November 27, 2023
The $1.2 trillion American Infrastructure Investment and Jobs Act, the $280 billion CHIPS and Science Act of 2022, and the $900 billion NextGeneration EU fund in Europe are each ushering in a new era of construction—one focused on an increased investment in technology and a decreased environmental impact. In 2023 alone, construction costs alone rose more than 17.3 percent, exclusive of external market forces (war in Ukraine, supply chain issues, etc.).[1] As technology advances promise increased efficiency, reduced costs, and safer alternatives to age-old methods, construction participants are wise to examine the impact—and risks—of emerging technology and green building on contracts and projects and address the same long before project problems arise.
- Tech Focus in a Brick-and-Mortar Industry
Increased activity by private equity investors resulted in nearly $11.8 billion in investment in the construction industry between January and August 2022, representing 55 acquisitions of major subcontractors and an emphasis on forming synergies and relationships to combat supply chain issues and promote local capacity and assurance.[2] Such investment, bolstered by increased governmental appropriations worldwide, provides crucial incentives for research and development as well as technological advancement in an industry plagued by supply chain disruptions, increased competition, pricing volatility, and worker shortages.
- Building Information Modeling (BIM): Bolstered by nearly $550 million in investment/incentives under the Infrastructure Investment and Jobs Act, building information modeling involves constructing intelligent, three-dimensional digital designs of projects (or facets thereof) based upon prior input data. This method allows more of the design work to be completed in advance so that less changes are necessary at the project jobsite. BIM has the additional advantage of producing and storing an integrated, digital set of building plans which can then be modified for use on future projects. BIM is a shared resource and only as effective as the data provided to it. Accordingly, care must be taken at the contractual stage to control the entry of data into the model as well as mitigate risk and assess liability for any inaccuracies. Ownership of the data (particularly where supplied by a third party), model, and eventual plans as well as obligations for the protection of data and other intellectual property should all be clearly delineated in the parties’ contracts.
- Artificial Intelligence (AI): Within the construction industry, AI is generally divided into two realms—machine learning and deep learning. “Machine learning” focuses on the ability of technology to receive vast amounts of data, “learn” from embedded algorithms, and then offer predictions. “Deep learning” is a subset of machine learning based on the neural network construction of the human brain. Driven by data, both machine and deep learning receive and monitor data in real time, predicting outcomes, and supporting project workflow. In an industry plagued by labor and materials fluctuations/shortages, AI has the ability to better plan for labor and materials distribution(s) across one or more jobs, monitor site conditions, and continually evaluate and predict job progress to optimize projects and deploy real-time solutions. This can prevent project cost overruns, use historical data to predict completion timelines, and provide design alternatives before project costs become an issue.
Like BIM, AI is only as good as the data fed into it. As AI becomes more prevalent in the industry, attorneys can help ensure their client’s construction contracts contain sufficient risk allocation provisions specific to the technology utilized and that duties regarding updating of data (for change orders, amendments/modifications, etc.) are set forth.
- Digital Twins: Digital twins are digital replicas, and effectively virtual models, of a construction project. By combining information from multiple sources (scanners, sensors, other Internet-of-Things devices, etc.), the digital twin can effectively learn from multiple data sources, automatically adjust to the changing real-world dynamics, and enhance established BIM by providing a living model of the physical building(s)/environment(s) it represents. Digital twins optimize the building process by allowing architects, engineers, and contractors valuable insight into both external factors (e.g., building/project orientation, etc.) and internal metrics (such as stressload). From an engineering and design perspective, the technology allows experimentation and analysis of design outcomes before breaking ground or making physical changes to the project. When combined with augmented and/or virtual reality, digital twins enable project participants to safeguard against design defects by providing a hands-on, virtual view of the eventual physical environment.
With a wealth of experience in construction and technology, the attorneys at Stoll Keenon Ogden can assist with the careful allocation of technology-related risks during construction contract formation as well as prosecution and defense of actions related to emerging tech in construction.
