The Site Report - Construction Industry Insights, Issue 6, June 2024

Stephanie Eaton, Carrie Grundmann, Steven Hemric, Sophia Hines, Malcolm Lewis, Julian Neiser
Spilman Thomas & Battle, PLLC
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Issue 6, 2024

Welcome to our sixth issue of 2024 for our construction industry insights e-newsletter - The Site Report.

During the summer months, our firm is pleased to host a talented group of law students, who get the opportunity to research and write, shadow our attorneys, and learn about the practice of law in a firm setting. As young professionals still deeply involved in higher education, our Summer Associates will be contributing to our summer publications and sharing their perspectives as both students and future legal practitioners. Please join us in welcoming Sanya Memon to The Site Report team for this special summer edition.

Thank you for reading!

CASPA Clash: Major Victory for Contractor in Pipeline Project Dispute as Third Circuit upholds CASPA Penalties and Fees

By Sanya Memon, Summer Associate

In a significant decision on April 17, 2024, the U.S. Court of Appeals for the Third Circuit upheld significant penalties and attorney fees awarded to C.J. Hughes Construction Company, Inc. under the Pennsylvania Contractor and Subcontractor Payment Act (CASPA). This ruling, emerging from a contractual dispute with EQM Gathering OPCO, LLC over the MAKO pipeline project, provides critical insights into the court’s interpretation and enforcement of CASPA provisions. We have provided a brief analysis of this important court decision.

Click here to read the entire article.

Virginia Explained: Data Center Expansion, with All Its Challenges and Benefits

“Groups discuss how Virginia’s data center developments impact historic spaces, the environment, electricity and local revenue.”

Why this is important: This article notes the pros and cons of data center development in the Commonwealth of Virginia. While these data centers have produced billions of dollars in revenue, tax dollars, and wages for citizens, these data centers also take up a large amount of land – often in historic and/or rural areas – and use natural resources like water from local rivers, and data centers are imposing ever greater stress on the electricity grid. As reliance on electronic devices and electronic processes continues to grow, so too will the need for data centers. The article notes that several legislative proposals related to data centers have been referred to the Virginia General Assembly’s Joint Legislative Audit Review Commission (JLARC) for study, the outcome of which could be policy-based solutions to data centers locating in Virginia. Issues with data centers are not going to ebb in the near future, thus, this issue – and how best to solve it – will continue to be a hot topic in Virginia and throughout the United States as data centers are being developed around the country. --- Carrie H. Grundmann

Busy Hurricane Season Could Test NC’s ‘Weakened’ Building Codes, Experts Say

“The North Carolina Home Builders Association in 2023 pushed for modifications to the state’s building codes in an effort to speed up home inspections and home building— to help ease a housing crunch in the state, according to news reports.”

Why this is important: As we reported last year in Issue 3 of The Site Report, in 2023, the North Carolina Home Builders Association (NC HBA) advocated for modifications to the North Carolina State Building Codes in an effort to speed up home inspections and home building amid North Carolina’s housing crunch. With the passage of House Bill 488 (H.B. 488), the new law is in effect now, ahead of what is expected to be one of the busiest tropical storm seasons yet. However, with the retention of 2015 code provisions, North Carolina dropped to eighth place in the storm-resiliency rating system of the Insurance Institute for Business and Home Safety (IIBHS), a non-profit scientific organization.

H.B. 488 has been criticized as a step backward. North Carolina remains increasingly vulnerable to tropical storms, which continue to grow in frequency and strength. Hurricanes such as 2018’s Hurricane Florence—which made landfall as a category 1—can still cause significant damage when they slow down and “park” in a coastal area for long periods of time.

Of note, H.B. 488:

  • Created a separate residential building code council;
  • Barred newer energy-efficiency codes; and
  • Made requirements for plywood sheathing inspections in some high-wind areas stricter, but prevented local governments in some areas from requiring inspections of plywood sheathing during home construction.

North Carolina House Bill 893 (H.B. 893) is expected to further weaken resiliency requirements in the state. In general, H.B. 893 would authorize private inspectors to inspect commercial buildings and structures for compliance with the North Carolina State Building Code, and expedite local government approval of sealed multifamily and commercial building plans. Spilman attorney Malcolm Lewis expounds on H.B. 893 below.

Critics of North Carolina’s current building code and pending H.B. 893 observed that a wind-mitigation roof program administered by the North Carolina Joint Underwriting Association and the North Carolina Insurance Underwriting Association continues increasing the annual number of grants provided to North Carolina homeowners. According to this article, thus far “this year, the programs, have seen more than 8,500 fortified roofs completed, with another 2,900 in progress.” NCSU’s Institute for Advance Analytics found that these wind-mitigation roof programs produced a 35 percent reduction in storm-related insurance claims, with a 23 percent reduction in property damage losses per building caused by hurricanes in recent years. Roofing improvements funded by the wind-mitigation roof program should help offset some of the arguably negative impacts of North Carolina’s construction laws. --- Stephanie U. Eaton

HOUSE BILL 893: Private Commercial Building Inspection

House Bill 893 (H.B. 893) was introduced by North Carolina House Representatives Brody, B. Jones, Pyrtle, and Hardister in early 2023. In making certain technical changes and adding content to North Carolina general statutes, generally, H.B. 893 would authorize private commercial inspectors (PCI) to inspect commercial buildings and structures for compliance with the NC State Building Code (Code) and expedite local government approval of sealed multifamily and commercial building plans. Specifically, Sections 1-3 of H.B. 893 would allow a person certified and registered by the North Carolina Code Officials Qualification Board (Q-Board) as a PCI to conduct inspections of commercial buildings and structures for compliance with the State Building Code and to issue certificates of compliance with the Code.

