How Insurance Costs Make NYC Construction So Expensive

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So Tracy, everyone is like very into affordability these days and the cost of living and all that stuff. But I think, you know, there's all kinds of things you can do and whatever. But it seems like one fundamental thing, which is probably true, is whatever we're talking about, whether it's building infrastructure for public transportation, whether it's building offices, whether it's building houses, like there's various costs involved. But one is like just the cost of construction and the cost of construction is very high. It's hard to imagine affordability improving much on anything. Right. Does that seem fair? Yes, absolutely. I can't really debate that point, but it does seem like construction is this like one area where so many different things come into play. So you have the cost of basic materials, which have gone up, especially since the pandemic. You have the cost of labor, which has also gone up since the pandemic. You have the cost of insurance, which has also gone up since the pandemic. You have regulations, which we've done many, many episodes about the added costs from the permitting process for various things. It just seems like it's this bucket where you can throw all these different factors in and then get this kind of like reinforces itself and just makes it even more expensive. Yeah, totally. And then, you know, you sort of hit it with the insurance, but also just like cost of financing. Right. Because like as interest rates go high. Yeah, I forgot financing. That too. That too. It's a big bucket. It's a big bucket. And like we know that construction is an area across the economy, not just in New York City, where we talked about it with residential housing. There has been a lot of productivity growth. Right. Yeah. There's been no productivity growth, according to at least one paper I read. I think it was a Richmond Fed paper. I will have to go back and check. But it's a really unusual industry in the sense that you haven't actually seen. You know, we don't have robots building houses yet. We don't have robots building houses yet. So I don't know. You know, I think we need to learn more. You know, sometimes you see these viral statistics like, oh, the MTA spent $60 million on building an elevator or cost $3 million to build. Seven million installing those plastic fins on the subway turnstiles. I'm not even sure that qualifies as construction, but seven million. Millions to build a bathroom, which is not fun if you have little kids. All kinds of things. Anyway, we should do more about why it costs a lot to build and maybe whether there's something that can be done about it. Absolutely. Let's do it. Well, I'm very excited to say we really do have two perfect guests today. We're going to be talking about the high cost of construction, more infrastructure and stuff like that in New York City. We're going to be speaking with Elizabeth Crowley. She's the president and CEO of the Building Trades Employers Association, also known as BTEA, as well as Michael Capasso. He is the president and CEO of CAC Industries, Inc. So, Elizabeth and Michael, thank you so much for coming on Nodlots. Thank you for having us. Yeah. Thank you, Joe and Tracy. We are grateful for the opportunity to talk today. I represent over 1,200 contractors in the BTA who are building our skyscrapers, our subways, building commercial buildings, hospitals, schools, about $65 billion worth of work annually. And tell us about CAC Industries. What's your background, Michael? CAC is a public works heavy highway contractor based in New York City and Queens. We work for the public agencies, Port Authority of New York, Department of Design and Construction, Department of Environmental Protection, MTA, Battery Park City. Did you do the Highline as well? Yes. That's amazing. How did you know that? I do some research before I come on this podcast. I know a lot of people don't think so, but, you know, a little bit. Okay, let me ask the first question. Let's just get it out of the way. but your organization represents unionized workers, and I think your company is also unionized workers. A lot of people are going to hear high cost of construction in NYC and immediately go to the union factor. What is your response to that? Well, our members are employers, so they're really businesses. We're a business association, and our members are employing over 100,000 workers. And we're proud that we're union contractors. We're the good guys. And there are a lot of non-union contractors out there that are racing to the bottom. We're paying for benefits and wages. And that's just part of the cost of construction. Really, what we're looking at doing is reforming costs that are more controllable, the hidden costs that go into construction, such as construction insurance. Definitely want to talk about construction insurance and all this stuff. But again, just on this point of like how much is, quote, hidden cost versus how much is just labor. Maybe, Michael, you could like sort of break down or either one of you break down how we should think about like in a given project, when people see these big numbers, how much should people think about the labor component specifically versus measuring these other costs? Yeah. I mean, I would say typically labor ranges 30 to 35 percent of the total construction cost. But getting back to your original statements about union and sometimes people think that raises the cost of construction, I would actually take the counter argument to that. All the public works contracts in New York and the utility contracts are subject to the city or the state prevailing wage laws, which the union's