction" not covered by CSEC:
- Nonemployer construction
- Architectural and engineering costs
- Force-account construction
- Homeowner construction
- Construction done as a secondary source of revenue by non-construction
establishments
To reconcile the two surveys, we developed estimates for these missing
areas and added them to CSEC data. As part of this, we made assumptions
regarding data that are not directly measured.
The following steps outline the reconciliation process:
- Tabulate 1997 Net CSEC Data
Using 1997 CSEC microdata, calculate net or prime value by type (residential,
commercial, etc.) and class (new, additions/alterations, and maintenance/repair)
of construction . Net construction must be used since aggregate data
contain varying amounts of duplication; both prime contractors and
subcontractors may report receipts for the same projects. Net is calculated
at the establishment level by subtracting the value of work subcontracted
in from value of construction work done.
Work subcontracted in, class of construction, and ownership are collected
as a percent of value of construction work done. The formula for calculating
net assumes that maintenance and repair work is usually prime contract
work and that ownership is equally distributed among receipts.
A small percent of construction work is "not specified by kind,"
meaning that a type of construction code was not assigned to the work
done. This unclassified work is spread proportionally to all other
types of construction.
- Tabulate 1997 Net Nonemployer Data
In 1997, nonemployer establishments classified in construction had
receipts of $87.1 billion, based on data compiled from administrative
records. Only three pertinent data items are available for this set
of data: number of establishments, receipts, and NAICS code. Using
the distribution of surveyed establishments with one or two employees,
we estimate nonemployer net receipts by type and class of construction
and project ownership.
- Estimate Values for Misreporting and Undercoverage
The Internal Revenue Service (IRS) develops under-reporting factors
as part of their Tax Compliance Measurement and Information Return
Programs. We apply these factors to administrative nonemployer data
only.
The IRS also estimates receipts of firms who do not file tax returns.
Since the Business Register is based on tax return data, these firms
are missing from the Economic Census. We estimate receipts for these
firms for both employer and nonemployer data.
- Summarize Data and Estimates Calculated Thus Far
All data are summarized and expanded to the 6-digit NAICS level,
then distributed by type of construction.
- Adopt BEA Federal Data
BEA compiles estimates of Federal construction from federal agencies
and publishes these data by type of construction. We assume BEA's
estimates are more accurate than CSEC Federal data. Ownership for
CSEC is based on contractor response, which is typically not as accurate
as data obtained directly from the federal agencies. BEA's Federal
data are distributed to the CSEC types of construction.
- Adopt VIP State & Local Type of Construction Distribution
Unpublished VIP type of construction data are used to redistribute
CSEC State & Local data. We assume that VIP data have fewer classification
errors than CSEC due to VIP's increased analyst involvement.
- Estimate Construction Work Done by Non-Construction Establishments
Three separate estimates are made for this activity:
- Architectural and engineering work done by establishments classified
in the Professional, Scientific and Technical Services Sector is
estimated using 1997 Economic Census data.
- Force account construction, i.e., work performed by non-construction
establishments for their own use and by employees of those establishments.
Examples of force account include owner-built homes or construction
work performed at an industrial plant by the plant's own employees.
This estimate is developed from unpublished data collected in the
VIP survey.
- Secondary construction work done by non-construction establishments.
Examples of secondary construction are retail stores who perform
construction work for their customers with their own labor force.
This differs from force account in that the construction is not
for own use.
- Estimate Operative Builder Non-Construction Costs
Two estimates are made specifically for residential operative builders:
- Operative builders are likely to report sales rather than value
of work done in CSEC. To correct this we include an estimate of
the value of inventory change of single-family houses based on Survey
of Construction (SOC) data.
- Operative builders are also likely to include in their value
of work done non-construction costs such as land, landscaping, and
appliances. We subtract these costs from CSEC data using data related
to SOC.
- Summarize Data and Apply Non-Construction and Operative Builder
Estimates
All data are summarized by ownership and type of construction.
- Adjust Data by Ownership
As mentioned in step five, we have assumed that BEA's estimate of
Federal data is the most accurate. In this step, we assume the estimate
of net CSEC Public (Federal plus State & Local) is also accurate.
Thus, CSEC State & Local is recalculated by subtracting BEA Federal
data from CSEC Public .
CSEC Private data are then adjusted by subtracting the new CSEC Public
from CSEC at the type of construction level. The CSEC Private total
is not changed.
- Miscellaneous Adjustments
Final adjustments are made to correct:
- Negative data cells resulting from the reconciliation adjustments
- Ownership classification discrepancies by type of construction
- Double counting of prime activity done by both general contractors
and heavy construction contractors
- The redistribution of CSEC types of construction not specifically
classified in VIP (for example, swimming pools and fences)
The resulting data are shown in Table 1. Throughout the reconciliation,
data are tabulated on a CSEC type of construction basis. For the final
comparison, the reconciliation data are shown by VIP categories. At
the total level CSEC is only slightly higher than VIP, though there
are some large differences in the Private type of construction categories.
