The POWER 30: Kyle E. Hart

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Which is not to say that business hasn’t slowed down. Hart estimates that construction has lost a cycle of growth, although the stimulus money helped keep the wheels rolling, he said.

The labor shortage isn’t new. In April 2000, Hart wrote, “Today, there is more construction work available to contractors than there are workers to perform the work. There are, literally, hundreds of unfilled calls into the local unions for electricians, plumbers, fitters, masons, carpenters and laborers. The shortage appears to be getting worse. Many contractors have stopped bidding work because they cannot adequately staff the projects. That is a smart decision. If you know that you are facing a labor shortage before bidding a project, then it will be very difficult to escape your obligation to perform on time by claiming that it is impossible or impractical to do so because of a labor shortage.”

Sound familiar? It’s still the case, said Hart. It will be different for contractors to recover from loss caused by a problem they knew about, he said. Force majeure events are specified in a contract but if it doesn’t encompass labor shortages, the common law says performance must be “impractible.”

The solution is to plan ahead, Hart said. It takes time for people to realize a problem and provide for protection. Twenty years ago, contractors successfully lobbied the Minnesota Department of Transportation for contract provisions addressing gas and oil prices. Hart said.

Actually, 2008 was a worse year for the industry than 2020, Hart said, because government and business didn’t respond as aggressively. He expects an uptick, predicting that the federal infrastructure bill will be helpful.

Oil fields in North Dakota are a source of business, but pipelines pose questions. Hart recently handled an arbitration that resulted in a $30 million swing. The property owner fired the general contractor because the project was allegedly late. The contractor sued, claiming $30 million in damages. After the arbitration, it ended up owing $30 million, and decided to get out of the pipeline business. But President Joe Biden revoked the Keystone XL pipeline, and 23 states are now suing the administration. More contractors might want to get out of the pipeline business, Hart said.

In addition to a labor shortage, contractors, particularly minority contractors, face difficulties with the bid process. For federal projects, contractors are required to show a good faith effort to hire disadvantaged or minority businesses, but the standards for good faith are loose, Hart said, and the decisions about compliance are subjective.

When the bid is awarded based on considerations other than low price, newer bidders may have difficulty getting any business because they can’t rely on past experience, Hart said. They may have a sponsor, but that relationship can’t be so close that it looks like one company is an alter ego, he said.