rates are in line with Labor Law 220, which are in the city contracts. Those are wages and benefits you have to pay the employees. So it's not the union wages that are costing too much money. They're in line with all the rules and regulations of the city and state. When we think about union wages and why maybe there's this misconception, yes, compared to people that are not paying union wages, these people are paying good, honest wages and benefits for the work they put in during the day. There are people who cut corners who don't pay that fair market rate, which is where that kind of concept comes from. And look, there's a lot of cost to the delays. To delays. Yeah. When we look at our government leaders now, we have a new mayor in the city of New York who believes that we should pay baristas $40 an hour. So when Mike talks about the cost of union labor, it's not much more an hourly rate. And these are inherently dangerous jobs. But we have a mayor that wants to build more abundantly, wants to cut the time it takes to build. So the land use process from two years down to under six months. And we support that. And the stars are aligning also with the governor. You know, she has an ambitious plan to build a new subway or railway from Brooklyn to Queens. We haven't built like that in like over 100 years. She's in her budget going after environmental review. I mean, environmental review should only take a few months. You can see that process sometimes take well over a few years, some bad cases, five years. And so what we're doing here as an industry leader, the BTA, we're looking to reform insurance costs so that we can not only build more abundantly, build faster, but bring down the cost. And this is a substantial cost. We found out from a recent report that nearly 10 percent of construction costs are wasted in New York as opposed to any other state, even expensive states like California. The cost of insurance is only about 2 percent for the total project cost. Well, we're spending upwards of 10, 12 percent. Definitely want to talk about insurance. But you said something interesting there that just reminded me you said delays add to the cost pressure. this might be a dumb question, but why is that? Because I think back to like my own home construction projects. If I have a contractor and he says this is going to take six weeks, but then he gets caught up on another project and it ends up taking eight weeks, the cost usually doesn't go up. It's just frustrating for me because I have to live in a construction site. Also, I want to say my contractor knows I have a podcast. He's a very good contractor. Delays rarely happen. So thank you very much. But why would that cause additional expenses? Well, just sheer time. I mean, what can be controllable? Certainly the land use process. Before representing the BTEA, I was a New York City council member, so I served for nine years. And a quick case, by the time it goes to the local community board, the borough president's office, and then comes to the council with the best lobbyists happens within two years. And so if the mayor could get that narrowed down and the council speaker is also pledging to reduce the time to a window of less than six months, that's 25% of the average. And so that's significant time saved. That's something that we should be able to control. And if our government leaders want to control it, that's real reform. I'm not surprised at all to hear about delays, particularly environmental review. People talk about this. Let's actually talk about it a little bit more granularly. So you get some project that you want to do. I don't know, maybe something with a highway or something like that. And you have some time frame or some window that you think like you could get this done. And then we always hear delays, right? What drives the delays? Who intervenes and what are the processes by which like these calendars get very extended? There could be design errors or omissions in the bid documents. So when you actually go out to commence construction and do your preliminary work, the drawings don't match up with actual field conditions, which then result in changes to the contract, and that process can be very lengthy. So now you have to document the changes. You then, as a contractor with one of the public agencies, need to negotiate those changes, then get it approved. Depending on what the agency is, it could be with the controller's office in the city of New York, or if it's at the MTA with the board or whoever approves it at the MTA. And all those steps take time. While those delays are being incurred, contractors are then experiencing indirect overhead costs that are assigned to the project while no productive work. Explain that. What are these indirect overhead costs? Project managers, project supervision, safety directors, quality assurance personnel. So their salaries and their fees continue to run. You can't reassign them to another project while they're waiting. Correct. They're assigned to a project. You don't know when those processes will come to an end. So it could go very expeditiously. It could be delayed longer depending on how complex the changes are. So that project staff sits there, in theory, underutilized. And then, as is our contractual right, we will file a claim with that contracting agency for those additional costs. Coupled with that, and I don't know how these costs are calculated, the agency internally also has those same costs for the people on those projects, whether in-house staff or through third-party consultants, a combination of the two. So those costs all get compounded. all these changes happen. I mean, one of the last projects I funded as a council member was to pay for turf in a