Recent Trends in the Construction Industry: Observations from a Construction Attorney

With the clear skies and nice weather of the last several weeks, Iowa’s construction season has hit full speed and I have found myself thinking about continued industry trends from 2022 and new ones in 2023. 

Use of CMR for Public Projects: Effective July 1, 2022, Iowa added another allowable project delivery method for Iowa public entities – construction manager at risk (CMR). CMR projects generally involve the owner negotiating a guaranteed maximum price (GMP) for the project with a construction manager who agrees to complete the project within the GMP, including the work performed by it and its subcontractors, as well as the construction manager’s negotiated fee. In the last year, CMR has been used by multiple localities on their projects from small to large, including the Des Moines International Airport Terminal Project. It is vital for all involved in CMR projects to understand the new law. 

A Rise in Construction Project Audits: There continues to be a rise in project audits, meaning general contractors and subcontractors must understand the parameters of the audit and seek counsel when necessary. Some of the most commonly audited financial elements of a project include labor charges (e.g., hourly rates and labor burden), material/equipment charges, in-house fabrication billing, profit/overhead charges, and change orders. 

Continued Industry Challenges: On the plus side, skyrocketing fuel costs from 2022 have now stabilized in 2023; however, driver shortages remain a challenge. Some of the more dramatic material price increases from 2022, including lumber and roofing materials, have been stabilized, but new material price fluctuations have arisen in 2023. Both locally and nationally, labor shortages continue, which ultimately lead to continued volatility with the production of materials, material costs, and material availability. With these continued trends, companies must remain flexible and creative on everything from contractual protections and pricing terms to alternative material use and alternative supply chains. 

Jodie McDougal is a shareholder at the Fredrikson and Byron law firm, working as a construction attorney who handles both litigation and transactional matters for her clients, including contractors, architects, engineers, owners, and others. If you have questions, please contact Jodie McDougal at jmcdougal@ fredlaw.com.