- Green Building and LEED-AP Certified Projects
“Green building” focuses upon the creation of structures and utilization of processes “that are environmentally responsible and resource-efficient throughout a building’s life-cycle from siting to design, construction, operation, maintenance, renovation and deconstruction.” [3] For hundreds of years, the construction industry has maintained a high carbon footprint with excessive waste and pollution—all combined with significant use of non-renewable resources. Growing regulatory pressure for sustainability and preservation (such as Britain’s Building Safety Act and Sweden’s ID06) as well as increasingly strict legislation and procurement requirements have lead to a boom in green construction, where integration and reporting of environmental, social, and governance factors and impacts (“ESG”) may ultimately become a deciding factor in the award of capital projects and investor funding.[4]
Despite difficulties inherent in the construction industry (i.e. fragmented, multi-source projects, etc.), large scale projects have met with great success. The Thames Tideway Project, London’s cutting-edge sewer rebuild, is one of the earliest examples of green-conscious construction on a large scale. Begun in 2017, Tideway saw the use of state-of-the-art walling and drilling equipment specifically designed to reduce the project’s carbon footprint.[5] The project is also one of the first examples of “green bonding” and green funding.
Recognizing the importance of climate control and investors’ desires to have a full picture of a company (and construction project), the United States Securities and Exchange Commission proposed rule amendments which, if passed, would require companies to include certain climate-related disclosures in their registration statements and periodic reports. Furthermore, construction players now have a veritable panoply of options to support green build projects. The Inflation Reduction Act provides key tax incentives for green building, including the Sec. 48 Investment Tax Credit (ITC), the Sec. 179D energy efficiency deduction and the Sec. 30C credit for alternative vehicle charging infrastructure. These credits may be taken by companies as direct pay, even when there is no tax liability. Finally, the Federal Buy Clean Initiative prioritizes clean construction, specifying more than $2 billion for procurement of lower-carbon construction material and use in federally funded projects. It also resulted in the allocation of $100 million to support state, local government, and public utility purchases of building products derived from converted carbon emissions. The Environmental Protection Agency’s Greenhouse Gas Reduction Fund provides low-cost financing for green projects across the nation while the Federal Aviation Administration and Department of Energy, among others, each provide countless grants and funding options for green builds.
- Conclusion
Far from the lore of flying cars, sentient robots, and replacement of the human workforce, modern technological advances in construction offer optimization at all levels, augmenting human skills while reducing expensive errors and overall project costs. Coupled with technology, the rise of sustainable, eco-friendly building productions and designs promise to usher the construction industry into a new era capable of improving efficiency, increase delivery confidence, and honing resource allocation, all while lowering project expenses and environmental impact.
New technology and an increased focus on sustainability necessarily require additional focus at contract formation and while such will undoubtedly raise new litigation issues/challenges for construction participants and lawyers, an ounce of prevention may very well be worth a pound of cure. Although black letter law has arguably been outpaced, with careful collaboration between lawyers and their construction-based clients, risks may be mitigated and liabilities managed to allow technological innovation and a commitment to the climate and sustainability to shine.
The world of construction law can be complicated, but the attorneys at Stoll Keenon Ogden have extensive experience throughout all facets of the industry and can assist from the smallest of projects to the biggest of builds. Should you have any questions regarding your construction project, do not hesitate to contact us.
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[1] US Bureau of Labor Statistics, New Manufacturing and Industrial Building Construction PPI, March 2023; KPMG, 2023 Global Construction Survey: Familiar Challenges—New Approaches (Nov. 12, 2023, 10:15 AM) https://kpmg.com/be/en/home/insights/2023/06/re-2023-global-construction-survey-familiar-challenges-new-approaches.html
[2] Deloitte, 2023 Engineering and Construction Industry Outlook (Nov. 12, 2023, 9:30 AM) https://www2.deloitte.com/us/en/pages/energy-and-resources/articles/engineering-and-construction-industry-trends.html
[3] United States Environmental Protection Agency, Green Building (Nov. 12, 2023, 11:25 AM), https://archive.epa.gov/greenbuilding/web/html/about.html; Jose Juis Blanco et. al., From Start-Up to Scale-Up: Accelerating Grown in the Construction Industry, McKinsey & Company (Nov. 12, 2023, 11:40), https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/from-start-up-to-scale-up-accelerating-growth-in-construction-technology#/
[4] See KPMG, 2023 Global Construction Survey: Familiar Challenges—New Approaches (Nov. 12, 2023, 10:15 AM) https://kpmg.com/be/en/home/insights/2023/06/re-2023-global-construction-survey-familiar-challenges-new-approaches.html
[5] Rob Hakiman, Tideway | Looking back at the construction of London’s “super sewer,” The New Civil Engineer (Nov. 12, 2023, 3:35 PM) https://www.newcivilengineer.com/latest/tideway-looking-back-at-the-construction-of-londons-super-sewer-04-05-2022/