park, like just like a running athletic field, a replacement, simple replacement. It was funded fully in the budget. I left the council in 2017. They only cut the ribbon on that project being fully completed just in 2024 So what happened in those seven years Like what are they studying You buy the turf ground you done right How would you describe what happened in those seven years The Parks Department said it was going to be a million field replacement Then the contractor came out to the site. There was a lot of surface repair underneath that needed to happen, underlying, you know, just, you know, uneven surface or something like that. They sent it back. I had to go back before Design Review Council. I mean, it really is something so small and so simple that shouldn't even cost as much as it does. It gets to leave for far too long. And we need real reform in city government. I believe government leaders are finally addressing this as an impediment to building abundantly, really. Yeah. So this just reminded me, this is something else I want to ask. But when you mentioned site reviews, Is there something unique or sort of inherent about the way New York City is laid out and built and its geography that also makes it more expensive? I'm thinking like in Manhattan, obviously, we have crowded buildings. Is some of Manhattan on reclaimed land? I can't remember now. Well, Battery Park City is all reclaimed land. There we go. Reclaimed land. And it's mostly an island with few ins and outs, right? So I imagine there are some restrictions on how much material you can actually get into the city. Does just the physicality of the city make it more expensive? Yeah, all that's built into the contract costs. So when we're getting vendor quotes for different types of materials that will go into a construction project, most of the manufacturing base is not within the five boroughs. Right. So it's coming either from upstate, out on Long Island, New Jersey, maybe Pennsylvania, southern New Jersey. You have the cost of that transportation into the five boroughs. Right. So this if you're a vendor who's manufacturing somewhere in central Jersey, well, you probably can make multiple deliveries within the state of New Jersey, where maybe that same freight carrier can only make one delivery a day into the five boroughs. By the way, Kent Burns' brother, he made a great documentary about New York. It's like a 10-hour, 11-hour documentary. And there's a whole section on the speed with which steel got from the Bethlehem steel mill to build the Chrysler building or something like that. It's just an unbelievable logistics. I imagine it would be a little bit slower today. UKG. 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From Exactly Right and Adonde Media, this is Two-Faced, John of God. Listen on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Let's get to insurance and all of that stuff. You even brought us a nice report. Reading material. Scaffold law, economic impact, which evidently, even though on the cover of the report has a picture of a scaffold, is not about scaffolds. Not just about scaffolds. Not about scaffolds per se. Per se. But what is the scaffold law and why is this like an important priority of yours? Well, look, if a worker was to fall off the scaffold, then the scaffold law would apply. And it's to any height-related injury. A New York contractor, a New York City contractor, is held 100% liable. And in 49 other states, it's comparable negligence. So what we found through that economic impact study was that every $100 million that is wasted on frivolous claims, when you look at reinvesting that into the economy, there's $140 million output. And that amounts to about $55 million in wages and over 600 jobs. And we look at big projects like the president wants to build Penn Station that's estimated to be $7 billion in cost. If we were to put comparative negligence on that project, we could save over $500 million. That's half a billion dollars. So just so we understand the difference between comparative negligence and absolute liability. So if I'm a construction worker working on a sky rise or something and I'm not wearing my helmet and I fall off a 60 story building, I would be dead. But let's assume that I get injured. You'd probably be dead. I would probably be dead. All right. A three story building. Yeah, OK. Or one story. OK, but I'm not wearing my helmet even though my employer says I should be wearing a helmet. And then I, you know, file a claim. The absolute liabilities rule basically says that you can't divide blame between the company and the worker. Is that right? So instead of being 90% at fault for my own injury because I wasn't wearing a helmet and I got a head injury, the company is now 100% at fault. That's absolutely right. And in other states, they do comparative negligence. And it's really driving up the cost of insurance, so much so that insurers don't even want to write insurance in New York anymore. The market's limited. Tell us about the insurance market for you because this is a good thing for us. So, I mean, there's zero purchasing power. Contractors make a significant investment in safety. I promise you there's nothing more important to the contracting community than for every employee to go home safe to their family, loved ones, or whoever that may be at the end of the day. I know everybody cares about that. But when we go to renew our insurance every year and the large insurance carriers look at what this market for them is considered one of the or the least favorable market to write insurance, so much so that carriers don't even want to write insurance in this market anymore. And if they do, deductibles are really high. Rates are really high. So on a