WEBVTT - How Insurance Costs Make NYC Construction So Expensive 0:00:02.720 --> 0:00:15.840 Bloomberg Audio Studios, Podcasts, radio News. 0:00:18.560 --> 0:00:22.160 Hello and welcome to another episode of the Odd Lots Podcast. 0:00:22.239 --> 0:00:24.599 I'm Joe Wisenthal and I'm Tracy all the way. 0:00:24.840 --> 0:00:28.080 So Tracy, everyone just like very into affordability these days 0:00:28.120 --> 0:00:30.280 in the cost of living and all that stuff. But 0:00:30.480 --> 0:00:32.080 I think, you know, there's all kinds of things you 0:00:32.120 --> 0:00:34.800 can do and whatever, but it seems like one fundamental thing, 0:00:34.800 --> 0:00:38.880 which is probably true, is whatever we're talking about, whether 0:00:38.920 --> 0:00:43.720 it's building infrastructure for public transportation, whether it's building offices, 0:00:43.760 --> 0:00:46.960 whether it's building houses, Like, there's various costs involved, but 0:00:47.000 --> 0:00:49.320 one is like just the cost of construction. And if 0:00:49.360 --> 0:00:52.040 the cost of construction is very high, it's hard to 0:00:52.080 --> 0:00:56.360 imagine affordability improving much on anything, right. 0:00:56.240 --> 0:01:00.880 So, yes, absolutely, I can't really that point, But it 0:01:00.920 --> 0:01:03.640 does seem like construction is this like one area where 0:01:03.760 --> 0:01:06.959 so many different things come into play. So you have 0:01:07.040 --> 0:01:10.319 the cost of basic materials, which have gone up, especially 0:01:10.360 --> 0:01:12.640 since the pandemic. You have the cost of labor, which 0:01:12.640 --> 0:01:14.440 has also gone up since the pandemic. You have the 0:01:14.480 --> 0:01:18.160 cost of insurance, which has also gone up since the pandemic. 0:01:18.319 --> 0:01:22.160 You have regulations which we've done many many episodes about 0:01:22.200 --> 0:01:25.800 the added costs from the permitting process for various things. 0:01:26.040 --> 0:01:27.880 It just seems like it's this bucket where you can 0:01:27.920 --> 0:01:30.840 throw all these different factors in and then get this 0:01:31.400 --> 0:01:34.280 kind of like reinforces itself and just makes it even 0:01:34.280 --> 0:01:35.000 more expensive. 0:01:35.160 --> 0:01:35.759 Yeah, totally. 0:01:35.800 --> 0:01:37.120 And then you know you sort of hit it with 0:01:37.160 --> 0:01:39.520 the insurance, but also just like cost of financing, right 0:01:39.560 --> 0:01:41.240 because like as interest rates go high. 0:01:41.080 --> 0:01:44.119 The yeah, I forgot financing that too. It's a big bucket. 0:01:44.120 --> 0:01:44.839 It's a big bucket. 0:01:45.000 --> 0:01:47.160 And like we know that construction is an area across 0:01:47.200 --> 0:01:49.960 the economy, not just in New York City where we 0:01:50.040 --> 0:01:52.320 talked about it. With residential housing, there's been a lot 0:01:52.320 --> 0:01:55.520 of productivity growth, right, Yeah, like there's. 0:01:55.320 --> 0:01:58.360 Been like no productivity growth according to at least one 0:01:58.400 --> 0:01:59.920 paper I read. I think it was a Richmond fed 0:02:00.360 --> 0:02:01.840 I will have to go back and check. But it's 0:02:01.880 --> 0:02:04.559 a really unusual industry in the sense that you haven't 0:02:04.600 --> 0:02:07.480 actually seen you know, we don't have robots building houses yet. 0:02:07.520 --> 0:02:10.600 We don't have robots building houses yet, So I don't know, 0:02:10.600 --> 0:02:12.440 you know, I think we need to learn more. You know, 0:02:12.680 --> 0:02:15.840 sometimes you see these viral statistics like oh, the MTA 0:02:15.960 --> 0:02:19.560 spent sixty million dollars on building an elevator, or cost 0:02:19.600 --> 0:02:20.360 three million. 