Backlog Just Slipped to an 18-Month Low. Your WIP Schedule Decides What Happens Next.
Associated Builders and Contractors released its July backlog numbers last week, and they weren't pretty. The average contractor now has 8.0 months of work in the pipeline, down from 8.8 in June and the lowest reading since January. Every region, every industry, every company size declined.
Here's the part that should get your attention if you run a contracting business in Utah. The drop hit small and mid-size firms hardest. Contractors in the $30 to $50 million revenue range are sitting at their thinnest backlog since March 2020. If you strip out the data center contractors, who are still riding 11.4 months of work, the average for everyone else is just 7.5 months.
Thinning private backlog means more contractors are about to chase public work. And in Utah, there's a lot of it to chase. UDOT alone is running $2.8 billion across 176 new projects this construction season, from the $621 million freeway connection in Utah County to the I-15 widening in St. George.
But public work runs through your surety. And your surety's decision comes down, more than anything else, to one document: your work-in-progress schedule.
Why the WIP schedule matters more right now
When backlog is fat, a mediocre WIP schedule is an annoyance. When backlog is thin and everyone's bidding the same public jobs, it's the difference between getting bonded for the project that carries you through 2027 and watching a competitor take it.
Surety underwriters call the WIP the most revealing document in your financial package, because it shows whether you estimate accurately, control costs, and finish jobs at the margin you bid. A clean, credible WIP can meaningfully raise your bonding capacity. A sloppy one caps it, no matter how good your balance sheet looks.
There are three things underwriters go looking for first.
1. Profit fade
Underwriters compare the gross profit you projected on each job at signing to what you're showing now. If a job started at 12% and it's sitting at 6% at 70% complete, they want to know why, how big the overrun is, and what you're doing about it. One fading job is a conversation. A pattern of fade across your schedule tells them your estimating can't be trusted, and they'll price your capacity accordingly.
2. Underbillings
Costs and earnings in excess of billings. On paper it's a current asset. To a surety, a big underbilled position usually means one of two things: you're behind on billing, or there are costs on jobs that you'll never collect for. Either way it's cash going out faster than it's coming in. Underwriters have seen underbillings sink contractors who looked profitable right up until they weren't.
3. Overbillings, and where the cash went
Billing ahead of the work is fine. It's good cash management. The question the surety asks is whether that cash is still around to finish the job. If you overbilled $800K across your schedule and the money went into a new excavator, you've effectively borrowed from your own projects. The surety knows it, and they'll want to see how you plan to fund the back end of those jobs.
What to tighten up before you bid
If public work is part of your plan for the next 12 months, here's where to focus.
Update cost-to-complete estimates monthly, not quarterly. Most fade problems are really stale-estimate problems. Project managers hold bad news, and by the time it hits the WIP it looks like a surprise. A monthly review with each PM, job by job, keeps the schedule honest and gives you time to fix problems while they're still fixable.
Reconcile the WIP to your income statement. If your WIP says you earned $400K of gross profit this quarter and your P&L says $250K, the surety stops trusting both. This reconciliation is the single fastest credibility check an underwriter runs.
Watch unearned profit against overhead. One ratio underwriters lean on is the gross profit still left to earn in your backlog versus the overhead you'll carry while earning it. If your remaining margin doesn't cover next year's overhead, you're going to feel pressure to take bad work. Knowing that number before bid day changes what you're willing to bid.
Get your books on percentage-of-completion and keep them there. Sureties want CPA-quality statements with a proper POC method behind them. Cash-basis or hybrid books get discounted hard, and in a competitive bonding environment that discount comes straight out of your capacity.
The backlog data says the easy-work era is cooling off. The contractors who win the next stretch will be the ones whose numbers hold up under an underwriter's flashlight. That's not about being a bigger company. It's about having a WIP schedule that tells a clear, accurate story every month.
Sources: Building Design + Construction, ABC July 2026 Construction Backlog Indicator | Engineering News-Record, Construction Backlog “Plummets” in July | UDOT, $2.8 Billion in New and Ongoing 2026 Construction | UFG Insurance, How Contractors Can Maximize Bonding Capacity with a WIP Schedule
