As construction technology advances rapidly—from automation and 3D printing to the use of drones and robots—concerns over system security are growing—and for good reason. The last several years have seen a steep rise in the number of cyberattacks targeting construction companies, with ransomware, fraudulent wire transfers, and data breaches among the most common threats. The industry is targeted largely due to its reliance on legacy systems, lack of security, complex supply chains, large amounts of confidential data, and sizable financial transactions. Cyberattacks can result in huge financial losses for construction companies, as well as operational and reputational damage. These attacks have the potential to seriously disrupt a company’s operations by threatening company financials, project timelines, infrastructure, and stored data. As cyberattacks become more sophisticated and frequent, it’s more important than ever that contractors take the necessary steps to safeguard critical systems and sensitive information.

Common Cyberattacks

• Ransomware is one of the most common forms of cyber threats facing construction companies. Ransomware is a type of malicious software that cuts off a company’s access to its computer systems, data, and networks until a ransom payment is made.
• Wire transfer fraud is another type of attack in which a scammer deceives a company into sending money to a fraudulent account (for example: a fraudster hacks a subcontractor’s email and requests a contractor send payment to a fake account).
• Data breaches are another category of cyberattacks frequently threatening the construction industry. Data breaches occur when an unauthorized party gains access to a company’s sensitive data, including blueprints, project plans, financial information, employees’ personal details, and more.

Impacts on Construction Companies

Companies that fall victim to a cyberattack may suffer the following consequences:

• Major financial losses
• Delayed or halted projects
• Exposure of confidential company and employee information
• Loss of intellectual property
• Potential legal consequences
• Loss of confidence from clients and the public

What Can You Do?

Below are some preventative measures construction companies can implement to strengthen cybersecurity and minimize risk.

1. Robust cybersecurity training: Implement regular company-wide cybersecurity training so employees can recognize threats and avoid falling victim to cyber scams.
2. Security systems: Install protections such as network firewalls, anti-malware and antivirus software, and intrusion detection systems (IDS).
3. Password protocols: Secure company devices and sensitive data by requiring strong passwords, multi-factor authentication, and regular password changes.
4. Updated software: Routinely update software, replacing legacy systems with updated programs if necessary.
5. Regular risk assessments: Regularly assess systems for vulnerabilities or hire a third-party cybersecurity service to conduct risk assessments.
6. Vet third parties: Review the cybersecurity protocols of third-party vendors, suppliers, and service providers.
7. Response plan: Prepare a detailed incident response plan establishing protocol for when cybersecurity incidents do occur.

Conclusion

This new age of technology for the construction industry brings with it a great deal of opportunity, excitement, and innovation—but also a new level of risk. Contractors must be vigilant and prepared for the threat of cyberattacks at all times to avoid serious operational and financial damage. Implementing the proper protections now can save you a world of trouble later on.

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.

Succession planning is a critical strategic process that ensures business continuity in the event of a leadership change. It is a proactive approach that involves identifying and developing potential leaders who can replace key roles when they become vacant. This process is crucial in every industry, but it holds particular significance in construction due to its unique challenges and skills and knowledge requirements.

Succession planning in construction is important because it enables a smooth transition should someone in a key role leave or become unable to work. Construction projects often involve complex operations and long timelines. Having a well-prepared successor can ensure that projects stay on track during a leadership change. In addition, succession planning fosters a culture that shows staff development matters. By identifying potential leaders and providing them with training and mentorship, companies can enhance employee engagement and retention. Finally, succession planning reduces the risk of business disruption. In the construction industry, where contracts are time-bound and penalties for delays can be substantial, business continuity is critical.

Succession planning in the construction industry entails a systematic process beginning with identifying key roles that are critical for business operations. These roles often include the company owner, project manager, site supervisor, and other positions that are instrumental in decision-making and project execution.

Once these roles have been identified, potential successors are selected based on their skills, experience, and leadership potential. These individuals are then provided with targeted development opportunities, such as training programs, mentoring, job rotation, and exposure to strategic decision-making. This process helps them acquire the necessary skills and knowledge to succeed in their potential future roles.

The impacts of not having a succession plan in the construction industry can be severe. Without a plan, the transition of leadership roles can be chaotic and stressful, leading to disruptions in project execution. This can result in delays, cost overruns, and potential damage to the company’s reputation.

Furthermore, the lack of a succession plan can lead to a talent drain. If employees do not see opportunities for advancement within the company, they may choose to leave, taking their skills and knowledge with them. This can further exacerbate the leadership vacuum and affect the company’s long-term sustainability.

What’s more, in the absence of a succession plan, companies may resort to a hurried recruitment process, which can lead to the selection of leaders who are ill-prepared for their roles. This can impact the quality of decision-making and potentially put the entire business at risk.

Don’t leave the future of your business to chance. Invest time and resources in developing a robust succession plan that prepares the company for future leadership transitions and promotes long-term success.

Creating winning project bids is a science onto itself. Do it right and you open up opportunities to maintain or enhance your business’ profitability (pending actual performance on-the-job). The secret is to not forget to invest the time and attention to show the buyer why your business is the best for the job. In truth, that’s easier said than done, but there are ways to promote your chance at success.