The differences are less for Public construction due to assumptions
made during the reconciliation.
There are many classification differences between the two series
that make a definitive comparison difficult. For example, VIP classifies
office buildings at a manufacturing site as "Industrial",
while CSEC would classify them as "Office". Also, public
utility projects are classified by their industry rather than the
type of building.
An estimate of $13.9 billion has been added to the VIP residential
data shown in Tables 1 and 2. This estimate is for selected remodeling
expenditures that are not currently included in VIP, but will be included
in the future. The expenditures include remodeling work done in manufactured
(mobile) homes, wall-to-wall carpeting installation, some types of
kitchen appliance installation, and remodeling work that may be deducted
as a business expense (such as the creation of a home office). The
estimate is based on data collected in the American Housing and Consumer
Expenditures Surveys.
VIP/ACES Reconciliation
Type of structure (or type of construction, as CSEC and VIP call
it) detail from ACES is necessary to compare the series to VIP. These
data have only been collected in 1992, 1994, and 1998. Here we compare
1998 VIP and 1998 ACES data.
The process to reconcile VIP and ACES is much simpler than reconciling
VIP and CSEC because the scope of VIP and ACES is very similar.
We begin with an unpublished tabulation of ACES employer data by
industry and type of structure. A small amount of data were not distributed
by specific industry and type of structure. We calculated a "boost
factor" to account for this nondistributed value and applied
the factor to the detailed data. Construction which is not in scope
for VIP is subtracted from ACES (e.g., manufactured (mobile) homes,
mining, oil, and gas related construction).
In some instances, industry rather than type of structure data are
more comparable to VIP. Thus, for the Manufacturing and Utility industries,
industry data become the estimate for the respective type of structure.
For the industrial type of structure, data are also added from all
other industries having industrial expenditures.
For nonemployer companies in ACES only total new and total used structures
data are collected. We developed a nonemployer type of structure distribution
based on structures reported by companies with 1-5 employees. This
distribution was applied to the published total new structures data
for nonemployers.
Table 2 shows the resulting ACES data on a VIP type of construction
basis. The ACES collects the equivalent of VIP nonfarm Private; Public
data are not within the scope of ACES.
Conclusion
Although close in total, there are significant differences among
the three surveys by type of construction. The reasons behind the
differences are varied. Between CSEC and VIP, type of construction
and ownership misclassification by CSEC respondents and definition
differences exist. In CSEC, respondents select types of construction
from a preprinted list on the questionnaire. Interpretation of these
categories will vary among respondents. In VIP, analysts review classifications
based on project description. Also, CSEC classifications are based
on the function of the structure whereas VIP classification is sometimes
based on the ownership of the project. For example, all VIP construction
related to the utility industries is classified in the utility types
of construction. The ACES and VIP use the same classification scheme,
but implementation may differ. For example, assisted living facilities
are typically considered residential in VIP while ACES may classify
them as institutional.
All three surveys have both sampling and nonsampling errors that
must be considered when reviewing the data shown in Tables 1 and 2.
Though at the total level the sampling error is about one percent,
the error increases as the classification detail increases. The VIP
data are adjusted by various factors to account for things like outliers,
frame undercoverage, and architectural, engineering and other costs.
The VIP industrial data are benchmarked to ACES; State & Local
data are benchmarked to the Bureau's Annual Survey of Government Finances;
VIP 1-unit residential are estimates based on SOC data; and VIP Federal
data are classified by the agency responsible for the work rather
than by specific type of construction work done. Response rates for
the surveys also differ. For a full explanation of the limitations
and errors associated with each survey see their respective publications
on-line at www.census.gov.
The ACES sample is selected by number of employees and payroll, which
are not necessarily predictors of capital expenditures. The sample
size is relatively small considering the universe. About 32,000 employer
companies represent 4.7 million companies. For nonemployers, 14,000
businesses represent 16.9 million businesses.
Individually each survey is an excellent measure of its intended
scope. The process described here to compare the surveys results in
some biased data due to the assumptions and estimates that were made.
Nevertheless, we believe this undertaking is worthwhile. It provides
perspective to data users who wish to relate the surveys to each other.
Also, the process and resulting data highlight inconsistencies, often
pinpointing areas of improvement.
