One of the most significant challenges facing any sitework construction company today is the ever-evolving regulatory landscape. From environmental regulations to safety standards and labor laws, the rules of the game are in constant flux. Failure to navigate this ever-evolving landscape effectively can result in project delays, hefty fines, and reputational damage.
But when it comes to regulating construction companies, the stakes can be high for everyone, not just the companies themselves. A healthy and robust construction industry is a bellwether for the overall economy. It generates jobs, stimulates demand across various sectors, and signals economic growth.
Even more, it acts as a leading indicator. While it would be an oversimplification to say that where the construction industry goes the economy follows, a number of predictive insights can be gleaned from taking a close eye at what’s happening in construction generally.
It’s not just the size of the construction industry in terms of employment and fiscal clout, which is considerable. According to the Bureau of Labor, the construction industry is populated by approximately 8.2 million workers – a little over five percent of the total nonfarm workforce.
But the position of the industry itself within the greater economy is what underscores its importance; because the industry features deep pocket investments, it’s a stimulus for the economy at-large. Its projects are often broad in scope, involving the purchase and mobilization of many types of resources and activities. Even something as small as a house remodel may involve a number of subcontractors, like landscape, hardscape, or drainage repair.
So no matter what, the construction industry has a kind of “stimulus effect,” acting as a syringe that injects investor capital directly into the economy.
Downturn and Regulation
A sluggish construction industry, then, can be a harbinger of a wider economic downturn. Acting as a sieve for cash flow, the industry’s optimal operation can restrict or hasten monetary movement throughout the economy as a whole. And the opposite is true, too; the construction industry’s unique tie to the pulse of the economy means that should the economy hit a snag, construction companies are going to particularly feel the sting, too.
The construction industry is a broad tent. Engineering, sitework, and home building can all indicate different things. In sitework, we tend to be a trailing, rather than a leading, indicator. By contrast, homebuilding and remodeling are at the forefront of signals as their work is often central to investment in land development. If fewer houses are being built, there’s often less work to go around for other sectors. Engineering firms are an early bellwether, too, because their work is such a crucial pre-installment to any long-term build project.
The interplay of all these parts is why effectively managing regulatory challenges isn’t just about protecting your company’s bottom line; it’s about contributing to a thriving economy that benefits everyone. While the administrative necessities of governance are unavoidable, making the most of every situation is essential to good corporate oversight.
In this article, we’ll delve into a few key regulatory areas impacting sitework specifically and construction generally. We’ll also turn to some operable strategies for staying ahead of the curve. Proactive regulatory management can turn challenges into opportunities, fostering success for both one’s company and the broader community.
The Regulatory Landscape: A Complex Terrain
The regulatory landscape for construction is complicated, and the particulars for sitework are no less so. While not exhaustive, we can understand most regulation regarding construction to fall into a few broad categories:
- Environmental Regulations: A Stormwater Pollution Prevention Plan (SWPPP) is a meticulous process that is required in sitework; it can prove costly if compliance is shoddy. But while perfunctory, these processes involve input from multiple regulatory sources, meaning their management is an important precursor to a profitable and efficacious closeout.
- Safety Standards: These standards are designed to ensure the safety of workers and the public by setting requirements for equipment, training, and work practices.
- Labor Laws: These laws govern wages, hours, and working conditions for construction workers.
- Permitting and Zoning Regulations: These regulations dictate where and how construction can take place. While the permitting process can moderate the pace of construction and make sure it occurs safely and evenly, bureaucratic lag can extend the permit approval process by as much as 18 months.
Any and all of these regulatory sectors can change suddenly or place great stress on the industry as a whole. This summer, for example, legal battles at the state and local levels have provided extra impetus for the Occupational Safety and Health Administration to craft statutes governing heat safety. And while many corporations were already in the process of updating their heat safety practices, this doesn’t dismiss the gravity of waiting for the Federal government, with its sweeping powers, to weigh in on the issue.
Also, the challenge of tracking all of this regulation is compounded by the trifecta of American governance; regulation can vary wildly at the federal, state, and local levels. And, as indicated above, legal challenges can come from each of these levels or private industry actors. Combine these complex interplays with the ever-evolving nature of politics, and just tracking regulatory shifts becomes a near insurmountable obstacle.
Regulation As An Economic Factor
Many regulations assist in the protection of the environment, workers, and communities. But excessive bureaucracy and lengthy permitting processes can stifle construction activity, leading to project delays, increased costs, and a chilling effect on investment. These delays can ripple through the economy, hindering job creation and economic growth.
Certainly the most obvious form of regulation that influences the economy is the Federal Reserve’s pursuit of its dual mandates, maximum employment and stable prices. The Reserve manipulates currency, and thereby the economy, by controlling both the physical production of money and its circulation.
In 2023, we saw strong rate hikes that limited the flow of cash in hopes of bringing inflation in check. While there were certainly other factors at play, such as material cost hikes and supply/demand fluctuations, the Reserve’s rate increases no doubt also contributed to the construction market contracting by 4.9% last year.