Before anything else, consider whether a project is worth bidding on. If a job is simply a stretch, don’t do it. If there’s slim to no chance of winning, take a pass. Invest in bidding on projects that match your capabilities and business goals.

Make sure you completely understand the project scope. Become familiar with all project documents, plans and specifications, including bonding requirements, inspections, and security clearance. Review the request in detail, noting important points like whether you have to be prequalified to bid, the submission deadline, mandatory meetings, and any specific materials required. If you need clarification, ask! Not including all information requested can be an automatic reason for denial.

Research the company requesting the bid and any team members (i.e., architects) to gain insights into their values and priorities, client base, past projects, and more.

Assess risks and define how you plan on mitigating them. Are there any red flags that can cause problems like unknown site conditions, safety concerns, accelerated timelines, or inaccurate bidding documents?

Attend pre-bid meetings and conduct site visits to clarify project requirements and obtain answers to any questions. Are any bonds required? Does the client have participation goals for minority businesses or ESG? Can you substitute materials? Your goal should be to clarify expectations and identify any potential issues (like a work site not being easily accessible).

Define costs, accountabilities (who is responsible for what), and a project timeline. Estimates should encompass labor, mobilization, equipment (including fuel and transportation to/from a work site), and materials. If a job requires subcontractor work, get bids from at least three subcontractors and review closely for competitiveness, completeness, and accuracy. When it comes to accurate takeoffs and measurements, the importance cannot be overstated. Once you have a final bid, consider whether it will prove beneficial for your business. Sometimes not making a bid is the best decision you can make.

If you decide to move ahead with submitting the bid, have someone else proofread it and double-check all of the math. Confirm that all requested paperwork is included.

After submitting your bid, maintain communication with the potential client, subcontractors, and suppliers. Don’t hesitate to reach out to the potential client for periodic updates, especially if the project can impact other bids and work.

Finally, periodically review your bid process. How many projects have you won or lost? For losses, consider reaching out to the client or project manager for feedback. Learn whether there are adjustments you can make – without compromising profitability – to improve your hit rate going forward.

While I originally set out to write about interest rates and inventory, research into the housing and commercial real estate markets left me feeling that there are a lot of mixed messages out there, and that’s probably because there are. With so many different ways to measure what’s going on with these markets and so many different indices, I feel a need to take a step back and simplify what I’m seeing.

To start, let’s talk interest rates. The Federal Reserve increased them for the eighth time on February 1 by a quarter point. The fact that it was a lower increase than the past few may signal efforts to rein in inflation are working – which would be good news for real estate and ultimately construction…maybe.

While the Fed doesn’t set mortgage rates, which are influenced more so by 10-year Treasury yields, lenders do try to determine what the Federal Reserve’s actions mean and that eventually impacts mortgage rates, which have dropped from their high of 7.12% last October to 6.3% as of Bankrate’s national survey on February 1.  (The Mortgage Bankers Association is predicting rates as low as 5% by the end of 2023.)

Home prices are no longer soaring upward. In fact, they’re starting to stabilize or even decrease a bit, which you would think would mean a pickup in demand and sales, but there are other factors at play. Inventory for affordable housing is down for the 39^th consecutive month and the number of properties for sale are down for the 37^th consecutive month, according to a report from the New York State Association of Realtors.

Rather than adding to inventory, homebuilders are focusing on getting rid of their existing inventory (and boosting new home sales) and people who locked in historically low mortgage rates will likely continue holding onto their homes. While single family home starts did increase in December, permits decreased. Then starts decreased in January, sending more mixed messages.

Still, the National Association of Homebuilders (NAHB) national Housing Market Index (HMI) increased for the first time in 13 months in January and again in February. The NAHB predicts this increase in homebuilder sentiment combined with lower mortgage rates will spur permits and new starts for single-family homes, which have fallen to the wayside in favor of multi-family homes due to the expectation that people would continue to rent versus buy. However, the NAHB anticipates higher vacancy rates and tighter lending conditions may lead to a slowdown in multifamily housing starts this year, while others believe multi-family housing remains attractive to investors especially during an uncertain economy.

Turning to commercial real estate, what the Fed does has a bigger impact. When rates increase, there are corresponding slowdowns in investor activity on the commercial side. The 2023 Dodge Construction Outlook expects total construction starts to decrease, with retail, warehouse and hotel projects falling dramatically and office and warehouse sectors seeing pullbacks. There’s still a high volume of unfilled office spaces in big cities, although Moody’s Analytics indicates vacancy rates haven’t dropped below 2019 levels.

Thanks to onshoring, CHIP manufacturing and data centers, U.S. industrial real estate needs are on the rise. E-commerce continues to drive the need for warehouse and industrial space. Neighborhood retail is doing well, but malls are not. While the Dodge Momentum Index, which measures nonresidential building projects in planning and leads nonresidential construction spending, was down 8.4% in January it’s still up 32% year over year. It also doesn’t hurt that when interest rates are rising, commercial real estate is seen as a solid investment.

That’s where things stand as of 2:12 PM EST on February 23, 2023. If inflation starts increasing again, the Feds change direction, and/or mortgage rates start increasing again, the message will likely change once again.