Each year, I’m asked what I see happening in the next 12 months. Well, here we are at the end of 2012, and to say the least, it’s been interesting. Now we are looking at 2013 and what it may hold for the VACR industry. And as you know, to really be able to make any kind of predictions about the future, you must look at the immediate past.
R-22 Sticker Shock
2012 started off with a bang in the industry. When the Environmental Protection Agency failed to set the production and import allocation levels for R-22 for the year, prices skyrocketed. Contractors reported to ACCA that prices doubled, tripled and in some cases quadrupled overnight. And since the EPA has still not set the 2012 allotments, we can be sure to see continued uncertainty over the price and availability for R-22 in 2013.
Gridlock on Capitol Hill
It’s no surprise to hear that Congress didn’t do much in 2012; after all, it was a major election year. With many lawmakers on the campaign trail, including the President, everyone was trying to “play it safe.”
Congress defined itself this year by political gridlock and what seemed to be unwillingness to discuss significant and looming issues facing the country until the lame duck session. They did extend the Bush tax cuts through the end of 2012 but failed to reach an agreement on what should be done about the deficit spending. The extension of tax incentives and spending cuts are two important issues again coming to a head on Capitol Hill as the end of 2012 is in sight.
The impact these two issues will have on the industry and the country, is huge. Because of congressional inaction, the business community cannot reliably predict what their tax liability will be in the coming year.
More than one hundred credits, deductions and expensing allowances that lower the tax liability for millions of households and small businesses are set to expire on Dec. 31, 2012. These include the lower individual tax rates under the Bush tax cuts, the lower capital gains and dividend tax rates, relaxed estate tax rules and a fix to keep the Alternative Minimum Tax from hitting millions of middle class Americans.
And if Congress can’t resolve the “fiscal cliff” issue by cutting spending and/or generating new revenues, severe and sudden cuts to military and discretionary spending will kick in as the New Year begins.
Regulations, Regulations and More Regulations
On top of the uncertainty about the “fiscal cliff,” federal agencies are sitting on a backlog of new regulations that have been in a holding pattern since before the election. It’s expected that new rules from the Department of Energy, the EPA and the Department of Labor will be released in the coming months.
How Have Our Contractors’ Attitudes Changed?
ACCA continued to gauge how contractors feel about short-term growth through its Contractor Comfort Index (CCI). 2012 marked the second full year of the monthly survey that asks contractors how they feel about new customer acquisition, existing business and employment numbers.
With an index of 50 or above indicating anticipated growth, in 2012 contractors were telling us that they were feeling optimistic, even more so than they were in 2011. The CCI had a high of 70 in May, the first time it has reached that high, and a low of 56 in both January and September.
And It Was Hot, Hot, Hot!
We all know we can’t control the weather. And thankfully, after a warm winter around most of the country this year, the temperatures heated up in the summer. Record heat for a second year in a row helped fuel business
for contractors.
So, That Was a Quick Look at 2012, But What Does It All Mean for 2013?
2012 was the interesting year we predicted, but I think 2013 will hold our interest much in the same way.
The election is over, and we know what Congress will look like for at least the next two years. And if there is one certain outcome of the election, it is that health care reform will continue to move forward with various implementation milestones, and it is unlikely that a congressional challenge will materialize. Fifteen new provisions will start to take effect in 2013, and another 16 provisions will take effect in 2014. The most notable ones for employers kick in more than a year from now when the individual mandate takes effect in 2014. That’s when individuals must obtain health care coverage from their employer, a state exchange or on their own. Employers with 50 or more workers who do not offer health care coverage AND who have at least one employee claiming a tax credit for obtaining insurance coverage through a state exchange will pay a penalty. Larger employers will have to pay a penalty if they don’t provide comprehensive, affordable coverage to their employees.
Employers should also watch over the next two years, as the government will reveal the “essential health benefits” that will constitute a qualified health care plan. In some cases, plans currently offered by employers may not qualify, and if they have to be modified, those employer-provided plans may lose “grandfathered” status. Self-insured group health plans, health insurance coverage offered in the large group market and grandfathered health plans are not required to cover the essential health benefits.
Outside of Washington, D.C., contractors will need to again focus on their business, not just their work. The strong contractors who have survived the recession and continue to find success in these uncertain times have done just that. They have put the processes in place and begun to focus on their financial operations, building customer loyalty, providing the right education and training for employees, concentrating on smart marketing and looking at appropriate markets to expand business.
ACCA understands how important it is to continue to look for new opportunities. ACCA has known for years that home and building performance are the way the market is moving and that there is no better segment of the home contracting market to provide these services than HVACR contractors. To help our members take advantage of these growing opportunities, we launched the Building Performance Council at our 2012 Annual Conference in Las Vegas.
This new council has accomplished much in the past 12 months, including holding the first-ever Building Performance Forum this past October in Austin and starting a bimonthly eNewsletter. They have much more planned for 2013. They are working on marketing messages that contractors can customize with their company information and share with their customers to help them understand what home performance is and how it can improve customers’ comfort, health and overall quality of life. There will also be a full building performance track during the annual conference.
And while I’m discussing ACCA councils and how they are helping contractors take advantage of new opportunities, I need to mention ACCA’s Radiant & Hydronics Council. This council was formed in the fall of 2011 and since then has grown to be the largest contractor-run association for hydronics contractors. This group, led by Dan Foley of Foley Mechanical, has been extremely busy. They launched the Inside Hydronics Newsletter this past summer, and they held the first-ever Hydronics Roundtable in September. These activities are just the start of what this group is going to do. In fact, hydronics contractors have two things to look forward to in the coming months from ACCA: first, the new Hydronics Hub column in IE3 magazine and the Radiant & Hydronics track at the annual conference.
Since I’ve mentioned the annual conference twice, I should tell you it is scheduled for Feb. 26–March 2, in Orlando, FL. We have reworked the schedule to add in some extra events that will give you even more opportunities to learn, network and grow.
Each year, we receive dozens of proposals for learning labs, and we review them for their value and interest to contractors. During ACCA 2013, we are targeting six tracks, including: Commercial HVAC, Residential HVAC, Quality Assurance, Building Performance, Radiant & Hydronics and Business Operations. Presenters will address code changes, social media, lead generation, measuring performance, developing leadership skills, risk management and much more. If it affects HVACR contractors, we will cover it during this conference. Plus, we are bringing back the CEO forum and our popular “I’ve Got an Idea” session. Add to that the new IE3: Indoor Environment & Energy Expo, and contractors have one-stop shopping for their business solutions. The IE3 Expo is co-sponsored this year by IAQA and RESNET.
As you can see, ACCA has been busy developing programs to help contractors continue to be successful in a constantly changing environment. We don’t have a crystal ball and we can’t say
exactly what 2013 will bring. What we do know is that contractors that continue to focus on their businesses and follow sound business practices will be the ones that see growth and success in 2013 and many years to come.
Paul T. Stalknecht is president and chief executive officer of the Air Conditioning Contractors of America (ACCA). Contact him at 703/575-4477, [email protected] or visit www.acca.org.