The Site Report - Construction Industry Insights, Issue 2, February 2024

Issue 2, 2024

Welcome to our second issue of 2024 for our construction industry insights - The Site Report.

Business today is characterized by relentless change. To assist our clients in navigating this dynamic landscape, we pride ourselves on our ever-evolving practice. For 2024, we developed our report titled "ReSolutions" to show how Spilman's evolution translates into real, impactful enhancements to client service.

Thank you for reading!

A Look at the Pennsylvania Statute of Repose

By Bryan S. Neft

The Pennsylvania Statute of Repose for Improvements to Real Property, 42 Pa. C.S. § 5536 (PA Statute of Repose) is a powerful tool that provides protections to persons lawfully performing or furnishing the design, planning, supervision, or observation of construction, or construction of any improvement to real property. The PA Statue of Repose bars any claims for personal injury or injury to property based on defects in those improvements, or for the defects themselves, that are brought after twelve years since the completion of the improvement. The law requires (1) the defense be asserted by a member of the protected classes (i.e., those performing lawfully the design, planning, supervision, construction, or observation of construction) (2) concerning an improvement to real property that (3) was completed over twelve years prior to the claim being made.

There are a great number of cases that discuss what constitutes an improvement to real property.

Click here to read the entire article.

Challenges and Uncertainties Surrounding Offshore Wind

By Steven W. Lee

Renewable energy has become a major topic for governments and private companies alike. As the world attempts to pivot towards renewable energy, offshore wind has developed as a potential part of the solution but comes with significant challenges.

Click here to read the entire article.

A Clean-Energy Bet Goes Bad for Power Companies

"U.S. power companies raced to get in on the offshore wind boom a few years ago. Now some are rushing to get out."

Why this is important: In 2021, President Biden’s administration announced a target of 30 gigawatts of offshore wind by 2030. Currently, there are domestic offshore wind farms in operation off the coast of Rhode Island, Block Island Wind Farm (30 megawatts), and off the cost of Virginia, Coastal Virginia Offshore Wind Pilot Project (12 megawatts). To meet federal and state carbon reduction goals, many U.S. utilities have included or plan to include offshore wind energy in their suite of generation sources in the near future. Northern European wind farm successes by British Petroleum and Equinor and other large energy companies sparked investment in U.S. offshore wind development, including numerous East Coast projects. However, plans for Ocean Wind 1 and 2 off the coast of New Jersey and construction of a seabed off the coast of Massachusetts are being unwound. Projects intended to provide power to portions of New York, Rhode Island and Connecticut may be in a similar dilemma or are stalled. Why?

This article is important reminder of many of the contingencies involved with the deployment of offshore wind energy in the current economy. It highlights the impacts of increased interest rates, supply chain disruptions and bottlenecks, and resources diverted or stalled as a result of foreign military conflicts. Contracts must be evaluated by state regulators. Further, there remain construction challenges of erecting huge turbines in the Atlantic Ocean for which specialized vessels are needed to transport turbines from ports to the project sites.

Despite the current economic and construction climate, the article also highlights Dominion Energy’s plans for a huge wind farm off the coast of Virginia remain on time and within budget. Dominion Energy’s development success thus far is attributed at least in part to its ability to recover costs of the construction from ratepayers, though the article also notes that Dominion Energy “is seeking an investor in the nearly $10 billion development as part of a wider strategic review of its business.” Further, while not discussed in the article, Duke Energy’s recently updated Carolinas Resource Plan includes plans for 2,400 MW of offshore wind by 2035, subject to regulatory approvals. While this offshore wind development would occur off the coast of North Carolina, Duke Energy intends for that resource to benefit its operations in both North and South Carolina.

Spilman’s Construction and Energy Practice Groups will continue monitoring the development of offshore wind to bring you important updates. --- Stephanie U. Eaton

Manufacturing and Construction are Hiring — but There aren’t Enough People Trained to Fill the Job

“The Manufacturing Institute has projected that more than 2 million jobs could go unfilled in the sector by 2030 if workers do not pursue manufacturing careers.”

Why this is important: We hear from clients all the time that finding new skilled workers is a challenge, and that struggle only appears to be getting worse. Lack of skilled labor can impact project schedules and backlogs, and construction companies are having to change their strategies for talent acquisition to meet the needs of their clients and projects. One popular method involves using specialized staffing companies to help add skilled labor to a project. However, using staffing companies creates unique legal risks, and if the temporary labor staff is not well vetted, poor-performing crews can do more harm than good on a project. Another growing strategy is implementation of apprenticeship programs. Apprenticeships can be an excellent way to train new skilled workers, but these programs require substantial up-front planning and precise implementation to ensure the company’s legal rights are protected. For any construction company looking to implement new or creative strategies to combat the skilled labor shortage, consulting with an experienced construction attorney can be a valuable resource to help ensure risks are minimized and the company’s rights are protected. --- Steven C. Hemric

Union Approval at a Record High, Despite Falling Rates

“While the percentage of the workforce that is unionized is declining, ‘membership is growing in value,’ a Gallup report indicated.”