percentage base of revenue, we're talking about 5, 6, 10x other states with much higher deductibles. So now contractors carry the cost of those deductible payouts in their bids, which goes into these public work bid numbers. So that's where you exponentially see the higher cost of construction. But it actually, take it a step further, all the subcontractors and vendors that are going to be working on our jobs also have the same problem. And typically the subcontractors are smaller contractors by either volume or revenue or employees. So they're typically paying a higher premium on a percentage basis. So those numbers are also baked into our contract pricing. Yeah. Our report, really, when we say contractors in New York are paying 10% of total construction costs to insurance, that's 500% more than other states. Where in other states, it's only about 2%. And then, as Michael mentioned, the subcontractor, they get hit the worst. On average, if you're a concrete subcontractor or a steel painting contractor, you're paying 15% to 20% of your total volume of work, and it's unsustainable. So New York is the only city or only state, city, state that still has this law in place. Is that right? Yes. What happened in other states when we saw it go away? So the last state to reform the so-called scaffold law, absolute liability standard, was Illinois in 1995. So this is 140-year-old law. It's antiquated. It's broken policy. Even both the Democrats and the Republicans, when you speak to them one-on-one, they know this is failed policy. And the interesting thing, Illinois, the number of fatalities declined after they put a comparative negligence model in. So those that say it's a, you know, you have some trial lawyers, then they really, it is a cash count for the trial bar. That was going to be my next question. And so if everyone agrees that this is an antiquated law, who's actually standing in the way? We're definitely going to get an email after this episode. And they're like, your guests are totally biased. It's going to be from some lawyer. And they're like, come on and do a follow up. But this raised the question, OK, the law has been around for over 100 years. So why not? I mean, like, I can understand that that might raise. Yes. OK, New York is going to be a higher cost state. That doesn't explain the surge per se. Has something changed in the last 5, 10, 20 years? I mean, New York used to do a lot more building or used to build a lot. Has something changed such that the law has more teeth or bites more than it did? I mean, again, you talk about the disappearance of certain insurance carriers. The law existed 50 years ago, right? Right. When I first started my business a little over 30 years ago, you know, insurance was an add-on on the bid where you didn't really focus about it. We're talking about 1%, 2% of the contract price. And that held true maybe up until even 10 years ago. And in the last 10 years, we've seen a significant rise in the cost of insurance. And I think it directly correlates with frequency of claims, third-party claims, payouts of those claims, and how either a judge or jury awards damages in those cases. There's been well-documented cases of staged construction accidents on sites. What Michael said is absolutely true. In New York, for scaffold laws, the bodily injury claim settlements for scaffold laws are six and a half times the average of other claim settlements. The sheer volume has been increased by tenfold. But we're talking about in 15 years, and that's why these insurers are leaving. You know, why now? Why do we think we have a real opportunity? not just because we have this economic impact report that shows us exactly how much we're spending, because government leaders are finally talking about the fraud and abuse that's happening. You know, our governor and her state of the state last month called on insurance reform for the automobile industry. Now, half of the consumers in the state are car owners, right? They're driving. They could relate to us paying so much more. But we're paying 50% more in car insurance compared to every other state. But our contractors are paying 500% more. And the governor had touched upon fraud and abuse, just like Mike said. The governor says we need to address that. We need to lower litigation costs. And mind you that these are auto insurance claims that are much, much less than the scaffold law claims. And we need to fix this. We need reform. So this is a step in the right direction. And we're really focused on reform in Washington right now. There's movement there. There's a lot of support on this big federal infrastructure package that's a part of a surface reauthorization transit bill that gets reauthorized every five years. It pays for big projects like a Second Avenue subway or major roads and highways, bridges. And it's a must-pass bill. And we think that we'll see reform there first. And we're very hopeful that reform will come soon in Albany. How would you actually go about reducing litigation costs? Because my assumption is, as long as you're doing like a jury process, it's going to be pretty expensive unless you go to something like arbitration. Yeah, well, the litigated costs, one would say it goes to jury, but all of these insurance companies right now are just afraid to get that far in New York State So they settle pretty quickly One insurance company Tresman Insurance they filed five different RICO cases in recent years Probably I heard them say that they invested over 16 million dollars to do personal investigations to stop fraud and abuse. And they say that because they were able to get so many claims dropped by showing the fraud that There were bad actors. They saved over $2 billion and the numbers keep