Proponents likely find that H.B. 893 will foster economic growth and efficiency by producing PCIs, providing continuing education and professional development for PCIs, allowing PCIs to conduct inspections and provide reports to local governments, and/or by reimbursing and/or eliminating certain inspection fees for inspections conducted by PCIs. Critics likely express concern about potential compromises in the safety and oversight of commercial building as a result of instances including relieving local governments from the duty to inspect and releasing local governments from claims arising out of inspections performed by PCIs. 

However, overall, and despite such opinions and concerns, the passage of H.B. 893 would signify a delicate balance between regulatory efficiency and safety standards in North Carolina’s commercial building industry. H.B. 893 does not wholly void local governments' oversight, duties, and responsibilities relating to commercial building. Instead, H.B. 893 expands responsibility and allows certain requirements and standards to be streamlined through certified and continuously educated professionals. Be that as it may, instruction and application can be different. Thus, following the passage and effective date of H.B. 893, its impact and effect will then be more clearly apparent. --- Malcolm E. Lewis

Reforming NC’s Construction Plan Review Process is Necessary for Efficiency and Growth

“North Carolina currently has 210 inspection departments, each operating with its own set of procedures and timelines.”

Why this is important: Changes to the inspection and plan review processes in North Carolina could be on the horizon. The new bill sponsored by Forsyth County Rep. Jeff Zenger promises to streamline the plan review process and remove barriers that commonly stand in the way of smaller-scale developers, as well as bring duplexes, triplexes, and quadriplexes under the residential (as opposed to commercial) building code and standardize plan review processes across the state. While a number of builder and developer groups have expressed support for the bill, other groups have expressed concerns about removing development controls from the communities most impacted by proposed developments. As the General Assembly looks to find balance between protecting communities’ individual and varied interests with the goal of increasing consistency and efficiency, changes to the final bill should be expected. Spilman’s construction team will monitor this bill closely to assess the potential impacts on construction professionals and communities alike. --- Steven C. Hemric 

Test AI Now, but Know the Risks, Panelists Say

“Speakers at the annual NIBS conference recommended using the ‘gorilla test’ and other techniques to monitor the technology as it evolves.”

Why this is important: At the recent National Institute of Building Sciences Building Innovation Conference, in Washington, D.C., industry experts encouraged exploration into the generative AI space. Many of the advantages of artificial intelligence are known; however, the results across software platforms are not homogenous. During live examples, panelists at the conference demonstrated the flaws of various generative AI models, via a test of two models to find the instances of the word “gorilla” in a spreadsheet of miscellaneous data. There was a 50 percent accuracy rate.

AI models are not perfect, hallucinations - instances where the technology makes a mistake or invents arbitrary responses - happen frequently enough for general warning against blind reliance. Nevertheless, the advantage of incorporating AI into the construction sector is predominantly in workflow. The capacity of AI to filter through copious reports and manuals and expeditiously articulate a response can significantly accelerate the pace of project management with a reasonable sense of confidence. AI should not replace oversight and general professional compliance standards. However, advanced technology will creep into every industry whether leaders are opposed or not; the only question leaders need to consider at this point is how prepared they are to stay at the cutting edge of what is already possible. --- Sophia L. Hines

AI's Role in Heavy Equipment Preventive Maintenance

“AI can be trained to analyze and detect video imagery that would indicate a fault or safety hazard.”

Why this is important: As the construction industry technologically advances, so does the integration of Artificial Intelligence (AI) into that technology. An innovative solution to often daunting and complex service operations and customer demands, present in construction operations is AI. With the global AI market projected to reach $621.19 billion in 2024 and soar to $2,740.46 billion by 2032, it’s clear that AI’s role and influence on the construction industry will be far-reaching and is growing rapidly.

Common challenges in the construction workplace include efficiency and reliability. For improved efficiency, the incorporation of AI may allow contractors to combat low field service productivity resulting from worker downtime, traveling, and administrative tasks. Specifically, AI can allow contractors to automate routine daily tasks (e.g., generating client proposals or planning and scheduling optimization (PSO) software adjusting schedules in real-time), delegate administrative tasks and sales operations (e.g., asset performance review) to AI-driven systems, and ensure efficient travel time by autonomously and digitally generating and routing travel plans. For improved reliability, the incorporation of AI tools like computer vision, which enables machines to “see” and understand their environment, can improve the reliability of operations. In construction industries involving oil and/or gas, such computer vision models can monitor and detect issues such as corrosion, inform users of any necessary maintenance needed, and develop an algorithm to have more routine updates for necessary maintenance. 

Further, through AI-driven predictive analytics, equipment performance can be analyzed in real-time and allow for early detection of potential issues before they escalate to costly breakdowns and/or injuries. What is more, and ancillary to such positive outcomes, the continued integration of AI-driven systems into construction safety operations will afford heavy equipment operators the ability to ensure optimal performance, reduce operational costs, and extend the lifespan of their machinery. 

Overall, the benefits and capabilities of incorporating AI into the construction workplace appear infinite. It is no secret that AI represents a paradigm shift in the construction industry, offering unprecedented capabilities to enhance productivity, reliability, and efficiency. As the construction industry continues to adopt and adapt to these technological advancements, it will undoubtedly reap the benefits of such capabilities. 

To obtain additional information, guidance, and/or to evaluate your existing AI efforts in your current construction operations, it is encouraged that you reach out to the authors of this publication or any member of Spilman Thomas & Battle’s Cybersecurity & Data Protection Practice Group or Construction Practice Group. --- Malcolm E. Lewis

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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