Why this is important: Gallup and other pollsters who periodically survey public opinion on workplace issues have all reported that the percentage of Americans who view unions favorably has reached levels unmatched since the mid-1960s. Annual Gallup surveys show union popularity among all Americans increasing from a low of 48 percent after the Great Recession of 2009 to 71 percent in 2022 (the highest since 1965) with only a slight decrease in 2023 to 67 percent. A survey recently commissioned by the AFL-CIO and conducted by ABGO reflects similarly high levels of public approval for labor unions among registered voters. However, despite high public approval, the federal Bureau of Labor Statistics reports that union membership has not seen corresponding increases, and, in fact, the percentage of all wage and salary workers who are union members continues to remain at historically low levels of 10 percent; particularly in the private sector where union membership remains stuck at 6 percent.

There are a number of possible explanations for what appears to be a disconnect between growing union approval and declining union membership rates, including the fact that recent strong growth in overall employment exceeded the increase in union membership and that 58 percent of non-union members continue to have no interest in organizing. Nonetheless, the significant improvement in public approval should not be ignored, and, in fact, there are regulatory and demographic developments that suggest employers need to be more diligent than ever.

Unions prevailed in 95 percent of representation elections involving groups of 500 or more workers in the first half of 2023. In gross numbers, unions won 662 elections during that same period – covering over 58,000 workers, the greatest first-half win total for unions in nearly 20 years. Representation petitions filed with the National Labor Relations Board (Board) also significantly increased in fiscal years 2022 and 2023. These are developments that should not be ignored.

These recent union election successes were closely followed by two significant changes by the Board in the second half of 2023 to the union organizational process that will likely aid unions seeking further gains in 2024. First, the Board’s Cemex decision in August of 2023 paved the path for mandatory bargaining without the traditional imprimatur of a secret ballot employee election and, in some situations, shifted the burden from unions to employers to seek an election. Second, the Board issued new procedural rules, which went into effect on December 26, 2023, designed to reduce the time between when a petition for election is filed and when the election occurs. In short, the changes introduced by the NLRB under President Biden, the self-styled “most pro-union-president in history,” should prompt employers to immediately prepare for an increase in union organizing activity.

Finally, the public polling on union favorability demonstrated that approval of unions is very high among younger workers. AFL-CIO polling released in August 2023 indicated that 88 percent of registered voters under the age of 30 and 69 percent of voters between the ages of 30 and 50 support labor unions. Thus, the Millennial and Generation Z workers who are rapidly replacing the retiring Baby Boomers provide new opportunities for long-floundering unions to swell their dues-paying membership ranks.

Employers concerned about effectively communicating an accurate description of the consequences of union organizing need to immediately up their game to counter the demographic and regulatory developments that favor increasing union representation. Recommended steps to take in consultation with legal counsel include the training of managers to recognize and report early signs of organizing, the use of employee satisfaction surveys, regular wage and benefit market surveys, and assessing and improving management communications about your business objectives and challenges. --- Peter R. Rich

Protecting Smart Building Access and Assets with Advanced Biometrics

“Improvements and reduced costs in biometrics are making them a more viable option for buildings where additional security is needed.”

Why this is important: In the 1992 cult classic heist film, Sneakers, Robert Redford played a character whose story arc required him to patch together a secret voice recording including the word “passport” in order to breach the biometric building security protocols set in place by his nemesis, played by Ben Kingsley. More than 30 years later, building access and security protocols using biometrics have become much more mainstream. As businesses and developers look to incorporate these systems in their operations, there is a delicate balance between meeting the security need of the asset, and avoiding unnecessary disruption to the workflow and operations. High traffic areas may call for a more passive mechanism, such as facial scan or walking gait analysis systems, while for lower traffic, high security assets may be better suited for iris scans, as an example. As biometric systems become increasingly more integrated with the day-to-day operations, and access points, it is absolutely critical to recognize that ensuring privacy, operational efficiency, safety, and overall security will require creativity to implement the right system for the right asset. --- Brian H. Richardson

Pumped-Storage Hydropower could Help Renewable Energy Flow

“Pumped-storage hydro is attracting a lot of interest, thanks in part to generous tax credits from the 2022 Inflation Reduction Act.”

Why this is important: The article provides an overview of an interview extolling the value of pumped-storage hydropower as a renewable source of energy, spurred in part by credits available through the 2022 Inflation Reduction Act (IRA). As is pointed out, the variability of solar, wind, and other renewable resources is problematic, so storage of power is a necessity. Pumped-storage hydropower – which involves storing water until needed to release to spin turbines and create power – is a proven technology that effectively operates as a power storage facility or energy bank to be utilized when the power grid is in need. The challenges, however, to the development of this type of hydropower include tremendous upfront investment costs and navigating a “cumbersome” regulatory approval process, both of which must be balanced against long-term value, low operating costs, and the importance of emission-free power production. As a result, the interest in pursuing such projects is limited, although a large-scale project is being pursued in the Northwest. --- Derrick Price Williamson

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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