The Dotted Line: Legal Trends to Watch in 2024

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This feature is part of ‘The Dotted Line’ series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series, click here.

As 2024 begins, construction professionals face continued inflation, supply chain issues, growing cyber threats and project delays.

While these stress tests can lead to conflict, builders (and their lawyers) are also finding creative ways to share risk and adapt to this environment.

The legal world is also changing rapidly, from new federal funding mandates to Supreme Court rulings to state-level indemnification clauses. Here are some of the top issues that construction legal experts are watching this year.

The supply chain grumbles, inflation will continue to lead to legal disputes

While COVID-19 is no longer disrupting supply chains as it initially did, its impacts continue to affect the industry. Material outages seem to be staying put for now amid issues like geopolitical tensions i climate changeand builders are planning accordingly.

One way contractors deal with this uncertainty is through material escalation clauses, said James Gallagher, principal at Resolution Management Consultants in Marlton, New Jersey, which provides dispute resolution and project management services to the industry. of construction

“It’s a question of how much risk is the contractor taking on, and then how much can they recover if something comes up?” Gallagher said.

Higher prices will lead to more demands

As inflation and other factors continue to drive up project costs, contractors and owners are jockeying to spread risk, according to Norton Rose Fulbright Annual Litigation Trends 2024 Survey.

“This price escalation [is] making owners more stringent with their change order provisions,” said Tim Walsh, head of construction at global law firm Norton Rose Fulbright US. The end result is that landlords work harder to enforce these provisions to stay with the original price, he added.

One of the key aspects of supply chain challenges now is inflation, according to Gallagher. Contractors try to estimate the cost of materials months in advance, but it could end up being much higher or lower than expected, which can lead to disputes.

“There are different times when different materials for different reasons become short and therefore more expensive,” Gallagher said. “That’s why then, especially architects, engineers, they will look for alternative types of products to implement in a project if certain costs increase in one type of material compared to others.”

More cases will go to arbitration

Other forces are also at play. COVID-19 shut down much of the US court system for about a year, creating a backlog in many jurisdictions. Gallagher sees more clients turning to arbitration rather than waiting, in some cases for years, while their case goes through the courts.

“I think there’s been a little more emphasis on the alternative kind of litigation systems such as mediation and arbitrationGallagher said. The benefit there, he said, is that the parties actually work to actually resolve the dispute, rather than just going through motions in court.

The affirmative action decision will create uncertainty

Last year’s Supreme Court ruling striking down race-conscious college admissions will likely have far-reaching ramifications, from classrooms to workplaces. In recent months, companies have been re-examining diversity, equity and inclusion initiatives amid unclear guidance on what is legal or not.

For now, many of the ruling’s implications remain undefined, meaning government workers are scrambling to interpret what it means, said Jennifer Flickinger, a partner in the government contracts group at HKA Global, a consulting firm. construction risk management.

“Anytime you leave something up to an individual’s interpretation, you can get very different results from the same government agency but different people. And because it’s not defined right now, I think that’s what’s causing that stress or tension.” , Flickinger said.

For construction, this also affects minority and disadvantaged business names, which have been criticized through a handful of lawsuits questioning their constitutionality. Before, a contractor could say they were a disadvantaged business simply based on race, for example, and that’s no longer the case, he said. Flickinger has seen new applicants denied MWBE status because they didn’t meet the financial specifications, but has yet to see a company lose the designation. Still, the full ramifications of the ruling remain to be tested.