A Few Insights into Construction and Development in Louisiana Post-Pandemic/Pre-Recession

After surviving the pandemic and the mess it created with supply shortages, everyone is understandably ready to “take their toys out and play”.  However, economists predicting a 70% chance of economic downturn this year, understandably everyone is guarded, especially in the construction and real estate development sectors.

What’s  Hot.   As a result of the Infrastructure Investment and Jobs Act,  it is anticipated that infrastructure will be huge this year in Louisiana. If you are planning to pivot into these markets this year, it is important that you familiarize yourself with public works laws and regulations that pertain to the public entity letting the job.  Not only do different rules apply from federal to state jobs, but the rules may differ from jobs let by La DOTD and jobs let by other state agencies and local governments.  Everything from bidding requirements to pay applications may be completely different depending upon who is the public owner of the project.  If you have been mainly working in the private sector, everything may be alien to you.  Considering that a bond backed by your personal guarantee of performance is almost universally mandated in public works, it would be wise to seek help from someone with experience with this sector before “taking out your toys”.

What’s Not. With rising inflation and an unpredictable economy, fear of a recession looms in many economists forecast. As a result, a decline in the single-family housing and commercial markets is predicted.  Even if the forecast is wrong, the lingering issue of pricing and availability of materials is expected to remain until 2024.  True, some prices are falling (steel, lumber) or are leveling off (insulation).  However, some prices keep going up (cement, concrete, drywall).   And many experts state that the recent relief  in prices are only temporary.  No matter what side of the page your signature is on, it is important that you review your contracts to make sure these matters are clearly addressed.  While escalation clauses, force majeure language, and material delay provisions may be hard to negotiate, they are even harder to negotiate in the middle of a contract.

Mean Green. As a result of the Inflation Reduction Act, which provides tax credits for “green” projects, the year 2023 may see a boom in clean energy construction work.  However, before celebrating over the cost-savings from tax credits, a developer may find that going after these credits is a two-headed monster.  Obtaining the credits is contingent upon the inclusion of prevailing wage, apprenticeship, and domestic content requirements in the project. Each of these items can quickly translate to construction delays and added costs.  If you do decide to lay your claim to a “green” project, make sure you have a good understanding of these requirements and by all means, keep sufficient records to ensure compliance.   

Cracking the Code. For residential developers or builders of one or two-family house/dwelling sold and/or leased now must have at least one operable, life-long, sealed battery carbon monoxide (CO) detector.   Additionally, the Louisiana’s State Uniform Construction Code, which has not been updated since 2015, has numerous changes that adopt (with and without revisions) the 2021 International Building Code, International Residential Code, International Existing Building Code, International Plumbing Code, International Mechanical Code, International Fuel Gas Code, and the 2020 edition of the National Electrical Code.  Developers and design professionals should make sure that the plans and specifications address these changes, and contractors you should become familiar with these changes prior to bidding from now forward.  You can find these changes by clicking here (Louisiana Uniform Construction Code). 

Louisiana Fortified Homes Program.  Act 554 of the 2022 Louisiana Legislative Session creates the Louisiana Fortify Homes Program within the Department of Insurance.  The program creates an incentive for Louisiana homeowners to retrofit their roofs to meet the Institute for Business and Home Safety (IBHS) “Fortified Roof” standard.   This week (1/10/23) DOI sent its No tice of Intent to the Legislature of the promulgation of Regulation 126, which sets forth the proposed rules and requirements governing the administration of  the program as well as eligibility criteria. The rules will still need to go through a public comment period, but thereafter, grant awards equivalent to the actual cost to  upgrade to the IBHS Fortified Roof standard not to exceed $10,000 can be applied for.  The state, however, is not just handing out checks. The application will require a certified evaluator of the homeowner’s choice to provide an IBHS home review evaluation on the home seeking to be fortified. A homeowner must then upload bids from three LFHP-Approved Contractors of their choice to improve the home to meet the IBHS Fortified Roof standard.

At Bonaventure Law Firm, we have extensive experience with public works at the federal, state, and local government level.  Additionally, with twenty-five years in the construction law sector, we have developed a comprehensive understanding of contractual requirements that can protect you throughout a project as well as the provisions that may not be in your interest.  Couple this with actual boots-on-the-ground knowledge gained as a contractor and construction manager, and we can not only help you with an understanding of some of the recent legislation, we can help guide you into compliance.  Contact us at info@bonaventurelaw.com or  (225) 614-2658.  We will be glad to assist.

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