The Site Report - Construction Industry Insights, Issue 5, May 2024

Jonathan Deasy, Stephanie Eaton, Mark Heath, Steven Hemric, Eric Kinder, Malcolm Lewis, Nicholas Mooney II, Julian Neiser
Spilman Thomas & Battle, PLLC
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Issue 5, 2024

Welcome to our fifth issue of 2024 for our construction industry insights e-newsletter - The Site Report.

Thank you for reading!

The Dotted Line: What DOT’s Final DBE Rule Means for Civil Contractors

“New guidelines streamline certification, raise personal net worth limits and strengthen monitoring and prompt payment requirements.”

Why this is important: The new DBE rule is a crucial update that helps clarify many aspects of the DBE program and the certification process, perhaps most importantly prompt pay requirements and the guidelines for actual participation of DBE subcontractors on projects. The updated rule also streamlines the DBE certification process for businesses that work in multiple states, increases the net worth limitations for DBEs (not only in raw numbers but also by excluding retirement assets from the net worth calculation), and allows continued use of virtual certification procedures put in place during the COVID-19 pandemic. Among the improvements to the rule, however, is an interesting gap: the rule does not address the “rebuttable presumption” of disadvantage for the groups historically included in the program. This omission is notable in light of recent challenges to the DBE program spurred along by the U.S. Supreme Court’s recent decision on affirmative action programs in college admissions. These challenges are still active, and similar challenges to the SBA’s Section 8(a) program have already resulted in changes to the Section 8(a) program. Therefore, additional changes to the DBE rule and program may be on the horizon and are being monitored closely. --- Steven C. Hemric

What Artificial Intelligence Means for the Construction Workplace

“When integrating AI into their business models, construction companies should carefully weigh the costs and benefits of this technology.”

Why this is important: Indeed, the construction industry is likely, for the foreseeable future, to continue depending predominantly on human intellect and labor. As the saying goes, “If it isn’t broken, don’t fix it.” However, artificial intelligence (AI) is revolutionizing the construction industry, offering creative solutions to longstanding challenges and innovative methods of workforce expansion. Specifically, two key areas where AI is making a significant impact are improving worker safety and enhancing worker accessibility.

Safety is paramount in the construction industry, where workers face numerous hazards daily. According to Health and Safety Matters, 45 construction workers died in 2022/23, which is a 15 percent increase from the previous year. Historically, workplace health and safety efforts have been enforced and regulated by the Occupational Safety and Health Administration (OSHA), the U.S. Department of Labor agency. Now, in addition to OSHA, AI is increasingly being utilized to mitigate risks and ensure a safer working environment. For instance, AI-powered PPE, such as smart helmets and vests, can monitor vital signs, detect hazardous substances, and alert workers to potential dangers in real-time. Another example is AI-driven computer vision systems which can analyze live video recordings from construction worksites to identify safety hazards/violations, such as unauthorized personnel entering restricted areas or workers not wearing appropriate PPE. However, such safety measures do not only mitigate risks and protect your standard employees. It also opens the door to improving worker accessibility.

Ensuring accessibility for all workers, including those with disabilities or limited mobility, is essential for fostering inclusivity and maximizing workforce potential. Upon enacting the Americans with Disabilities Act (ADA) in 1990, the world's first comprehensive civil rights law for people with disabilities, Congress aimed to expand daily commercial, economic, and social prospects for individuals with disabilities. Under certain circumstances, the ADA mandates that employers offer reasonable accommodations to applicants and employees with disabilities, enabling them to fulfill the essential duties of a job. With the assistance of AI, various solutions now exist to address accessibility challenges for such a physically demanding industry (i.e., the construction workplace). For instance, AI-powered assistive robots can assist workers with physical tasks that may be challenging for individuals with disabilities or injuries. Additionally, AI-driven voice recognition systems can enable hands-free operation of equipment and machinery, allowing workers with mobility impairments to control devices more easily. Altogether, the possibilities seem limitless.

AI has genuine potential to be a powerful resource to improve safety and accessibility in the construction workplace. By harnessing the capabilities of AI technologies, companies within the construction industry can enhance worker health/safety, productivity, and inclusivity, ultimately driving positive outcomes for both workers and employers.

To obtain additional information or guidance concerning what AI means in the construction workplace or how you can appropriately introduce it, reach out to any member of Spilman Thomas & Battle’s Construction Practice Group, Cybersecurity & Data Protection Practice Group, or the Labor and Employment Practice Group. --- Malcolm E. Lewis

Twin Challenges for Construction in 2024: Technology and Policy Reform

“The $1 trillion federal infrastructure bill, growing investment in green power infrastructure, rising U.S. consumer demand, and initiatives to reshore manufacturing have all contributed to tremendous growth in commercial construction.”