0:02:20.120 --> 0:02:24.280 Dollars to build seven million installing those plastic fins on 0:02:24.360 --> 0:02:27.480 the subway turnstiles. I'm not even sure that qualifies as construction, 0:02:27.639 --> 0:02:28.760 but seven million. 0:02:28.639 --> 0:02:31.560 Millions to build a bathroom, which is not fun if 0:02:31.639 --> 0:02:34.280 like you have little kids, all kinds of things. Anyway, 0:02:34.560 --> 0:02:36.320 we should do more about wide costs a lot to 0:02:36.360 --> 0:02:39.160 build and maybe whether there's something that can be done 0:02:39.200 --> 0:02:39.520 about it. 0:02:39.560 --> 0:02:40.760 Absolutely, let's do it. Well. 0:02:40.760 --> 0:02:42.560 I'm very excited to say we really do have two 0:02:42.560 --> 0:02:43.320 perfect guests. 0:02:43.360 --> 0:02:43.600 Today. 0:02:43.639 --> 0:02:46.600 We're going to be talking about the high cost of construction, 0:02:47.000 --> 0:02:49.560 more infrastructure and stuff like that. In New York City. 0:02:49.800 --> 0:02:51.840 We're going to be speaking with Elizabeth Crowley. She's the 0:02:51.880 --> 0:02:55.880 president and CEO of the Building Trades Employers Association, also 0:02:55.919 --> 0:02:58.760 known as BTA, as well as Michael Capasso. He is 0:02:58.800 --> 0:03:03.480 a president and CEO of CAC Industries, Inc. So Elizabeth 0:03:03.520 --> 0:03:05.600 and Michael, thank you so much for coming on od lots, 0:03:05.639 --> 0:03:06.560 thank you for having us. 0:03:06.720 --> 0:03:09.320 Yeah, thank you, Joan Tracy. We are grateful for the 0:03:09.360 --> 0:03:14.280 opportunity to talk today. I represent over twelve hundred contractors 0:03:14.280 --> 0:03:19.519 in the BTA who are building our skyscrapers, our subways, 0:03:20.040 --> 0:03:24.600 building commercial buildings, hospitals, schools, about sixty five billion dollars 0:03:24.600 --> 0:03:26.799 worth of work annually. 0:03:26.360 --> 0:03:29.520 And wants to tell us about sac industries. What's your background? 0:03:29.520 --> 0:03:34.320 Michaelac's Public Works heavy highway contractor based in New York 0:03:34.320 --> 0:03:38.040 City and Queens. We work for the public agencies, Port 0:03:38.080 --> 0:03:41.600 Authority of New York, Department of Design and Construction, Department 0:03:41.640 --> 0:03:46.200 of Environmental Protection, MTA mays Battery Park City. 0:03:46.680 --> 0:03:49.640 Did you see the highline as well? Yes, that's amazing, amazing. 0:03:49.760 --> 0:03:52.920 Do you know that I do some research before I 0:03:52.960 --> 0:03:54.640 come on this podcast. I know a lot of people 0:03:54.680 --> 0:03:57.200 don't think so, but you know a little bit. Okay, 0:03:57.320 --> 0:03:59.880 let me ask the first question. Let's just get it 0:04:00.040 --> 0:04:04.040 out of the way. But your organization represents unionized workers, 0:04:04.120 --> 0:04:08.040 and I think your company is also unionized workers. A 0:04:08.040 --> 0:04:09.640 lot of people are going to hear a high cost 0:04:09.720 --> 0:04:13.640 of construction and NYC and immediately go to the union factor. 0:04:14.280 --> 0:04:15.760 What is your response to that. 0:04:15.760 --> 0:04:19.839 Well, our members are employers, so they're really businesses. We're 0:04:19.839 --> 0:04:22.560 a business association and our members are employing over one 0:04:22.600 --> 0:04:26.760 hundred thousand workers and we're proud that we're union contractors. 0:04:26.800 --> 0:04:28.640 You know, we're the good guys, and there are a 0:04:28.640 --> 0:04:31.159 lot of non union contractors out there that are racing 0:04:31.240 --> 0:04:35.080 to the bottom. We're paying for benefits and wages, and 0:04:35.880 --> 0:04:39.120 that's just part of the cost of construction. And really 0:04:39.200 --> 0:04:42.360 what we're looking at doing is reforming costs that are 0:04:42.400 --> 0:04:45.359 more controllable, you know, the costs, the hidden costs that 0:04:45.400 --> 0:04:48.120 go into construction, such as construction insurance. 