growing. And one law firm, Subinus-Solk's shit, that had like 300 different cases dropped, apparently, closed their doors last month. So it shouldn't get to that where insurance companies have to do the reform. This is bad public policy and we need our leaders in Washington and Albany to do reform now. It's, I mean, I think it's well documented. It's all public information of just one building or A couple of buildings where multiple claimants from the same building with the same law firm utilizing the same medical practices filing these lawsuits. Yeah. And some of the doctors are losing their licenses and they're barred from workers' comp cases. And so that is reassuring to see action happen. And we're reaching a critical mass at this point. So I think that's why now we're hopeful for reform. Michael, can you talk a little bit more about today versus mid-90s? You win a bid with the city or whatever. You have a project. You mentioned back then insurance was an add-on. Okay, it was 1% or 2%. Now it's 10%. But setting aside the price, going out and finding which carrier will take that. Can you just talk about what life was like, I don't know, again, 30 years ago versus today in terms of going out into the market for finding that insurance, available options, negotiations, and so forth? Yeah, I mean, it was much easier and much more simple 20, 30 years ago than it is today. All right, what'd you do? You'd talk to your insurance broker. They would come back with three or four quotes, all roughly the same. Who did you feel comfortable with? You would do your annual renewals. There would be incremental cost of living, inflationary adjustments to your annual rate. You signed on again for another year. Now it's a much more detailed, thorough process, thorough review. how much you're going to raise your deductibles, where back then deductibles might have been $25,000. I mean, I think we're at $750,000 or $750,000 now per occurrence. I mean, significant, significant changes, where now the insurance company will dictate when you're going through your quotes. If you don't raise your deductible, we won't even write your insurance, where that didn't happen back then. So there was much more purchasing power in the contracting community 20, 30 years ago in the marketplace than there is today. Yeah, this is what I wanted to ask. So if the scaffolding law goes away, are you confident that new insurance actors would actually come into the market? Because it feels like part of the problem here is a lot of people have exited. So you have limited insurers to actually choose from, which means they now have all the pricing power. Yeah, I think the free market will work itself. It's a competitive market right now for the limited that do do business in New York. I was just on the phone earlier today with Zorik, which is a worldwide insurer, and they stopped insuring small contractors and they'll only do big wrap up projects. In New York State, our Department of Financial Services regulates the companies to make sure that they can't charge too much or too little. And again, it's the market. As long as they can prove they can make money here in New York, they'll come back. It just dawned on me. One other thing to consider, which sometimes is good for the local contracting community, but also not necessarily good for the overall city of New York. There are contractors based in other states that won't work here because their insurance companies will exclude their policy from working in New York. And then they would have to buy job-specific or site-specific policies, which are also very uncompetitive rates. So it's easier for them just to stay out of the marketplace. That then, in theory, may drive down competition, right, from a low-cause bid analysis. I think an interesting, you know, to bring it back to what the governor has taken on in her state of the state or in her budget auto insurance. You know, we mentioned the trial lawyers and how this is really a catch cow for them. But, you know, they like to paint the insurance companies as the bad actors. But we look in places like Florida, for example, they had a similar no fault auto insurance policy like New York currently has. and they changed the policies there and they've given rate payers double-digit refunds. So there is a situation, a scenario where we could see the same for our contractors if real reform happens here in New York. Just to be clear, does the high cost of insurance also apply to projects where heights presumably don't come into it very much? So, you know, if you're building a new subway tunnel or something like that, I assume there's probably some scaffolding involved, but like, Maybe you're not falling too much. You could be standing on a ladder in a sewer trench six inches up on the ladder with the ladder secured in the bottom of the hole tied up all in conformance with OSHA regulations. And if the employee falls six inches to the ground, which typically we all think we would be OK falling six inches, but then some injury arises months later and ends up in a lawyer's desk and the contractor is then sued, there'll be some sort of payout. And that would fall under the scaffold law. So even though you're not up on the heights of a building, not building a superstructure, that law still applies. I'm Stephen Rinella from the Meat Eater Podcast. Do you love being out in nature? Ever wonder what it would be like to hunt and fish for your food? You want to hear about discoveries in ecology and anthropology with some animal attack stories thrown in? The Meat Eater Podcast has all that plus laughs delivered through conversations with authors, scientists, historians, policymakers, even comedians. The Meat Eater Podcast. Listen or watch wherever you get your favorite shows. 