Today, we are pleased to present Vic Lance as our guest blogger for our Construction and Lien Law Blog. Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps contractors get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business. The ideas and opinions expressed here are the solely those of the author and do not necessarily reflect the ideas and opinions of the Cobb Law Group.
After a solid 2015, the prospects for the construction industry in the coming year couldn’t be more optimistic. Analysts predict a 6% overall growth and projected $712 billion value of the industry.
A variety of factors will drive change in construction. Besides workforce shortages, technological innovation, and shifting consumer preferences, construction industry trends will also be shaped by legislative changes throughout 2016.
New requirements will take effect to improve diverse aspects of construction. Standards on diversifying, tighter rules on contractor bond claims, anti-discrimination rules, and immigration regulations will be some of the influencing legislative factors this year.
While stricter legislation mean more effort on the side of construction contractors, this will help solidify the industry and improve it in the long run. Let’s take a look at the five major legislative trends for 2016.
#1. Focus on safety and industry problems
This year, the U.S. Department of Labor’s Occupational Safety and Health Administration is definitely putting a strong focus on fixing safety issues and misdeeds in construction. For the first time since 1990, OSHA increased its fines for violation of its rules by construction companies.
With construction accidents rising due to inadequate safety measures, a disproportionate number of foreign-born workers suffer injuries and even death. In many cases, such workers are not hired legally, and regular audits show that many construction companies continue this practice. Immigration and Customs Enforcement is likely to enforce more checkups and penalties this year to address the problem.
Other U.S. authorities are also increasing control over contractors in order to prevent safety violations, corruption and all kinds of misconduct in the industry. Some hope also that OSHA’s higher fines will be used for education and training of contractors, so that future accidents, fraud, and mishaps can be decreased.
#2. Beware of False Claim Act liability
Enforcement of False Claim Act actions has been a priority for the federal government since 2014. This trend will certainly continue in 2016, as fund recoveries under the Act had already reached $22.75 billion by the end of 2014. The Act targets cases of contractors working on public projects who break the rules, by overcharging on materials and labor, providing low quality materials and work, or falsifying accounts.
Besides the legislation on the federal level, numerous state agencies have enacted their own acts to counter fraud and misuse against state and local authorities. Florida, California, and New York are just a few of the states where parallel legislation has been created and enforced.
To successfully adapt to this legislative trend, construction contractors working on public projects must be well-informed about FCA liability and FCA actions. It’s also a wise step to get acquainted with penalties’ limitations statutes that appeal courts are applying today. Seeking legal help is highly advised, as professionals would be best suited to advise construction companies on potential liability areas.
#3. Construction bond claims still problematic
Surety bonds for the construction sector– such as performance and payment bonds – have been used for decades, but some issues around them remain misunderstood and cause serious trouble for contractors. While there is no new upcoming legislation in this field, the legislative problems caused by noncompliance in bond claim cases are worth the attention.
A common pitfall is that construction contractors are not aware of the statutes set in the bonds they post in relation to project bidding and execution. Common misunderstandings include when you need to file a subcontractor in default and, more generally, how to handle bond claims in the best possible manner. This trend is causing millions lost for construction companies and difficulties for project owners.
Contractors can counter these problems with detailed knowledge of their obligations under the bonds they obtain. It’s more common for construction professionals to be aware of the rules that govern payment bonds, but when it comes to performance bonds, issues persist. Getting to know the terms of your bonds can save you a lot of hassle later– and a lot of money.
#4. Contractors bound to diversify projects
Even though the Small Business Administration expanded its Mentor-Protégé Program in 2015 and has been running its 8(a) Business Development Program for a while, a recent SmartBrief poll shows that the majority of businesses think that contractors should diversify their projects.
Using the opportunities set forward by the SBA, as well as the plentiful public projects that contractors can bid on and the different supporting government programs have been of great help to contractors over the years. Yet, the road towards a truly stable construction industry goes through construction professionals exploring different niches and diverse projects.
Relying on state help and support programs can only take construction businesses so far. Expanding into new types of projects, incorporating continuing education and training and resourceful investments are the upcoming trend for contractors in 2016.
#5. Green building growing strong
As in recent years, green buildings are in higher demand. Legislative trends in the industry also support the gradual switch to sustainable construction, as well as climate change negotiations and national commitments towards eco-targets.
LEED construction practices are one of the many ways in which the U.S. construction industry is catching up with environmental concerns and regulations. The push towards greener buildings comes not only from the legislative level, but also from client’s preferences. Institutional and commercial buildings are the ones that are most often required to meet green standards, but the trend is also moving in residential construction.
All in all, savvy contractors have a lot to gain in 2016. From increased focus on safety standards and green buildings to stricter rules under the False Claims Act, the construction field is bound to get stronger and more stable in the year to come.
What are your top legislative trends in construction for this year? What do you think will drive change in the industry? We’d love to hear your opinion in the comments below.