0:04:48.600 --> 0:04:51.480 Definitely want to talk about construction insurance and all this stuff, 0:04:51.720 --> 0:04:54.440 But again just on this point of like how much 0:04:54.520 --> 0:04:57.359 is quote hidden costs versus how much is just labor. 0:04:57.880 --> 0:05:00.240 Maybe Michael, you could like sort of break down or 0:05:00.279 --> 0:05:02.359 either one of you breakdown how we should think about, like, 0:05:02.720 --> 0:05:05.600 in a given project, when people see these big numbers, 0:05:05.800 --> 0:05:09.599 how much should people think about the labor components specifically 0:05:09.800 --> 0:05:12.239 versus measuring these these other costs. 0:05:12.320 --> 0:05:15.760 Yeah, I mean, I would say typically labor ranges thirty 0:05:15.800 --> 0:05:19.320 to thirty five percent of the total construction cost. But 0:05:19.400 --> 0:05:22.640 getting back to your original statements about union and sometimes 0:05:22.680 --> 0:05:26.040 people think that raises the cost of construction, I would 0:05:26.080 --> 0:05:29.480 actually take the counter argument to that. All the public 0:05:29.520 --> 0:05:33.160 works contracts in New York and the utility contracts are 0:05:33.320 --> 0:05:36.120 subject to the city or the state prevailing wage laws, 0:05:36.600 --> 0:05:40.560 which the union's rates are in line with Labor Law 0:05:40.600 --> 0:05:43.400 two twenty, which are in the city contracts. Those the 0:05:43.440 --> 0:05:45.880 wages and benefits you have to pay the employee. So 0:05:45.920 --> 0:05:50.240 it's not the union wages that are costing too much money. 0:05:50.240 --> 0:05:52.279 They're in line with all the rules and regulations of 0:05:52.320 --> 0:05:55.920 the city and state. When we think about union wages 0:05:56.480 --> 0:06:00.440 and why maybe there's this misconception. Yes, compared to people 0:06:00.560 --> 0:06:04.200 that are not paying union wages, these people are paying good, 0:06:04.279 --> 0:06:07.200 honest wages and benefits for the work they put in 0:06:07.279 --> 0:06:09.960 during the day. There are people cut corners who don't 0:06:09.960 --> 0:06:13.440 pay that fair market rate, which is where that kind 0:06:13.480 --> 0:06:14.640 of concept comes from. 0:06:14.760 --> 0:06:17.159 And look, there's a lot of cost to the delays. 0:06:17.640 --> 0:06:19.880 And when we look at yeah, when we look at 0:06:19.920 --> 0:06:22.719 our government leaders. Now we have a new mayor in 0:06:22.760 --> 0:06:24.839 the City of New York who believes that we should 0:06:24.839 --> 0:06:28.040 pay baristas forty dollars an Now, so when Mike talks 0:06:28.080 --> 0:06:31.240 about the cost of union labor, it's not much more 0:06:31.760 --> 0:06:35.719 an hourly rate. And these are inherently dangerous jobs. But 0:06:36.120 --> 0:06:39.440 we have a mayor that wants to build more abundantly, 0:06:40.120 --> 0:06:42.599 wants to cut the time it takes to build. So 0:06:42.680 --> 0:06:45.960 the land use process from two years down to under 0:06:46.040 --> 0:06:48.760 six months, and we support that, and the stars are 0:06:48.800 --> 0:06:51.360 aligning also with the governor. You know, she has an 0:06:51.360 --> 0:06:54.560 ambitious plan to build a new subway or railway from 0:06:54.560 --> 0:06:57.320 Brooklyn to Queens. We haven't built like that in like 0:06:57.440 --> 0:07:01.040 over one hundred years. She's in her budget going after 0:07:01.080 --> 0:07:04.640 our environmental review. I mean environmental review should only take 0:07:05.160 --> 0:07:09.360 a few months. You can see that process sometimes take 0:07:09.840 --> 0:07:13.320 well over a few years, some bad cases five years. 