Exploring the Impact of Deregulation on the Construction Industry
Originally Published by: Construction Dive — December 5, 2024
SBCA appreciates your input; please email us if you have any comments or corrections to this article.
Construction risk management expert Christopher Ward is associate managing director at New York City-based advisory services firm K2 Integrity. Opinions are the author’s own.
The shore of Caribou Lake in Colorado. Environmental deregulation can lead to potential legal challenges, a risk expert writes. Cavan Images via Getty Images
As we look ahead to a new Trump administration, the construction and real estate sectors must brace for significant policy shifts that could reshape industry practices. One of the most notable aspects of the previous Trump administration was its aggressive push for deregulation, aimed at stimulating economic growth.
This approach saw the rollback of numerous environmental rules and regulations. While deregulation can indeed reduce operational costs, streamline processes and expedite project timelines, it also brings with it a host of challenges.
The allure of deregulation lies in its promise of reduced red tape and faster project approvals. However, this comes at the likely cost of diminished oversight mechanisms.
Christopher Ward
Permission granted by K2 Integrity
With fewer regulations in place, the risk of noncompliance and unethical practices increases. For instance, the previous administration’s efforts to relocate federal agencies out of Washington, D.C., to reduce the federal workforce — for example, its decision to move the Bureau of Land Management to Colorado — led to decreased scrutiny over construction projects, primarily due to the reported 87% of staff that either left the agency or retired.
This environment can foster mismanagement and abuse, as it removes certain checks and balances that typically prevent such issues.
Potential for increased fraud
Reduced regulatory oversight creates fertile ground for fraudulent activities and wasteful practices. The construction and real estate sectors, already prone to such risks, could see an uptick in these issues under a Trump administration.
The relocation of federal agencies and workforce reductions not only decrease scrutiny but also dilute the expertise available to oversee complex projects. This scenario elevates the risk of mismanagement and abuse, potentially leading to significant financial losses and reputational damage for companies involved.
In addition, the previous Trump administration’s acceleration of environmental rollbacks raised serious concerns about noncompliance with environmental and cultural resource protection laws. Expedited project timelines, driven by deregulation, often sideline critical environmental considerations, leading to increased noncompliance and potential legal challenges.
In addition, while deregulation can provide cost savings to construction companies that could be passed on to owners, the short-term economic gains could lead to increased workplace hazards. For example, the “heat stress rule” recently introduced by the Department of Labor would likely be reversed, when heat is noted as the leading cause of weather-related deaths in the U.S.
Risk management considerations
Regulations come and go as new administrations come into effect, that much is expected, however, for owners looking to protect themselves (and for the companies that provide services to them), there are specific actions that can be taken:
- Implement robust internal safety protocols that exceed minimum safety requirements.
- Provide ongoing training for employees on best practices and ethical standards.
- Engage third-party auditors to ensure compliance with industry best practices.
With the incoming artificial intelligence-generated changes to the industry, a Common Data Environment (CDE), should also be strongly considered, if it is not already in place. Not only will this provide centralized documentation, but it will also help with version control, audit trails and risk management.
While deregulation under a new Trump administration may offer certain economic benefits, it also necessitates heightened vigilance.
By strengthening internal controls and fostering a culture of compliance, industry players can navigate these challenges and capitalize on the opportunities presented by a deregulated landscape. More importantly, stronger internal controls can be viewed as a competitive advantage, by demonstrating commitment to quality and responsibility.