Welcome to the fourth issue issue of the year for The Site Report.

We are sponsoring and participating in three upcoming conferences that you may find interesting. 

On May 1-2, 2023, the West Virginia Manufacturers Association is holding its WV Manufacturing Energy Growth Summit. This regional, annual event brings together manufacturing and energy leaders, state and local officials, economic development professionals, and friends of industry and energy from West Virginia, Ohio, and Pennsylvania. Summit attendees will explore the broader intersections of manufacturing and energy from power generation to downstream manufacturing development through feedstocks by created oil & natural gas and rare earth extraction. Click here to learn more and register. Spilman invitees will receive the discounted member registration rate of $259. Simply check the box for "WVMA, GO-WV & WV Chamber Members" on the registration form.

On May 3-5, 2023, DRI is hosting its 2023 Employment and Labor Law Seminar. We are pleased to sponsor what is considered to be one of the nation’s best employment law seminars. It brings together leading management-side employment and labor attorneys, in-house counsel, human resources professionals, and EPLI representatives from throughout the U.S. and Canada. Always intensely practical and accompanied by helpful written materials, this seminar is indispensable for experienced practitioners as well as those who are just getting started in labor and employment law. Click here to learn more and register.

On May 15, 2023, DRI is hosting its inaugural Wind Energy Litigation Seminar. At this seminar, attendees will gain an in-depth understanding about the onshore and offshore wind sector from experienced attorneys and directly from the industry itself. Join our own Stephanie Eaton in Chicago, as she will be speaking at this event. Click here to learn more and register.

We hope you enjoy this issue and, as always, thank you for reading.

Stephanie U. Eaton - Co-Chair, Construction Group; Vice Chair of Southern Offices, Litigation Department; Editor, The Site Report

and

Julian E. Neiser - Co-Chair, Construction Group; Vice Chair of Northern Offices, Litigation Department

“Business interruption/supply chain disruption and natural catastrophes are the top risks for the construction and engineering industry, followed by the energy crisis, according to a new report by Allianz.”

Why this is important: Allianz Global Corporate & Specialty issued its Global Industry Solutions Construction Outlook in which it identified risks facing the construction and engineering industry. First, continued supply chain and business interruption issues that arose during the global pandemic will remain challenges for the industry. These challenges require that contracting parties realistically analyze the scope of the project and material needs, including lead times for delivery of those materials, before and during construction. Change orders must be anticipated and implemented as soon as practicable when materials are delayed or unavailable within the time frame available. Second, the industry will continue to face catastrophes such as severe storms and fires, some of which will require rapid re-construction of damaged communities. Restoration of homes and commercial buildings in storm- or fire-affected areas will require risk assessments for future fires, windstorms, flood, and climate-related changes to achieve the maximum risk mitigation possible. Third, the energy crisis will impact the way in which the industry operates, in that more energy efficient construction practices and materials will be needed to reach “net zero” carbon emission goals of the project owners, contractors, and governments in the project locales. In this regard, implementation of new technologies and increased use of electric vehicles and other equipment should be carefully considered and discussed among the contracting parties before, during, and at completion of new construction projects to address unforeseen implementation, product defect, or power shortage issues. Moreover, risks that may arise from the use of modern building methods and materials need to be carefully allocated and discussed among the contracting parties and insurers to avoid shortfalls in coverage or unexpected risk absorption by a party or parties on the project. As always, communications among the parties will be the key to a successful project. If you have questions about your projects and would like a thorough analysis of these issues, contact our Construction Practice Group for assistance. --- Stephanie U. Eaton

“A new study reveals some of the problems that plagued the real estate sector last year.”

Why this is important: Residential construction in Pennsylvania is in steep decline according to a recent review of historical U.S census and labor bureau data. According to this data, the residential construction industry as a whole enjoyed a steady rise in the number and value of permits issued between 2012 to 2021. In fact, the number of residential permits issued in 2021 doubled the amount issued in 2012. A 4.9 percent drop in 2022, however, marked the end this decade-long surge.

