The United States’ economic landscape has seen a great deal of change over the last few months since the arrival of the new administration. One of the most widely discussed and debated acts by the White House has been the enactment of significant tariffs on imported goods. The impact of the new trade policies can already be seen in the construction industry, taking the form of rising material costs and supply chain disruptions. The construction industry may be hit hard by the new tariff policies, but there are ways for contractors to prepare for the changing trade situation and remain resilient despite logistical challenges.

Since January, the U.S. has announced tariffs on goods imported from Canada, Mexico, and China. The U.S. has also reinstated a 25 percent tariff on steel imports and increased the tariff on aluminum imports to 25 percent. Several countries have responded to these measures with retaliatory tariffs on U.S. goods. The newly imposed tariffs will likely impact the construction industry in significant ways, with some effects already taking hold.

The most obvious impact of the tariffs is the likelihood of increased material costs. According to the National Association of Home Builders (NAHB), “approximately 7% of all goods used in new residential construction originate from a foreign nation.” Costs of certain materials began rising even before the new tariffs took effect, due to widespread anticipation of the new trade policies. Materials impacted by the recent tariffs include lumber, gypsum, steel, iron, aluminum, and cement.

Increased material costs could force contractors to either absorb the additional costs or pass them on to their customers. Contractors with fixed or maximum price contracts may be unable to pass increased costs onto customers, forced instead to take the financial hit themselves. Cost increases and escalating tensions with trading partners may also impact supply chains, leading to potential disruptions, delays, and/or shortages. These disruptions could in turn lead to delays in project deadlines, and uncertainty surrounding future material costs may lead to difficulty estimating project costs.

The current uncertainty surrounding the tariffs and retaliatory measures by other countries makes it hard to predict the full effect of these policy changes. However, there are ways contractors can prepare for the impact of tariffs. Business owners should identify which of their sources and materials will be affected and assess the potential cost impact of the new tariff rates. To offset higher material costs, contractors may consider raising prices strategically while maintaining transparency with clients.

To avoid the new tariffs altogether, businesses may consider alternative sourcing, domestic suppliers, and the use of alternative building materials. Diversifying suppliers helps to strengthen the resilience of supply chains against unpredictable events and circumstances. Contractors should also meet with their legal counsel to review their contracts and contract language. Fixed-price contracts present financial risk for contractors, especially during uncertain economic times. Business owners, under the guidance of their attorneys, might consider adjusting contract language to include protective clauses such as price escalation clauses and change-in-law clauses. These clauses help to protect businesses from factors outside of their control, such as unexpected changes in material costs and law changes.

Lastly, contractors should stay informed of the latest tariff developments, as the situation is developing rapidly. The new tariffs may present significant challenges to the construction industry in the coming years, but U.S. businesses can weather the storm of changing trade policies by rethinking their sourcing, improving supply chain resilience, and innovating their business strategies. Planning ahead with financial and legal advisors—and adjusting your business strategies accordingly—will help to minimize the risk of disruption to your operations in the face of the new tariffs.

The new year brings with it new legal requirements for contractors and subcontractors in New York State. On December 30, 2024, Section 220-I of the New York Labor Law went into effect. This new law requires registration with the Department of Labor for all contractors and subcontractors working on public projects, as well as private projects covered under Article 8 of the Labor Law.

The legislation has been enacted in an effort to increase compliance with New York’s prevailing wage laws and other laws protecting workers.

As of December 30, contractors must register before submitting any new bids or starting work on covered projects. Any contractor or subcontractor planning to bid on a covered project who has not yet done so should register immediately.

Review and processing time for applications is estimated to take three to four weeks. As such, the New York State Department of Labor (NYSDOL) encourages all contractors and subcontractors to register as soon as possible to avoid impacting project schedules or bidding periods. Please note that registration is not valid until an application has been reviewed and a certificate has been issued.

The NYSDOL lays out the steps for registering on their website. As part of the application process, contractors and subcontractors will need to provide details regarding their business and its officials, workers’ compensation and unemployment insurance, any previous labor law or employment tax law violations, previous violations of workplace safety laws or standards, and apprenticeship programs if applicable. Also, contractors who are in arrears on NYS State Unemployment Tax (NYS-45 SUTA) may be denied a certificate by the DOL until addressing past due amounts.  For a full list of required information and documents, see the NYSDOL website’s page titled “What You Need to Register for the Contractor and Subcontractor Registry.”

