New York, city and state, has been put forth as a bell weather location for construction. What happens in Las Vegas may stay there; what happens in New York gets treated like it represents the whole of the country. As such a critical part of the construction ecosystem, New York gets put under a microscope, analyzed in granular detail.
As an example, Grassi & Co., a CPA firm with more than 300 clients across all segments of construction and contracting, undertook a survey of the New York construction industry. The three-month long project was conducted by an independent research firm and included contractors and construction leaders in the New York region.
The topics covered include labor conditions, the regulatory environment, safety compliance, technology, cybersecurity, and insurance—all issues that impact the profitability of contractors. More than 82% of the respondents were either general contractors (43%) or subcontractors (39%).
Among the many issues that are top-of-mind for contractors are skilled labor shortages and general business conditions. Even so, the challenge of complying with regulatory oversight stood out. Regulatory compliance was cited by more than 25% of the survey respondents as a top industry concern.
When respondents were asked about union trends in the construction industry by sector, 46% of industry professionals said that non-union and open shop work had greatly increased in the residential sector. In fact, the share of non-union and open shop in the residential sector was still increasing but at a slower pace. This trend was cited less frequently in the civil/infrastructure sector, with almost half seeing no change on projects in that sector. About 87% of the survey respondents said they expect these current union vs. non-union and open shop trends to continue.
Regulatory compliance was also a concern for many of the contractors surveyed. For example, compliance with the MWBE (Minority/Women-Owned Business) requirements. Some 54% of the respondents said MWBE compliance was difficult or very difficult while only 13% said it was easy or very easy. And yet, 34% indicated that MWBE compliance was not a significant issue for their business.
Survey respondents were also asked how NY Labor Law, Sections 240 & 241, is impacting their profitability. Section 240, also known as the “Scaffolding Law,” was designed to protect workers from falls and/or injuries from falling objects. Section 241, while similar, focuses on the safety of a construction site at ground-level. This section outlines specific regulations about how the areas of a construction site should be arranged and operated, to prevent slip and fall and/or trip and fall accidents, chemical hazards, air contamination, etc.
While the consensus was generally negative, assessments on the scale of the impact of 240 and 241 varied considerably. For 42%, the negative impact on the bottomline was large, while 46% said the impact was negative or slightly negative. Only 12% said that there was no impact.
While New York laws might seem uninteresting to those working in other states, these regulations often are viewed by other locations as the prototype for new laws in their jurisdiction. Local Law 196 (construction safety training) is typical of the statues that can be found, in similar or exact form, in other locations.
Of those surveyed 63% said they were factoring compliance costs into their project bids. Safety training seemed to be a significant investment focus of compliance for respondents, with 60% saying that they were investing or planning to invest in safety training. Forty percent of firms were complying with Local Law 196 by hiring in-house safety personnel and 36% said they were engaging outside firms. Another 29% said they were investing or planning to invest in safety technology.
While we don’t often consider cybersecurity awareness to be a “construction” problem, it was a key issue raised in the survey. With an ever-increasing reliance on data at the core of every construction business, around 45% of respondents strongly agreed or agree that construction projects are increasingly susceptible to cybercrimes and 76% said that the number of people with access to worksite data was a significant security concern. And another 62% of respondents currently have an internal policy to protect data on laptops and mobile devices.
Overall, 86% of those surveyed see revenues remaining the same or increasing, demonstrating optimism in the construction market. This growth comes despite the many challenges these companies face.