Why this is important: The U.S. construction industry is in the midst of a construction boom, with an estimated 40,000 new projects such as highway improvements, airport renovations, renewable energy construction projects, and EV charging station installation. But, perhaps it is a boom that is moving too quickly. This article highlights the fact that the combination of $1 trillion in federal funding for infrastructure and renewable projects, increased domestic consumer demand, and restoration of U.S. manufacturing facilities have led to an all-time high in construction spending in this country, which is undeniably good for the overall construction industry. However, the industry now faces overwhelmed permit processing requests, acute construction labor shortages, and high material prices that have not significantly dropped since the pandemic. Now is the time for investment in construction-related education in colleges and technical schools and apprenticeship programs, increased use of construction-related technology -- such as updated cost estimating programs, project management software, tracking devices for equipment and employees that monitor progress and safety issues, and use of drones for inspections -- and collaboration among all participants of a project on construction sequencing and permitting. Further, it is a time for contractors to evaluate workforce needs, contracts that need to account for increased permitting times and material delays, and consider technology updates to improve efficiency in project management and oversight. Our team is happy to evaluate labor, process, contractual, and technology improvements that your company can make so that your company can remain a participant in this construction boom. --- Stephanie U. Eaton

OSHA Goes Forward with Walk-around Rule for Inspections

By Mark E. Heath

On March 29, 2024, the Department of Labor (DOL) published its final rule allowing employees to authorize a representative to accompany an OSHA compliance officer during inspections of their workplace. The rule will be effective May 31, 2024, and is published in the CFR. 

The Occupational Safety and Health Act (OSH Act) has language that gives both the employer and employees the right to authorize a representative to accompany OSHA officials during workplace inspections. In order to comply with the OSH Act, the new rule is intended to clarify when and how workers may authorize another employee or select a non-employee to serve as their representative.

Click here to read the entire article.

NEPA Revisions could Delay Critical Infrastructure, ABC Says

“ABC says new NEPA regulations will make it more difficult to build important projects and are a step backward for critical infrastructure.”

Why this is important: Earlier this month, the White House Council on Environmental Quality (CEQ) finalized a rule that aims to simplify and modernize the environmental review process under the National Environmental Policy Act, commonly known as NEPA. Specifically, this rule provides for more efficient NEPA reviews through the establishment of clear deadlines and imposition of page limits on Environmental Impact Statements and Environmental Assessments. The rule however also includes provisions indicating that agencies identify alternatives to avoid or minimize environmental effects and places substantive requirements on NEPA reviews, including a more comprehensive review of climate change environmental justice impacts. As a result, the feelings surrounding this rule amongst those in the construction industry have been somewhat mixed. Environmentally conscious projects, such as solar projects, battery storage, offshore wind development, and EV charging infrastructure, are expected to benefit from the rule’s streamlined process whereas projects involving fossil fuels may be subject to further scrutiny and will need to perform additional environmental analysis. --- Jonathan A. Deasy

How Drones are Making Construction Projects Safer

“Automating high-risk activities is a huge net win for construction workers, who will increasingly be able to work remotely on dangerous tasks..”

Why this is important: Drones and their impacts on the construction industry have been a regular topic of discussion in both this publication and the industry at large, and this recent article again highlights one of the potential advantages to construction businesses of leveraging drone technology: increased jobsite safety. As drone technology continues to improve, and the legal requirements for implementing drones on construction projects continue to be refined and become more clear, using drones for inspections, jobsite monitoring, and even performance of actual work becomes more and more viable for contractors, and businesses should take a look at the opportunities available to them. As with any new technology or method, however, implementing drones carries its own unique liabilities and risks. Any construction business interested in implementing drones should seek input from legal professionals who can help them navigate the legal requirements and address the risks involved. --- Steven C. Hemric

Carbon Emission Concerns Changing Delivery Requirements for Construction Projects

“Construction projects will be different in the future. To remain competitive, contractors are advised to prepare for them now.”