Largely attributable to the decrease in permits for single family homes, the drop demonstrates the stress recent banking and financial challenges has placed on the residential construction market. This is especially true for Pennsylvania. After a record 86.3 percent increase in permits in 2021, permitting action fell by nearly 50 percent in 2022. For perspective, Tennessee saw the second largest drop with 25 percent decrease. Consequently, Philadelphia and Pittsburgh are among the largest metro areas nationwide that recorded the biggest drops in 2022.

Despite the fact that residential construction activity remains high compared to 2012, a continued drop in Pennsylvania should be expected given the ongoing economic challenges. Residential contractors should therefore take note and consider implementing cost-effective building strategies, if they have not already done so. --- Jonathan A. Deasy

“Swinerton’s Timberlab is supplying the components for the 67,000-sf structure within the Live Oak Bank campus in Wilmington, N.C.”

Why this is important: Mass timber construction is on the rise and continues to become a more and more attractive option for project owners looking for eco-conscious solutions to traditional multi-story construction methods. Some industry participants claim mass timber buildings can be up to 25 percent faster to construct and can require up to 90 percent less construction traffic. As project owners continue to seek more sustainable ways to approach their projects, contractors and design professionals have significant opportunities to set themselves apart by considering alternatives like mass timber construction and by developing expertise in these new types of buildings that are growing more and more common. Like with any other change in the industry, mass timber projects (and the changing expectations of project owners) create new and different project challenges and potential liabilities that project participants should consider in their project planning and account for in their contracts. Consulting with a specialized construction lawyer is an excellent step for construction businesses to set themselves up for success on these specialized projects. --- Steven C. Hemric

“A member of the state’s code council says the bill, sponsored by a GOP lawmaker who is also a builder, comes as a ‘surprise’ amid efforts to compromise with the building industry.”

Why this is important: As we reported in the last edition of The Site Report, the 17-member North Carolina Building Code Council was set to evaluate updates to the state’s 2009 Energy Conservation Code in an effort to increase energy efficiency in new construction, and bring the Code in line with the 2021 international guidelines. Many builders attended the Council’s March public hearing to address Code changes. On March 27, 2023, Union County Republican Representative Mark Brody sponsored House Bill 488, which would block potential revisions to the Energy Conservation Code that would require more efficient lighting, thicker insulation, and other energy efficient measures through at least 2031. In addition, to govern residential construction, House Bill 488 creates a new Residential Code Council comprised of 13 members – six appointed by the General Assembly and seven appointed by the Governor, as opposed to the current makeup of the Council consisting of all Governor appointees. Critics of House Bill 488 point to confusion and implementation issues that could arise from separating the Residential Code Council from the Building Code Council. Moreover, the legislation is inconsistent with current climate change legislation in the state. Nevertheless, the Bill has been referred to the House Finance Committee and is being considered at this time. We will follow up on any new developments and report those to you in future editions. --- Stephanie U. Eaton

“According to a release, this measure will allow the Department of Professional and Occupational Regulations to create a Universal Licensing Recognition program for 85 occupations.”

Why this is important: On July 1, 2023, new legislation will take effect in Virginia that will allow Virginia’s Department of Professional and Occupational Regulation (“DPOR”) to create Universal Licensing Recognition for 85 occupations, including a number of construction-related trades. The legislation will allow DPOR to simplify, expedite and recognize out-of-state licenses for people: 1) who have held an equivalent license in another state for at least three years; 2) are in good standing in all states where they are licensed; 3) were required to pass a competency exam and met training standards to obtain their original state license; and 4) pay all applicable Virginia fees. The legislation will also have an expedited process to license those who come from states that do not require licensure, by recognizing the person’s work experience in a trade that requires licensure in Virginia. This is important because it will help fill critical in-demand jobs and cut consumer costs, while at the same time protect the public by ensuring that those jobs are filled by qualified trained professionals whose competence has been recognized by the licensing processes of the other states, and who have been and remain in good standing in the jurisdictions where they are licensed. Notably, this will not apply to architects, professional engineers, land surveyors and landscape architects. Understandably so, this allows for Virginia licensed design and engineering professionals to design and administer construction projects where Virginia’s building codes, laws, and regulations are implicated, and who will ostensibly be inspecting and confirming that construction work is in compliance with the design and building requirements. While at first blush, Virginia contractors may view this as a threat by virtue of new competition, the benefit of potentially having access to more qualified licensed subcontractors and labor in the face of the shortages confronting developers and contractors is apparent and has been recognized by the adoption of this legislation. As a parting note, however, it still remains important for owners, developers, general contractors and others hiring construction trades to screen subcontractors and tradesworkers to ensure competence, qualification, and suitability for their particular projects, for as the saying goes -- “ a mere license to drive does not a good driver make!” --- Robert A. Ziogas

