Ohio – Construction Overview – Chambers USA 2021
Prepared by Hahn Loeser & Parks LLP
Overview of the Ohio Construction Industry
Ohio has a strong and mature construction industry, including newer entrepreneurial companies, long-term family businesses, regional companies and national construction companies. Our industry is well organized and represented by different construction industry associations who regularly interact with large public owners, industry groups and the Ohio General Assembly. Those industry groups continue to advocate for positive change, maintain the competitive nature of bidding, address staffing needs and work for greater equality in hiring, promotion and pay.
As we begin to turn the corner on the COVID-19 pandemic, the impact of the last year, combined with the shifting priorities of the new Biden Administration, offers contractors and developers unique challenges and opportunities.
Construction Industry Trends and Developments
The COVID-19 pandemic accelerated a change in priorities and demand. New warehouse, residential and similar developments are expected to trend upward. Office and retail will likely decline due to shifting work and shopping habits. The entertainment, hospitality and hotel industries are in a holding pattern waiting to see what the post-pandemic economy (and new administration) holds in store. There is a current and surprising focus on the development of new co-working spaces replacing traditional offices and work-from-home, at least in the short term.
There is little doubt the construction industry will face continued disruption caused by material shortages and shipping delays. Non-residential projects will continue to face challenges with onsite project management driven by pandemic safety protocols. As contractors address project impacts from all of these causes, the number of disputes related to schedules and delays is anticipated to rise. To combat these issues, it is critical that contractors diversify their supply chain partners and be vigilant in guarding their rights to, and pursuing claims for, increased cost and loss of efficiency associated with COVID-19 safety restrictions, delivery delays, construction schedules forced into adverse weather and escalated labor and material costs.
Not surprisingly, the construction industry has seen an overall increase in project payment disputes. Lien and bond claims are on the rise as contractors have a very limited tolerance for waiting for payment or risking lien or payment bond rights. As the COVID-19 crisis de-escalates, nerves will begin to settle and projects will get back on track. But the impact of the pandemic on current projects and associated claims is expected to linger into 2022.
On a positive note, the industry is seeing a renewed focus on improved technology, in both design and construction, including Building Information Modeling, Virtual Design Construction, Modular Construction and the use of 3-D printing. Contractors and industry professionals who leverage these and other technological advances will continue to be at a market advantage. The industry is also looking for the next generation of employees who are trained in technology and committed to careers in construction.
Beyond these market forces, the industry should be mindful of the priorities of the Biden Administration that will impact construction. We anticipate the Administration will use federal contracting to address climate change and help address issues with racial inequalities. With regard to climate change, this may include requirements related to green infrastructure and power generation; opportunities in wind and solar; a reduction in fossil fuel vehicles, that will involve the creation of a national vehicle charging infrastructure; and a new taxation regimen to account for falling gas tax revenues. We also predict the Administration will use federal contracting to address fair housing policies, equitable relocation of low-income housing, construction of new low-income housing communities and the creation of vaccination and health clinics in low-income neighborhoods deemed food or health care deserts.
In addition, the Biden Administration placed a priority on increasing contracting opportunities for small and minority-owned businesses. This includes requiring prime contractors to increase subcontracting opportunities for small, disadvantaged firms, with the aim of tripling the small, disadvantaged business goal (currently 5%) by 2025.
We are also seeing an increase in State and Federal investigations and enforcement related to questions regarding connections between majority and minority-owned businesses; questions about family connections; and investigations of MBE/FBE/EDGE businesses that hold this status in name only. The use of joint-ventures on projects to meet the minimum contracting size will continue to trend upward.
In addition to these industry trends, there continue to be a number of employment issues of which contractors and others in the industry should be aware.
COVID-19 Vaccine Policies
While employers can mandate employees receive the vaccine, there are important exceptions, including employees with a disability (ADA), employees with protected religious beliefs (Title VII) and where such a mandate would violate applicable union contracts (NLRA). Further, employers must ensure they do not solicit information that may reveal a family history of a disease (Genetic Information Non-Discrimination Act – GINA).
Additional Labor Policies
While raising the national minimum wage may not directly impact wages in the construction industry, it could potentially shift the labor market. In addition, the industry will want to watch the Biden Administration’s labor policies as they will impact the balance on the National Labor Relations Board and its rulings and policies that impact both unionized and non-unionized workplaces.
Recent and Pending Legislation Impacting the Construction Industry
In Ohio, there have been pushes to make the Prompt Pay Act, which requires contractors to pay lower tiers within ten days or face penalty interest and attorney fee claims, also apply to Owners. Additionally, the Ohio General Assembly considered raising the limit for non-competitively bid work, something that was opposed by Ohio’s industry groups. As of this writing, neither proposal was approved.
Challenges and Opportunities for the Construction Industry
As detailed above, diversification of suppliers, embracing of technology, mastery of contract terms including allocation of risk and ensuring a knowledgeable, well-trained, diverse and flexible workforce are keys to construction industry success. With the increased delays, materials shortages and pandemic related issues, it is critical that a contractor understand its contract risk and strictly follow contract requirements. Those who fail, do so at their own peril.
It is clear that the construction industry is facing a shifting landscape. Keeping an eye on industry trends, making adjustments where necessary and employing prudent business measures to take advantage of new technologies, as well as manage risk and enforce contract rights for compensation, are as important as ever. Those who monitor these trends and remain vigilant in adapting to this new environment, will be best suited to stay ahead of the curve and leverage the new opportunities waiting for us in 2022.