A $200 fee is due upon registration, reduced to $100 for New York State certified Minority or Woman-owned Business Enterprises (MWBEs).

Once registration is approved, a registration certificate will be available for download in the Contractor Registry Portal. The certificate is valid for two calendar years from the date of issuance. It is important to note that registration must be renewed at least ninety days before the current registration expires. Contractors and subcontractors can check the status of their registration at any time through the Contractor Registry Portal.

Contractors who do not register with the DOL run the risk of not being awarded public works jobs. Additionally, failing to comply with registration requirements may result in a penalty of up to $1000 and the issuance of a stop work order. Register now to avoid these risks.

Lastly, the burden of proof of registration for all subcontractors will fall on the prime contractor.  Prime contractors can initially review the NYS DOL website registry to see if a sub has applied and been approved. However, they should set a new standard of collecting a copy of the subcontractor’s registration certificate as part of a bid package or prequalification. Please note that registration under this new law does not replace or change other legal requirements for contractors and subcontractors, but stands in addition to previously existing requirements.

The Frequently Asked Questions page on NYSDOL’s website provides helpful information for registrants. The Bureau of Public Works and Prevailing Wage can also be contacted for additional information or assistance regarding the registration process at 518-457-5589.

Recent years saw surges in the cost of different types of insurance due to inflation, interest rates, the skilled labor market (or lack thereof), supply chain issues, and an increase in lawsuits and related six, seven, and eight-figure awards. While a couple of sources indicate the construction contractor insurance market may be stabilizing, there are other rumblings about continuing and emerging challenges specific to New York.

In the U.S., rates for workers’ compensation coverage appear to be the most grounded, especially for contractors with a favorable loss history. While some in this situation may see premiums stay flat or increase slightly, average increases are expected to be around 5%. Rates for general liability coverage and umbrella policy rate increases are expected to increase between 5% and 15%, while commercial auto coverage may average a 10% to 15% increase. (Source: Insurance Marketplace Realities Spring Update 2024, May 8, 2024.)

It will be interesting to see how this translates to coverage in New York, where some sources indicate contractors should prepare for double-digit increases upon renewal and potentially face a harder time securing coverage, especially if they have a history of losses.

A new report by the New York Civil Justice Institute asserts, “Construction insurance costs are highest in New York representing 12.5% of a project’s cost versus 2.5% in nearby states like CT, NJ, and PA.” It names the litigious environment and state laws for minimum insurance as two of the main cost drivers. It also says, “New York State is the most expensive insurance market in the country. In nearly every category of insurance coverage — from medicine to construction – insurance premiums (and the losses that drive them) are higher in New York than any other state in the United States.”

With a growing number of insurers paying out more in claims, verdicts, and settlements than what they receive in premiums in New York, there’s concern that more insurers will exit the market and leave people and businesses struggling to find coverage and keep it. Some are even calling it a crisis.

When it comes to escalating premiums for contractors in New York, many blame the state’s Scaffold Law (which holds contractors 100% liable for gravity-related injuries) for enabling dubious lawsuits and nuclear awards. While there is currently a bill making its way through the NY Assembly that would make staged construction site falls a felony, the push for reform has been an uphill battle for several years.

As the situation continues to play out in board rooms, courtrooms, and on legislative floors, a two-pronged strategy – focused on coverage and culture – may help contractors manage insurance premiums (and increases) while protecting their businesses, employees, and brand.

When it comes to coverage, it’s tempting to offset insurance premium increases with higher deductibles, lower coverage and/or more exclusions. Be sure to balance these considerations with what increased risks and exposure can mean to your business. Other ways to try and manage these costs include starting to shop around early (i.e., 90 days before a renewal); leveraging programs available through professional affiliations; and seeing if discounts are available for paying in full upfront rather than monthly. While some insurers (especially those new in the market) may make enticing offers, be sure to research rankings, customer experiences, customer service, and financial ability to cover losses before moving ahead.

As for culture, make safety an innate part of how you do business. Ensure recruiting processes help you hire the right people with the right skills and experience (yes, it’s tough in today’s labor market but worth the extra effort). Do your background research on subcontractors and work with legal counsel to make sure contracts address safety, injuries, and indemnification. Consider hiring a safety/risk manager to develop and oversee comprehensive safety plans for people, facilities, and equipment. Explore how technologies like drones, robotics, and wearables may mitigate loss while improving your risk profile.

Finally, keep an eye on developments. With so many factors influencing the New York contractor insurance arena, staying informed can help you make sound decisions for your business and employees.