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I find this argument to be very compelling and the high cost of insurance on a per-project basis in New York City versus every other state. That seems like an issue, unquestionably. All that being said, some of the numbers you read about construction processes, okay, let's say we take only 30% for labor or labor is 30% of the job. And then let's say insurance is 10% of the job. So we have this other part. And when you read about the cost of an elevator in a subway, it seems like even if we like knocked off a lot of it for insurance and labor, whatever, it still seems crazy expensive in New York. So can we just talk about like, are these numbers real? Like when we see like, oh, it costs $60 million to build an elevator somewhere. Is that real? Or is that clickbait? What's going on there? I mean, I don't know where it costs $60 million to build an elevator. But look, remember, there are subsurface conditions in New York that you have to deal with, like relocating utilities and gas mains and steam mains and electric that all may go into the cost of that elevator, but it's really not the direct cost of the elevator. So like when the MTA goes and puts a new elevator in on a corner. Yeah. Yes, maybe the cost of that elevator project sounds enormous. And it is for the elevator project, but not all of it is directly tied to the elevator. It's clearing a lane. But other cities have this too, right? Like, I mean, yeah, absolutely. It's not all there's going to be real estate acquisition costs and all the issues of materials and everything. But I get the impression that like building an elevator in New York City, like should taxpayers be happy with like the numbers? They seem very high and they seem out of proportion with what we see in other cities. Yeah, I don't know the comparative data. Yeah, we are most expensive to build in comparison to other cities like San Francisco. Yeah. But it's still very expensive to build there too. Sure. So what are we paying for? What are these numbers? I mean, again, let's go back to the turf example. $4 million for like turf on. And you did. And I laughed before when you mentioned the skyscraper, the Chrysler building and the Bethlehem Steel and how that was probably put together in less than a year, the Empire State Building. And today we're building mega towers that are taking three, four years. And while they're important projects and they're very expensive projects, we were able to do it in such a shorter timeframe back then. Of course, you save money when you reduce the time. Back to that track, it was in Tunepa Park. And it's funny that you mentioned that, but actually I realized after you spoke about Battery Park and how, you know, that was water before we expanded. That was a swamp land once in Queens, that particular park. And so those are the constraints that we don't think about when we're building in New York. It's so hard to find schools, you know, places to build schools. I remember as a council member just having the most overcrowded school district and so many sites were contaminated and we couldn't find a good site. It's just these difficult things that happen in such a dense city. And part of the reason it's so expensive to build here. Does anyone have any good examples of building like efficiently at not so much cost relatively in New York City or New York State speak, but still to a high standard? Like an example of a project that was done really well. Michael, surely you should be naming some of your own. Yeah, no, we don't have, unless there are major design flaws or errors, I feel like almost all of our projects do go extremely well, right? It's a competitive marketplace. We're the low bidder, right? Typically when you get the job, which means we're the cheapest price, the lowest responsible bidder. And more often than not, we don't have these major overruns or changes. They seem to go fairly well. And Michael introduced himself as the president of the company. But me and Michael worked together on the mayor's task force for capital reform. And we went up to Albany as part of the reforms two years ago and pushed for progressive design bills or different ways of building projects that New York didn't use and other states used. And that actually decreased the timeline. And you were able to build for less by using these delivery methods. And I think that Shirley Chisholm Park, they just, Mayor Mamdami cut the ribbon, but DDC is pointing to that project as coming in under budget in a shorter amount of time that was estimated that it would take to build. So there are ways we could work together, putting our minds together to bring about real reform. I think one area that we didn't touch on, which I think is important, I know you probably know the statistics, right? If you look at the counter argument, like if you said the trial lawyers to what's driving these insurance costs, you would think if these stricter rules and laws are in place, it would make everything much safer or safer for the worker or less injuries. And do you want to touch on those? There's nothing more important than safety. That's a cornerstone of the work that our contractors do. You know, they want their workers to go home as safe as they were when they came to work that day. We're, you know, even focusing on culture on the job site and total wellness. That's important. So we need to continue to be forward thinking and work together. But the data, the data set, the results in New York are equal to other states. Oh, in terms of our rate of fatalities. In fact, New York has a higher rate of fatalities despite this law in comparison to a state like New Jersey or the average in