Why this is important: As climate change pushes farther and farther into the foreground of political, social, and scientific discussions, this article highlights the fact that the construction industry is one of the most significant contributors to global carbon emissions. In fact, approximately 39 percent of the annual total global energy-related carbon emissions are caused by construction and renovation of buildings, which in turn produce an additional 11 percent of “embodied” carbon over the buildings. As a result, federal, state and local governments are pressuring the construction industry to reduce carbon emissions both through laws mandating and through programs incentivizing lower carbon use. In turn, public and private owners, engineering and design professionals, contractors and subcontractors will face increased needs to “rethink” building construction to improve energy and water efficiency of buildings, incorporate renewable energy sources, reduce transportation-related fuel use, replace carbon-intensive building materials – asphalt, concrete, glass, and steel – with different or modified materials, alter traffic flow, boost the use of recycled materials, and install landscaping to enhance stormwater management and biodiversity. Construction industry participants who audit their current “carbon emitting” practices, identify improvements that can be made on a company- and project-level, and document the implementation of carbon reduction in their operations will remain competitive in this ever-changing industry. If you need assistance identifying ways in which your company may be able to reduce its carbon footprint in its operations or with regard to a specific project, contact a member of Spilman’s construction practice group. --- Stephanie U. Eaton

MIT Report Details New Cybersecurity Risks

“Cloud misconfigurations, more sophisticated ransomware, and vendor exploitation attacks are contributing to rising cyberattacks.”

Why this is important: Worldwide spending on cybersecurity and risk management is projected to hit $215 billion in 2024. Most companies are aware of cybersecurity threats and are taking steps to improve their defenses. However, threat actors are still finding ways past companies’ defenses as data breaches hit an all-time high in 2023.

A recent report identified three attack vectors threat actors are using and companies need to consider when evaluating their defenses:

  • Cloud misconfiguration. The article makes a startling point about the experience of IT personnel and how the security of cloud storage may suffer. As companies race to store data in the cloud, many IT organizations and their personnel are not experienced in the nuances of cloud configurations and procedures in order to properly secure data. The article recommends addressing this issue early in the build cycle of storage systems and earlier in the hiring process of IT personnel.
  • Ransomware. Ransomware attacks are evolving. What once was an attack where threat actors take control of a company’s data and refuse to return it until they get paid has morphed into attacks where the actors also steal personal data and threaten to release the company’s data on the dark web. Ransom with blackmail to boot. Moreover, Ransomware-as-a-Service is on the rise, essentially providing a product that bad actors can use to attack companies. Encrypting data when it is “at rest” helps make data useless to attackers.
  • Vendor exploitation attacks. The services vendors provide for companies also provide a way into those companies’ systems. Companies should consider making a cybersecurity audit part of any vendor on-boarding process.

The article offers additional ways in which companies can guard against these new attack vectors. It’s worth a read. If you’d like to talk more about your company’s defenses and any of these issues, contact Spilman’s data privacy group. --- Nicholas P. Mooney II

FTC Bans Noncompetition Agreements

By Eric E. Kinder

On April 23, the Federal Trade Commission (FTC) approved on a split vote a proposed rule that bans virtually all employment noncompetition agreements nationwide. The rule was first proposed in 2023 and is scheduled to go into effect 120 days after it is formally published, which, for now, would be approximately late August 2024. Currently, there are four states that have banned noncompetition agreements in total (California, Minnesota, Oklahoma, and North Dakota) and a number of other states that have significantly restricted their use.

Click here to read the entire article.

Ask the Attorney

Many construction firms find themselves facing litigation and many turn to arbitration. Why would arbitration be a good option and what do companies need to know when it comes to contracts and arbitration clauses? 

"Arbitration is a good option if the two parties want to resolve a matter outside of the court system as it can save time and reduce costs. One of the key components of arbitration is the ability to preserve the working relationship between companies, which can be particularly helpful in the construction industry due to ongoing collaboration that may be necessary. Another key component is that most arbitrations are conducted outside the confines of the procedural and evidentiary rules found within the court system resulting in a less expensive and more streamlined process. 

It's important to know who is arbitrating your case. Many companies use the American Arbitration Association (AAA) for a variety of disputes, including commercial contracts, labor and employment matters, and construction disputes. The neutrals affiliated with the AAA that are assigned to a particular dispute are subject-matter experts with many years of experience in that particular area of practice. As a result, AAA neutrals are able to quickly distill both the factual and legal issues and render a decision that effectively resolves the dispute. At Spilman, we are advocates of the AAA as many of our attorneys represent clients before the AAA and several have been selected as AAA neutrals.

Those in the construction industry should be familiar with their contracts and should pay careful attention to the provisions governing disputes between the parties. In this regard, it can be very advantageous to include an arbitration clause in these contracts. Your attorney can ensure the clause protects your interests and aligns with your strategy. Additionally, these clauses can be drafted in a way that leaves you the option to waive arbitration should you decide that your particular dispute is best suited to be handled within the court system. Ultimately, it’s essential you retain counsel who is well-versed in arbitration clauses, contracts, and arbitration itself. This is a specialized area of law and having an attorney and firm that have been involved in all aspects of the arbitration process can prove to be invaluable. 
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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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