Construction backlog remains strong nationally, but the picture in the West is more restrained.
The Associated Builders and Contractors’ May Construction Backlog Indicator rose to 9.1 months, up 0.3 months from April and 0.7 months from May 2025. Western contractors, however, reported 7.6 months of backlog—only 0.1 months higher than the prior month and the prior year.
That puts the West 1.5 months below the national average. It also reflects what many construction owners may already be seeing: Work is available, but attractive, profitable opportunities are not spread evenly across markets or contractors.
“Backlog is an important indicator, but the number of months alone does not tell you whether the work will be profitable,” said Tracy Allen, Construction Partner, Aldrich CPAs + Advisors LLP. “Contractors need to understand the expected margin, cash requirements, scheduling risks, and customer concentration behind the backlog. Nine months of poorly priced work can create more risk than six months of disciplined, profitable work.”
Data is important, but context is critical.
“The headline number is useful, but decisions about hiring, equipment, and new work need to be based on the company’s actual pipeline, operating capacity, and financial position,” said Brendan Hollis, Construction Partner, Aldrich CPAs + Advisors LLP. “Owners need to put the national data in the context of what is actually happening inside their own business.”
That distinction matters right now.
The National Numbers Do Not Tell Every Contractor’s Story
Part of the recent strength in national backlog is tied to data center construction. In ABC’s June Construction Backlog Indicator, contractors with data center projects reported 11.0 months of backlog compared with 8.5 months for contractors without that work.
Because many smaller and midsize Western contractors do not compete heavily in the data center market, the national average may not reflect what they are seeing in traditional commercial sectors. Owners should focus less on how their backlog compares with a national benchmark and more on whether their current work supports their margin, cash flow, and capacity goals.
More Backlog Can Also Mean More Cash Pressure
Backlog represents future revenue, but it also represents future spending.
Before a contractor collects from the owner, the company may need to cover payroll, mobilization, materials, equipment, and subcontractor costs. A growing backlog can therefore create a working capital problem even when the underlying projects are expected to be profitable.
Timing is often the issue. A project may be signed and included in backlog but still be waiting for permits, financing, design decisions, or final owner authorization. If the contractor hires ahead of the expected start date or reserves equipment that sits idle, the economics of the job can change quickly.
“Growth can put real pressure on cash, even when the work looks profitable on paper,” said Shaivi Vasanadu, CPA, Construction Partner, Aldrich CPAs + Advisors LLP. “Managing growth requires understanding the timing of project cash requirements relative to customer billings and collections. Contractors that integrate backlog with cash-flow forecasting and staffing plans are better-positioned to grow without placing unnecessary strain on working capital.”
Owners should distinguish between work that is under contract and work that is ready to begin. A signed project that may not mobilize for another six months should not drive the same financial decisions as a job scheduled to start next week.
Cost Increases Can Erode a Healthy-Looking Pipeline
According to Construction Executive’s report, Construction Materials Prices Surge 2.6% in May, Up Nearly 10% Year Over Year, construction input prices increased 2.6% in May and were nearly 10% higher than a year earlier.
That surge creates a problem for projects that were bid months ago using older assumptions for labor, materials, equipment, or subcontractor pricing.
“The longer a project sits between bidding and construction, the more likely it is that some of the original cost assumptions have changed,” said Jeremy McAdams, Construction Partner, Aldrich CPAs + Advisors LLP. “Contractors should regularly reforecast labor, materials, and subcontractor costs. Margin erosion is much easier to address when it is identified early rather than after the project is substantially complete.”
For contractors, that pressure may be compounded by long permitting timelines, labor availability, travel distances, and the cost of moving people and equipment across a large geographic area.
A project can remain in backlog while becoming less profitable. That is why the conversation should go beyond how many months of work exist. Owners also need to ask what that work is likely to earn and what it will take to deliver.
About Aldrich’s Construction Team
Aldrich has one of the largest construction accounting practices in the Western U.S. and was recognized in Construction Executive’s 2025 Top 50 Construction Accounting Firms.
Our construction professionals help contractors put these financial moves into practice through:
- Timely financial reporting for bonding needs;
- Audits, reviews, and compilations of financial statements;
- Federal and state tax planning, including multistate compliance;
- Strategic business planning and consulting;
- Job-costing processes and accounting systems;
- Cash-flow analysis and forecasting;
- Benchmarking and overhead-rate analysis; and
- Succession and ownership-transition planning.
A healthy backlog should give you confidence, not leave you wondering whether the company has enough cash, capacity, or margin to complete the work. Talk with the Aldrich Construction team about turning your backlog into a clearer financial and operating plan for the months ahead.