- Issued May 2002
Tamara Cole
Manufacturing and Construction Division
U.S. Census Bureau
Table 1. 1997 Adjusted CSEC and
VIP by VIP Type of Construction (billions of dollars) |
|
CSEC |
VIP |
Difference |
% Difference |
Total Construction |
679.3 |
667.3 |
12.0 |
1.8 |
|
|
|
|
|
Private Construction |
524.3 |
516.6 |
7.7 |
1.5 |
Residential Buildings |
251.8 |
302.9 |
-51.1 |
-16.9 |
1 unit |
228.1 |
266.6 |
-38.5 |
-14.4 |
2 units or more |
23.7 |
36.3 |
-12.6 |
-34.7 |
|
|
|
|
|
Nonresidential Buildings |
225.4 |
173.9 |
51.5 |
29.6 |
Industrial |
63.4 |
37.6 |
25.8 |
68.5 |
Office |
47.6 |
34.3 |
13.3 |
38.7 |
Hotels and motels |
11.8 |
12.9 |
-1.1 |
-8.5 |
Other commercial |
59.7 |
51.8 |
7.9 |
15.2 |
Religious |
7.2 |
5.8 |
1.5 |
25.2 |
Educational |
4.8 |
8.7 |
-3.9 |
-44.4 |
Hospital and institutional |
20.6 |
13.5 |
7.0 |
51.8 |
Miscellaneous |
10.3 |
9.2 |
1.1 |
11.6 |
|
|
|
|
|
Farm Nonresidential |
3.5 |
3.8 |
-0.3 |
-7.0 |
|
|
|
|
|
Public Utilities |
33.8 |
33.6 |
0.1 |
0.4 |
Telecommunications/Electric light
and power |
23.8 |
23.7 |
0.1 |
0.4 |
Other public utilities |
9.9 |
9.9 |
0.1 |
0 |
Railroads |
4.9 |
4.9 |
0 |
0 |
Gas |
4.0 |
4.0 |
0 |
0 |
Petroleum pipelines |
1.0 |
1.0 |
0 |
0 |
|
|
|
|
|
All other private |
9.8 |
2.4 |
7.4 |
310.0 |
|
|
|
|
|
State and Local Construction |
139.4 |
136.6 |
2.8 |
2.1 |
Buildings |
57.4 |
63.8 |
-6.4 |
-10.0 |
Housing and redevelopment |
4.1 |
4.6 |
-0.5 |
-11.4 |
Educational |
29.4 |
33.5 |
-4.1 |
-12.3 |
Hospital |
3.0 |
3.7 |
-0.7 |
-19.3 |
Other |
20.9 |
21.9 |
-1.0 |
-4.5 |
|
|
|
|
|
Highways and streets |
43.8 |
42.3 |
1.5 |
3.4 |
Conservation and development |
2.5 |
2.3 |
0.2 |
9.8 |
Sewer systems |
15.1 |
10.5 |
4.6 |
43.8 |
Water supply facilities |
12.3 |
6.5 |
5.8 |
89.7 |
Miscellaneous nonbuilding |
8.3 |
11.2 |
-2.9 |
-25.9 |
|
|
|
|
|
Federal Construction |
15.5 |
14.1 |
1.5 |
10.3 |
Buildings |
10.1 |
6.1 |
4.0 |
65.1 |
Housing |
1.8 |
0.7 |
1.1 |
162.1 |
Industrial |
1.0 |
1.0 |
0.0 |
-1.6 |
Educational |
0.9 |
0.0 |
0.9 |
X |
Hospital |
1.4 |
1.3 |
0.1 |
11.3 |
Other |
5.0 |
3.2 |
1.9 |
59.5 |
|
|
|
|
|
Highways and streets |
0.3 |
0.3 |
0.0 |
0.0 |
Military facilities |
0.0 |
2.6 |
-2.6 |
-100.0 |
Conservation and development |
3.3 |
3.4 |
-0.1 |
-2.3 |
Miscellaneous public |
1.9 |
1.8 |
0.1 |
6.2 |
|
|
|
|
|
X - the result is undefined |
|
|
|
|
Table 2. 1998 Adjusted ACES and
VIP by VIP Type of Construction (billions of dollars) |
|
ACES |
VIP |
Difference |
% Difference |
Private Nonfarm Nonresidential Construction |
241.6 |
232.5 |
9.1 |
3.9 |
Nonresidential Buildings |
189.1 |
190.7 |
-1.6 |
-0.8 |
Industrial |
42.9 |
40.5 |
2.4 |
5.9 |
Office |
43.2 |
42.2 |
1.0 |
2.4 |
Hotels,motels |
6.6 |
14.8 |
-8.2 |
-55.5 |
Other
commercial |
41.3 |
53.6 |
-12.3 |
-23.0 |
Religious |
11.5 |
6.6 |
4.9 |
74.3 |
Educational |
13.3 |
9.7 |
3.6 |
36.9 |
Hospital
and Institutional |
22.5 |
13.8 |
8.7 |
63.0 |
Miscellaneous |
7.9 |
9.5 |
-1.6 |
-16.7 |
|
|
|
|
|
Public Utilities |
47.8 |
39.2 |
8.6 |
22.0 |
Telecommunications |
19.4 |
12.5 |
7.0 |
56.0 |
Other
public utilities |
28.4 |
26.8 |
1.6 |
6.1 |
Railroads |
6.3 |
5.7 |
0.6 |
10.6 |
Electric
light and power/Gas |
21.2 |
19.8 |
1.4 |
7.1 |
Petroleum
pipelines |
0.9 |
1.3 |
-0.4 |
-30.0 |
|
|
|
|
|
All other private |
4.6 |
2.6 |
2.1 |
79.9 |
|