“Airport projects of all sizes and geographies are getting a boost from the Infrastructure Investment and Jobs Act, which designates $15 billion over five years for runways, safety and sustainability efforts, terminals, airport-transit connections and roadway projects.”

Why this is important: One of the five airports undergoing major changes is the Southwest Florida International Airport in Fort Meyers, Florida (“RSW”). This 3-year construction project is important because it will create approximately 1,000 jobs with an average of 200 workers per day, making it the second largest public works project in Lee County, and a boost to the economy hit hard by Hurricane Ian last fall. The $331 million project has mixed funding generated through grants from the Florida Department of Transportation, airport revenue bonds, Lee County Port Authority construction fund and passenger facility charges. The airport will now have a consolidated TSA checkpoint, connector for the three concourses, and remodeled concession areas and business lounge to meet the surge in air traffic to the area. --- Stephanie U. Eaton

“Recent uncertainty among lenders could lead to new challenges for U.S. construction firms as more projects fail to pencil out.”

Why this is important: Economic conditions, including interest rate hikes, point to decreased construction activity in coming months as financing costs for many developers have become prohibitively high. Coupled with these conditions is the recent uncertainty in the banking industry. According to the Associated Builders and Contractors, construction backlog decreased to 8.7 months in March, its lowest level since August 2022. Meanwhile, industry experts, concerned about the long-talked about recession, stress that lending standards for banks have tightened as banking insecurity intensifies causing owners and developers to hold off on projects in the short term. These trends are fueling increased concerns about access to capital in general, and the development of a vicious cycle where lenders charge more to limit their risk, and developers will not or cannot pay higher interest rates to achieve their targeted returns.

Additional factors influencing capital access is the focus on yield from projects and longer lead times for materials. Challenges for project yield (a property’s return after purchasing costs and renovation expenses) are exposed with higher and more limited capital costs and access. On the supply side, longer lead times for materials increase the cost to carry the goods for contractors and developers. Although some materials have become more readily available, the overall supply chain still remains in a fragile state, according to a first quarter CBRE market trends report.

Nevertheless, many industry observers believe that the recent bank failures and corresponding reaction by the Federal Reserve could ultimately force the it to put the brakes on interest rate hikes, which may help temper the construction headwinds. --- Bryce J. Hunter

“A Maryland collision that killed six construction workers nabbed national headlines, but it was a reminder of what contractors already know: Jobsites are at the mercy of speeding drivers.”

Why this is important: In 2020, 857 people were killed and 44,000 injured in work zone crashes, according to the National Work Zone Safety Information Clearing House. More recently, the 2022 Work Zone Awareness Survey found that 64 percent of firms working on highway upgrades experienced car crashes over a 12-month period, and 32 percent of respondents had five or more motor vehicle crashes at their highway work zone in the previous 12 months. This article illustrates the dangers of roadside construction and highlights some of the possible solutions. Importantly, as a contractor on a DOT project, it would be wise to negotiate during the bidding process for jersey barriers or some other heightened safety measures before the project begins. The most important asset of any company are the people that get the job done, and providing a safe work environment is not only the right thing to do, but is mandatory so as to avoid future workers' compensation claims or, even worse, wrongful death claims. The attorneys at Spilman have the experience and know-how to properly negotiate DOT contracts, so the next time you bid on a DOT project, reach out to our team and we would be happy to assist. --- Matthew W. Georgitis

“As tradesworkers expect more from their jobs, some general contractors could shift toward self-perform.”

