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Embracing Change While Mitigating Risk to Overcome the Skilled Labor Shortage in the Construction Industry

06.08.18  |  By Daniel A. McFaul, Jr.

The continuing growth of the construction industry is fueled by many factors including increased demand, population growth, global urbanization trends and the resurrection of suburban centers constructed near rail lines.  As the industry continues to boom, owners, design professionals and contractors face new challenges on projects that did not exist prior to the economic downturn ten years ago.  One such challenge is overcoming the skilled labor shortage which, if not addressed, may increase the risk of claims to all parties involved in construction projects. 

The origin of the skilled labor shortage has its roots in the economic downturn in 2007/2008 when many contractors were forced to downsize. Unfortunately, once things turned around, not everyone returned.  Some switched careers while others, including many baby boomers, retired. 

Since that time, the industry has struggled to attract new talent.  Millennials have shifted away from blue collar jobs and, instead, are attending college in record numbers.  As a result, less are participating in vocational, apprenticeship and educational training programs which once were the norm for prior generations.  Still others have been reluctant to join the construction industry because of certain perceptions, including difficult working conditions, instability and potential for injury. 

While the skilled labor shortage has impacted the construction industry in many ways, perhaps most significantly, it has increased the potential for risks and claims faced by all associated with construction projects, including owners, design professionals and contractors.  Given the lack of vocational training that was once a prerequisite for hiring, projects face the potential for an increased risk of injury to people and property as contractors struggle to find workers with the appropriate skill set. 

In addition to safety concerns, projects face the potential for cost overruns due to delays, which often result from an inability to appropriately staff a project with workers competent to carry out the work.  These delays can increase the overall cost of the project and potentially expose contractors to claims for consequential damages and liquidated damages, as well as increased labor costs due to overtime paid to workers in an effort to keep projects on schedule. 

While the risks associated with the labor shortage, discussed above, seemingly affect contractors only, all parties involved in a project face the specter of being subjected to claims and lawsuits.  Owners should protect themselves by performing due diligence on potential contractors and utilizing measures to avoid and mitigate the risks faced.  Such measures should include checking references, performing contractor candidate interviews and even researching claim history.  Failure to do so may result in costly litigation wherein aggrieved parties (whether they be the owner, contractor, design professional or construction worker) will turn to the courts to make determinations regarding construction and design defects, delays, property damage or personal injuries. 

Contractors that submit bids must be properly vetted to ensure timely project delivery within the agreed upon budget which should also minimize the potential for injury, damage and increased costs.  If a contractor has a history of being unable to deliver quality, on time and within budget projects, owners (and design professionals retained to assist owners in the bid process) should proceed with caution or look elsewhere provided they are not statutorily bound to accept the lowest responsible and qualified bidder.     

To address the skilled labor shortage and keep pace with the growing construction industry, contractors are embracing different avenues in order to mitigate risk. One such measure is embracing the use of technology on construction sites.  Incorporating technologically based equipment, tools and programs into projects has helped attract millennials who have both an interest in technology and the requisite skill set to utilize project related technological advances.  Examples include autonomous vehicles, robotics, virtual reality, business information modeling (BIM) and project management software to track project scheduling and work progress.  For example, using automated machine guidance technology with a grading machine can help to grade a site faster, with more accuracy and with fewer personnel needed than is necessary for traditional site grading.  Contractors have also turned to using pre-fabricated and modular products that are constructed in a warehouse or factory and then transported to a site.  Using these methods has aided in providing uniformity and quality control at a decreased cost.

In order to keep pace with the growth of construction, contractors must embrace these changes.  If they do so, they can remain competitive in a flourishing industry while mitigating the risks created by the skilled labor shortage.  

Mr. McFaul is a Partner in L’Abbate, Balkan, Colavita & Contini, LLP’s Garden City, NY office where he focuses his practice in the area of construction litigation, including the representation of design professionals.

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