Construction Tremor- Government intervention means more Red Tape. Are you ready?

 It's been a strong decade plus run, boosted by the CHIPS Act for commercial construction (and subsequently Heavy Equipment and Machinery). According to the Department of Treasury, "The surge comes in a supportive policy environment for manufacturing construction: the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA), and CHIPS Act each provided direct funding and tax incentives for public and private manufacturing construction' (U.S. Department of the Treasury, 2023)."

So why are we looking at a credit insurance crisis? Construction Enquirer posted this article last Friday: https://www.constructionenquirer.com/2024/04/05/main-contractor-trade-credit-insurance-hits-crisis-point/?utm_source=dlvr.it&utm_medium=twitter, stating "The spectre of further insolvencies following recent main contractor failures is disrupting the normal function of insurance within the sector as subcontractors say they are being forced to turn down work' (Morby, 2024).

It goes on to report an exodus of insurers from construction due to contractor failure rates which is now a cry for the Government to rehash old regulation- The Trade Credit Reinsurance.

So here is the question: is this the start of another natural cycle that will work itself out (as it has through generations of contractors) where many will fail, and some will survive to thrive. New entrants will continue to embark on the journey and eventually will land in one of these two scenarios.

Why will some fail? Cash flow and compliance failure are key reasons that companies are not successful long term. Why will some survive to thrive? Having sound business practices and processes can ensure success and longevity. Why will the new players eventually be one or the other down the line? Tale as old as time, the ease of entering,  lure of potential profits coupled with the ability to run in a deficit for a period of time by borrowing from new jobs.

Potential regulation means additional compliance. If your business struggles with the current compliance requirements, strap on that seat belt, it's going to get worse. Take the time to revisit your internal resources and processes now to elevate your chances to survive and thrive!

1. U.S. Department of the Treasury. "Unpacking the Boom in U.S. Construction of Manufacturing Facilities." Treasury.gov. Accessed April 5, 2024. https://home.treasury.gov/news/featured-stories/unpacking-the-boom-in-us-construction-of-manufacturing-facilities

2. Construction Enquirer. "Main Contractor Trade Credit Insurance Hits Crisis Point." ConstructionEnquirer.com. Published April 5, 2024. https://www.constructionenquirer.com/2024/04/05/main-contractor-trade-credit-insurance-hits-crisis-point/?utm_source=dlvr.it&utm_medium=twitter

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