the country. You know, we have nearly 12 fatalities per hundred thousand workers, whereas the national average is under 10. And so we're 20 percent higher in New York, despite having such a strict liability on contractors. Can we talk a little bit about current conditions? So one of the things that we heard a lot in like 2021 2022 23 this like intense scarcity of skilled tradesmen and various things electrical et cetera How is that? Is that still a big issue, still a major constraint right now finding available labor? I think an aging workforce, at least, I mean, without me having any demographic data, just like visual context. And we do have an aging workforce. I don't think the younger generations are so inclined to either go to a vocational school or some type of trade school. I would sit here and I would tell anyone I think it would be a great industry with the disruption going on in the world right now. Yeah. With, you know, the advent of AI and all these jobs. But like for you, like right now, is this like when you think of the various headaches that you have in your life, is keeping a sort of steady, the available flow of labor that knows how to build things, like one of the things that keeps you up at night? Yeah. I mean, available flow of labor is one of the things that's kept me up at night since I started my business. Okay. We converted to 100% employee-owned company a couple of years ago, so much so that I included the trades people, so the collectively bargained employees through the different unions in the city are part of that ESOP. That's very unusual. And I applaud Michael and his team for doing that. But when we think about workforce needs, many of our contractors that are doing the infrastructure work, like Michael, are experiencing difficulties and often take talent from one another. So ESOP is going to stop that for sure. But when you look at the commercial buildings that are going up, which is more of a private market or residential, that is not happening. And we really didn't have a chance to talk much about affordable housing. But that any of that building is much more likely to be non-union today, which is a real shame because a lot of times those workers are not getting paid on the books. More likely, 80 percent of the injuries that happen on job sites are happening on non-union job sites. So we really want to prevent that and help promote union employment as much as possible. Michael, you mentioned AI. So now I have to ask, you know, we dug in a little bit into construction productivity at the beginning of this conversation. And, you know, I think construction is largely done now as it was probably like 20 or 30 years ago. And there happened some technological advances like the nail gun. But beyond that, we don't have actual robots that are like putting shingles on our houses and things like that. But how confident are you that it's going to actually stay that way forever? Because, I mean, LLMs, chat GPT. I like how you're looking at me like I'm going to like vibe code. I'm going to vibe code a robot. It's the running joke. It's all Joe's fault. But it came out of nowhere for white collar workers. Could it come out of nowhere for blue collar? I think so. And look, I don't think it's going to replace the workforce. I actually was at a construction conference a couple of weeks ago. And my biggest takeaway is AI isn't replacing employees, but employees who use AI will replace the employees who aren't. Do you see that? Like, are there in your firm, are you getting value from it? Is anyone doing anything with like tech or anything? Is anyone using it for drawing? We had our off-site strategy session last week. And one of our quarterly priorities is all around implementing artificial intelligence in our processes and workflows. So really, how can we get information sooner? So instead of relying on maybe these incumbent software models, taking the data we have and using AI to give us analysis of that data much quicker. So not so much the physical process of like putting up drywall, but the planning and preparation. Well, look, that's coming. I mean, I have friends who have robots that can tie rebars now with wire, right? They've invested in these companies. I'm not utilizing those robots yet, but they're out there. Caterpillar has technology, the heavy equipment manufacturer, where someone can sit, let's call it like what we grew up with, a video game. It looks like a pole position. I don't know if I'm dating myself. And you can operate four different machines, not at the same time, but from one TV screen, four actual Caterpillar machines at four different locations, just sitting in like what I would call an arcade machine. Wow. With no operator in the seat. Yeah. Interestingly enough, you know, I mentioned Zurich earlier. Zurich insurance will only insure a project in New York if there are cameras watching. Now, they use AI after a day's work to study any movement that was dangerous. So it's not just like people, you know, believe it's for surveillance to stop fraud and abuse from happening, but it's really to correct workers, too, and reduce risk. And they've seen that their incidents have gone down significantly and their job sites are much more safer. I'm part of a tri-venture group doing the East Coast Resiliency Project on the Lower East Side. It's a $1.3 billion project. And we're utilizing that exact system. The cameras are located on machines, on poles, and the data gets downloaded every night, analyzed by AI. So not only do we get like near misses or data, but we also use it for training the workforce. So the videos that it captures to make the job site safer. What about, again, just talking about current conditions, what about materials costs? So