And while there are signs of an interest rate reduction on the horizon, it’s important to be mindful that the Federal Reserve is not the only metric to monitor. Remember that a whole host of regulatory processes can directly influence any stage of project completion.
So beyond keeping up with ordinances at each individual level of government, keep in mind that regulation can occur, sometimes quickly, on a wide array of construction practices. Monetary policy is not the only way the government can have an impact on the construction sector.
Strategies for Staying Ahead: Proactive Regulatory Management
To overcome these hurdles, proactive regulatory management is key. Anticipate the unexpected, adapt policies as needed, and collaborate with all stakeholders. Here are some key strategies for staying ahead of the curve:
- Build a Knowledge Base: Invest in continuous learning and stay informed about regulatory updates through industry publications, seminars, and online resources. At the most basic level, this kind of knowledge base can consist of a few relevant publication subscriptions.
But your outputs are determined by your inputs, meaning that the more you work to cultivate your knowledge and understanding of how regulations are made, implemented, and what is in the legislative pipeline, the more primed for success you’ll be. - Leverage Technology: At JWC, we recognize the importance of technical innovation and empowerment. But while the most obvious use of technology is driving profits in the field, technology solutions can also be leveraged to streamline compliance, too.
While construction software is often thought of in terms of its improvements to efficiency, it can also be an excellent way to track compliance and safety measures, forestalling any potential accidents or regulatory violations. - Foster a Culture of Compliance: Make compliance a core value of your company culture, ensuring that everyone from leadership to frontline workers understands the importance of following regulations.
This also means creating a work culture where every individual feels safe to come forward and speak on what they see and hear. An empowered workforce is one where clear communication, both up and down the ranks, is encouraged. This requires not only clear rules for discussion but also active listening by those in positions of authority. - Partner with Experts: Collaborate with legal and regulatory consultants to ensure you’re interpreting and applying regulations correctly. Actively participate in industry associations and advocate for sensible regulations that promote safety and environmental protection without stifling economic growth.
Expert partnerships also help get your voice heard; secondary organizations can bridge the gap between industry actors and political regulators. Access, for example, is one way that a partnership can improve a company’s political efficacy. A Senator might not speak with just one company, but they’re ill-inclined to ignore a cadre of industry leaders.
Membership to organizations like the American Subcontractor’s Association can be a real help. The association provides access to political advocates who not only offer representation in Washington and elsewhere via lobbying, but act as a source of information to constituent members. - Proactive Communication: Maintaining an open line of communication with regulatory agencies and stakeholders may not be an obvious strategy, especially for small corporations. Politics often seems like something that happens “over there,” and people act accordingly.
But political activity has a direct impact on our day-to-day lives. Being active in one’s self-advocacy is the key to success. If we wait until unfavorable legislation is being discussed or is up for vote to make our voices heard, we may find it hard to be heard at all.
Good communication in politics is a marathon, not a sprint. The politician who hears from hundreds of people a day is more likely to take seriously the person they know and have interacted with before than someone completely new. So don’t wait until you need to be heard to start speaking to legislators and other actors who contribute to the regulatory process.
Turning Challenges into Opportunities: Compliance as a Competitive Advantage
Regulatory compliance is demanding; it takes time, effort, and resources to comply with legal code and maintain an awareness of the changes that are being made in the regulatory world. But when approached strategically, these efforts can lead to positive outcomes beyond mere compliance. They offer several potential benefits:
- Enhance Safety: By adhering to safety standards, you protect your workers, reduce accidents, and create a safer work environment.
- Improve Efficiency: Implementing efficient processes to meet regulatory requirements can streamline operations and reduce waste.
- Open Doors to New Business Opportunities: Demonstrating a strong commitment to compliance can enhance your company’s reputation and make you more attractive to potential clients and partners. Moreover, the networking done to maintain regulatory awareness and proactive advocacy can lead to fruitful associations not available otherwise. JWC’s initiative in this area has been a key factor in our success.
- Drive Economic Growth: By advocating for streamlined regulations and efficient permitting processes, you can contribute to a robust construction industry that creates jobs and fuels economic growth.
Conclusion: Building a Better Future
A strong construction industry is a vital cornerstone to a thriving economy. Legal statutes are unavoidable, but by working to create a regulatory environment that supports both safety and efficiency, we can build a future that benefits everyone.
As the overall labor market continues to weaken, construction job numbers fall, material costs rise, and all in an economy where the skills gap lingers, construction companies should use all possible tactics to avoid financial pitfalls and shortcomings. One of these tactics is regulation management. Go beyond mere compliance and work to create a general awareness and advocacy that promotes not just corporate success, but social well-being, too.
Proactivity in regulation management is not just about avoiding penalties; it’s about building a better future for your company, your industry, and your community. By staying ahead of the curve, you can protect your business, contribute to a thriving economy, and leave a positive legacy for your employees.