By Todd Bryant
One month into 2016, the main construction industry trends and trajectories for the year are clearly in sight. As the construction industry continues on its path to recovery, its financial power and manpower keep growing. This year, more than 60% of firms intend to increase their total headcount between 1%-25% despite the still severe worker shortage and increase in competition.
At the same time contractors' heads across the country are turned in the direction of a number of legislative and regulatory updates that are due. Many of these are promising in that they will regulate aspects of the industry which have long gone unchecked and allow business to grow. Others, as the Associated General Contractors of America's (AGC) 2016 Construction Hiring and Business Outlook report shows are also a cause for concern to contractors who fear being overly regulated.
That being said, here are some of the main legislative construction industry trends and regulatory updates to watch out for in 2016!
1. Small Business Contracting About to Change!
Two major changes are underway in the world of small business contracting. One of these is related to the mentor-protégé program which the SBA has been working on over the past few years. Now, sometime in the first quarter of the year, a final rule is due. And as soon as this summer a pilot program may launch.
What this means practically is that a government-wide mentor-protégé program may be established. Under it small businesses will be capable of winning more contracts than before, because they will be able to take on contracts with their mentors as a joint-venture, as long as they are eligible for the contract. It also means that protégés will be able to take on bigger contracts.
The second change which may occur this year is related to a proposed rule concerning the performance of work requirements by small businesses. Under this rule, requirements for self-performance would increase, making more of the money made available to small contractors stay with them.
Until now, small contractors have often subcontracted their work to others, often bigger contractors, effectively making the contract that was set aside for them pointless. Yet, this rule also includes provisions that would allow small businesses to subcontract to "similarly situated entities," meaning other small contractors, because this would still benefit a small contractor.
2. OFCCP Minimum Wage and Pay Transparency Regulations Coming Into Effect
A number of regulations devised by the Office of Federal Contracts Compliance Programs (OFCCP) coming into effect this year should also be on contractors' radars.
As of January 1, hourly wages for workers performing on covered federal contracts and subcontracts increased to $10.15 per hour. Also increased are minimum wages for tipped employees who work on such contracts. These are now $5.85 per hour.
At the same time, as of January 11, pay transparency is introduced by Executive Order 13665. According to this order, covered federal contractors and subcontractors working on contracts over $10,000 cannot take any action (such as terminate a contract) against their employees or against applicants who discuss their pay with their colleagues.
Additionally, contractors are also obliged to include the Pay Transparency Policy Statement concerning this change in their employee handbooks, as well as circulate the statement among workers and applicants.
3. Disclosing Law Violations
While not yet signed and effective, Executive Order 13673 introduces an important requirement for federal contracts over $500,000. Under this requirement, before a contractor is awarded such a contract, he or she must disclose to the contracting side any violations of 14 labor laws and their state equivalents that have occurred in the past three years. And every six months thereafter the contractor will have to disclose these anew.
Furthermore, contractors will also have to collect such information from their subcontractors under these same conditions.
The Order also includes requirements for contractors to make available paycheck notifications to employees with detailed information about the amount of hours they have worked, including overtime, how much they have been paid, and more.
The purpose of this regulation is to provide more information to contracting agencies in order to enable them to make better choices when awarding contracts as well as to take legal actions if necessary. Needless to say, this regulation has generated a lot of resistance because "it's creating another layer of regulation, where there already are a lot of rules."
4. Requirements for Bond Claims Remain Unclear
This has actually been an ongoing issue for a while. In 2016, construction bond claims and the proper procedures to filing a claim all too often remain misunderstood and unclear.
Along with the usual confusion about the difference between payment bonds and performance bonds and what their implications are, rejected bond claims remain a serious problem. In other words, contractors who do not know how to file a bond claim, especially against subcontractors, run the risk of forfeiting an otherwise entirely legitimate claim and losing money.
Therefore, becoming thoroughly familiar with the conditions of one's contract bonds, one's obligations under them, as well as one's rights should be an important priority to contractors.
5. OSHA Increases Penalties, Requires New Electronic Reporting
Finally, the Occupational Safety and Health Administration (OSHA) has a few things in stock too when it comes to regulatory updates.
For the first time since 1990 OSHA will be increasing the amounts for civil penalties as required by the Bipartisan Budget Act of 2015. Effective August 1, 2016, OSHA fines will increase by about 80% making, for example, the maximum penalty for an other-than-serious violation from the current $7,000 to $12,600. More rigorous but less frequent inspections are also expected to be introduced by the Administration.
A final rule is also due on the "Improve Tracking of Workplace Injuries and Illnesses Rulemaking" in March. This regulation will introduce greater requirements for electronic reporting (OSHA 300 Logs) by employers. These records will be made public by OSHA and will be accessible by anyone who is interested, effectively creating pressure on those employers who are slow or sloppy in implementing safety standards and practices.
Additionally, OSHA will also be reviewing employer safety incentive programs and even making many of them illegal, as all too often they tend to discourage workers from reporting injuries. If found to be such, these programs may also result in citations for the contractors, regardless of their safety record or previous violations.
Are there any other regulations or construction industry trends which contractors should look out for or anticipate in 2016? Let us know in the comments — we'd be happy to hear your feedback!
Todd Bryant is the president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping contractors get bonded and start their business.