we know that the cost of everything surged a lot immediately in the wake of the pandemic. Are you getting any relief? Have the pace of price increases gone slowed at all? Are there any parts we've talked about, like transformers, like various key electrical parts that you can't get easily at any price? What are you seeing right now on just acquisition of materials? Yeah, I have not seen prices come down. OK. You know, it's no different when there was like a fuel surcharge, right? The oil market spiked and every vendor would put a fuel surcharge on deliveries. Somehow those fuel surcharges never go away. What about other like just other raw materials, like other things that are in like scarcity that you like have a difficult time finding at all at any price? Right now, no. I think we're pretty much getting everything we need. I know COVID and coming out of COVID, there was big issues. When you walk into a building like the Bloomberg offices, do you look around and you think like what a marvel of structural engineering? Or do you think I wonder what the insurance costs are? No, I think I should have done something different in my career. One last thing that you mentioned, and I've read people who like talk about like, you know, abundance, etc. They talk about how a lot of like public projects, there's a big consultant element that many aspects of it have been outsourced from the public sector, that these third parties and that that drives up. You mentioned consultants. Does that does that resonate with you in terms of where you see potential cost bloat and so forth? Yeah, I mean, I don't know the value of the consultant contracts, but I can tell you based on my experience, we used to work on a lot more contracts that were run in-house by the agencies. And now you see a lot of third-party, like resident engineer and inspection services and other tasks that used to be performed in-house that are now performed by third-party consultants. And often they're called owner's reps. And we'll get complaints from our contractors that owner's reps are delaying the project so they continue to get paid for the project. And that's something where we're interested in seeing some reform, too. I've heard of that on more than one type of project. It could be a school being built or a bridge being painted. Michael and Elizabeth, thank you so much for coming on OddLoss. That was a lot of fun. Thanks for having us. That was great. Thank you so much. Thank you for having us. Thanks so much. We appreciate it. Yeah, that was super interesting. Tracy, that was a fun conversation. I felt like I really learned about the city in some way. You know what I'm saying? I learned a lot about absolute liability. Yeah, absolute liability. That was interesting. Look, I also think the point about delays is very striking to me because, again, that would seem to be an issue where you're still paying people to build something, but building it is taking 10 years instead of five years or whatever. Especially at a time when interest rates are high because then they compound extra. Right. And also, it seems like there's a potential problem of incentives here. Yeah. Right. Like if I am a consultant working on a project and I am still getting paid, the project's not actually going and I can spend a lot of time, I don't know, pointing out like individual issues and potentially delaying stuff like that's an incentive problem. Absolutely. I guess I would say I find the point about insurance to be compelling and the point about like 49 other states have gotten rid of these laws and they're not actually even making New York a safer workplace. I mean, it would be one thing, I guess, if like New York had like half the accident rate as the rest of the country. And then you say, OK, well, look, like you could point to a law like this and say this is clearly making causing everyone to take safety more seriously. If you can't point to that, if every other state has gotten rid of it, I mean, I don't have any opinion. But and again, I'm sure we're going to hear from lawyers. You're about to make an enemy out of the trial bar. Well, yeah, we're going to get emails from lawyers saying we want to do a rebuttal episode. But my gut is that there's probably definitely something to that. Well, the other thing I was thinking about on the insurance point is, you know, I have this pet theory that like insurers basically run the world. Yeah. I mean, they control a lot of money. They set like not just safety standards, but social standards for a lot of things. It's really interesting hearing about using AI to monitor security cameras footage like for health and safety. Because I can imagine, you know, if that helps the insurers, I can imagine them asking that to become standard practice everywhere. It's super interesting to think like, OK, yeah, you want to have cameras because if there's an accident, then you can go back and review the footage. but this idea that like oh you could like see if there was a near miss or something like that and the ai can detect it directly potentially that's interesting and then of course there's going to be all these questions about surveillance and whether people like that but this is going to be uh it's going to be a big topic yeah and uh it's only it's going to come on very fast i know i keep saying this but we really should do more on insurers we'll figure out we're starting to do more you know like if we keep saying it like we are you know no yes but even more even more i agree i agree Shall we leave it there? Yeah, let's leave it there. Okay, this has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Jill Weisenthal. You can follow me at The Stalwart. 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