Why this is important: As the gap between demand and availability of qualified tradesworkers continues to impact the industry, contractors are being forced to consider new ways of approaching projects to set themselves apart from competitors and fill the labor gap to successfully complete projects. One way some general contractors may try to fill the labor gap and reduce project costs is by moving to a higher rate of self-performed work (as opposed to subcontracting out every trade). Hiring more W2 employees in trades brings increased employee-related obligations, but it also creates the opportunity for general contractors to reduce the number of project participants and some of the variables that can create project delays. Increasing self-performed work also creates additional potential liabilities for general contractors related to the work they self-perform and delays related to that work. Consulting with both employment and construction lawyers with industry expertise can help contractors mitigate the risks associated with increased self-performance and trade staffing. --- Steven C. Hemric

By Lee D. Denton

On April 18, 2023, Fox News agreed to pay Dominion Voting Systems a staggering $787.5 million to settle a defamation lawsuit. Particularly startling about the settlement is that Dominion was valued at around $51 million as recently as 2018, meaning that the settlement resulted in a payout up to fifteen times Dominion’s value. Dominion filed the lawsuit in response to publicly broadcast statements by Fox News and its guests after the 2020 election. Dominion alleged that the statements were not only false, but that Fox News knew that the statements were false and repeatedly broadcast them anyway.

Imagine one of your customers perceives that he suffered some slight (real or imagined) during an interaction with your company. Unbeknownst to you, he is one of the 4.5 billion people with a social media account. Fueled by outrage, the impression of anonymity, and the desire for revenge, the customer quickly tweets out a fake story about their interaction with you and your company in a matter of seconds, and goes on with his life. One of that customer’s followers retweets the story to his 10,000 followers, who share that story with their followers, and so on. Before it is over, your company’s business is devastated.

Click here to read the entire article.

Robert A. Ziogas

Member

Roanoke, VA

office 540.512.1827

Winston-Salem, NC

office 336.725.4496

rziogas@spilmanlaw.com

Bob is a Member in our Roanoke and Winston-Salem offices. His primary area of practice is litigation, with a focus in construction law. Bob’s extensive construction law experience brings a wealth of knowledge for our clients and especially those in the construction industry. He is very well versed in litigating matters in insurance, construction (including, among other things, construction contract disputes, defect claims, mechanic’s lien and payment bond claims), commercial and business disputes, and various other civil suits in state and federal courts; advising owners, developers, contractors, subcontractors, material suppliers, and other construction clients on how to prepare for and respond to the challenges of large construction projects; guiding and representing clients involved in commercial disputes in alternate dispute resolution proceedings before arbitrators and mediators; and providing general corporate and business advice toward avoiding the pitfalls that can lead to litigation.

Bob’s reputation precedes him. He is AV® Preeminent™ Peer Review Rated by Martindale-Hubbell. He has been selected by his peers for inclusion in The Best Lawyers in America® in the area of Commercial Litigation. He is listed in Virginia “Legal Elite” by Virginia Business Magazine. And, he has been selected for inclusion in Virginia Super Lawyers, including being named among the "Top 100 in Virginia" on several occasions.

He is a Member of the Litigation and Construction Law and Public Contracts Sections of the Virginia State Bar. He has served as Director of the Roanoke Bar Association and as Director and President of the Roanoke Chapter of the Federal Bar Association. 

He is admitted to the Virginia State Bar, United States Court of Appeals for the Fourth Circuit, and the United States District Courts for the Western and Eastern Districts of Virginia. Bob received his B.A., summa cum laude, from Roanoke College and his J.D. from the University of Virginia School of Law.