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Construction Year in Review:  2018 Trends and What To Expect in the Year Ahead

2018 was a strong year for the construction industry. Despite a labor shortage and some uncertainty regarding material costs, construction professionals remain optimistic that the trend of growth will continue in 2019. Below we identify eight trends we expect to carry forward into the new year. 

1. Technological Advancements and Use of BIM

Drone technology and aerial photography continue to be increasingly popular among industry professionals. These tools can help track project status and the progression of work and may also be used to increase and monitor safety. A word of caution: in the event of litigation, photographs and video are likely to become evidence.

BIM (Building Information Modeling) and other 3D-modeling tools have and will continue to become more prevalent in the industry.  3D-modeling tools allow for more effective collaboration, planning and construction. These tools also raise a myriad of legal questions concerning contractual rights and obligations, intellectual property rights, and the relationship between models and between models and other project drawings, plans or specifications. To avoid later disputes and ensure a successful project, each of these issues should be clearly and explicitly addressed in construction contracts. 

2. Sustainable Construction

The demand for green design and construction is likely to increase within the next 3-5 years, with specific emphasis on climate resilience, carbon reduction, and alternative forms of energy. The World Green Building Trends 2018 SmartMarket report revealed that nearly half of survey participants expect to make more than 60% of their projects green by 2021. 

3. Modular or Prefabricated Construction

We predict the market for modular or prefabricated construction will continue to grow, particularly in the face of increased material costs, labor shortages, and a continuing demand for new construction. Modular construction allows for the manufacture of multiple, component parts off-site, which in turn, can reduce costs, provide a higher degree of control, create more predictability in onsite construction, and reduce the risk of delay. Some stigma still surrounds the concept of modular construction with many questioning the quality and longevity of the materials and end product. Among other “checks” on growth: payment arrangements generally differ with modular construction, and some lenders may not be accustomed to the financing arrangements that are typical with modular construction. Some localities may also restrict the use of modular construction. 

4. Worker Misclassification

Worker misclassification remains a hot button issue in the Commonwealth of Virginia. Governor Ralph Northam signed an executive order on August 10, 2018 establishing an interagency taskforce targeting worker misclassification and payroll fraud. The taskforce includes the Virginia Employment Commission, Department of Labor and Industry, Department of Professional and Occupational Regulation, the State Corporation Commission’s Bureau of Insurance, the Department of Taxation, and the Worker’s Compensation Commission. The taskforce completed its work plan in November 2018 and must report its progress to the Governor in August 2019. Worker misclassification issues abound in the construction industry, so construction professionals should be aware that their companies will continue to face increased scrutiny in the coming year.

5. Licensing

Given the present shortage of qualified trade workers throughout the United States, including the Commonwealth of Virginia, and the Commonwealth’s focus on worker misclassification, government authorities will continue to place an increased emphasis on licensing. Contractors should take care to ensure all subcontractors are appropriately licensed. In the event of an inspection or audit, each contractor’s license is likely to be requested and examined.   

6. Increasing Material Costs

Reports on material cost increases in the last year vary between approximately 5-8%. Material costs will continue to increase in 2019, further hamstringing construction professionals. Uncertainty concerning tariffs, particularly with respect to steel, lumber and aluminum, also suggest that material prices will continue to increase. Overcoming these challenges will require increased communication and flexibility between owners, developers, contractors, and suppliers. Contractors involved in large-scale construction projects taking place over a longer period of time may need to reevaluate pricing and other options under their applicable contracts. 

7. Payment Disputes

As the demand for construction remains high and the cost of labor and materials continues to increase, there is an increased chance for payment disputes to arise on a project. Accordingly, owners and contractors may see an increase in mechanic’s liens. To prepare for potential disputes, construction professionals should pay close attention to dispute resolution procedures in their contracts. 

8. Scheduling and Project Delays

2018 saw an uptick in project delays and delay claims, a trend that is likely to continue. Construction professionals can employ a variety of tools to increase and manage productivity, but they should also take care to understand the claims procedures under their various agreements and document the project adequately to be prepared in the event of a claim. 

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