0:07:13.720 --> 0:07:17.040 And so what we're doing here as an industry leader, 0:07:17.120 --> 0:07:20.760 the BTA, we're looking to reform insurance costs so that 0:07:20.840 --> 0:07:25.240 we can not only build more abundantly, build faster, but 0:07:25.320 --> 0:07:28.040 bring down the cost. And this is a substantial cost. 0:07:28.080 --> 0:07:31.080 We found out from a recent report that nearly ten 0:07:31.160 --> 0:07:35.160 percent of construction costs are wasted in New York as 0:07:35.200 --> 0:07:38.320 opposed to any other state, even expensive states like California, 0:07:38.680 --> 0:07:41.440 the cost of insurance is only about two percent for 0:07:41.520 --> 0:07:45.720 the total project costs, where we're spending upwards of ten 0:07:45.800 --> 0:07:46.480 twelve percent. 0:07:46.840 --> 0:07:49.119 Definitely want to talk about insurance. But you said something 0:07:49.160 --> 0:07:52.119 interesting there that just reminded me. You said, delays add 0:07:52.200 --> 0:07:55.080 to the cost pressure This might be a dumb question, 0:07:55.160 --> 0:07:57.440 But why is that? Because I think back to like 0:07:57.800 --> 0:08:01.560 my own home construction project. If I have a contractor 0:08:01.720 --> 0:08:03.600 and he says it's going to take six weeks, but 0:08:03.640 --> 0:08:05.720 then he gets caught up on another project, it ends 0:08:05.800 --> 0:08:08.720 up taking eight weeks. The cost usually doesn't go up. 0:08:08.760 --> 0:08:11.040 It's just frustrating for me because I have to live 0:08:11.080 --> 0:08:13.560 in a construction site. Also, I want to say, my 0:08:13.680 --> 0:08:16.400 contractor knows I have a podcast. He's a very good contractor. 0:08:16.520 --> 0:08:20.360 Delays rarely happen, so thank you very much. But why 0:08:20.360 --> 0:08:22.760 would that cause additional expenses? 0:08:22.960 --> 0:08:25.880 Well, just sheer time. I mean what can be controllable, 0:08:26.080 --> 0:08:29.800 certainly the land news process. Before representing the BTA, I 0:08:29.880 --> 0:08:31.760 was a New York City Council member, so I served 0:08:31.760 --> 0:08:35.200 for nine years, and a quick case by the time 0:08:35.240 --> 0:08:37.760 it goes through the local community board, the borough President's 0:08:37.800 --> 0:08:41.319 office and then comes to the council with the best lobbyists, 0:08:41.520 --> 0:08:45.320 happens within two years. And so if the mayor could 0:08:45.360 --> 0:08:48.280 get that narrowed down, and the council speaker is also 0:08:48.360 --> 0:08:51.480 pledging to reduce the time to a window of less 0:08:51.520 --> 0:08:55.280 than six months, that's twenty five percent of the average, 0:08:55.440 --> 0:08:59.360 and so that's significant time saved. That's something that we 0:08:59.400 --> 0:09:01.679 should be able to control, and if our government leaders 0:09:01.720 --> 0:09:03.319 want to control it, that's real reform. 0:09:03.440 --> 0:09:06.000 I'm not surprised at all to hear about like delays 0:09:06.040 --> 0:09:09.000 a particularly environmental review. People like talk about this. Let's 0:09:09.040 --> 0:09:11.120 actually talk about it a little bit more grainuarly. Like, so, 0:09:11.240 --> 0:09:13.679 like you get like some projects that you want to 0:09:13.679 --> 0:09:16.120 do I don't know, maybe something with a highway or 0:09:16.160 --> 0:09:18.800 something like that, and you have some time frame or 0:09:18.800 --> 0:09:20.840 some window that you think like you could get this done, 0:09:21.440 --> 0:09:24.240 and then we always hear, oh, delays, Right, what drives 0:09:24.240 --> 0:09:27.280 the delays, who intervenes, and what are the processes by which, 0:09:27.480 --> 0:09:29.679 like these calendars get very extended. 0:09:29.960 --> 0:09:34.000 There could be design errors or omissions in the bid documents. Okay, 0:09:34.200 --> 0:09:37.880 so when you actually go out to commence construction and 0:09:38.640 --> 0:09:41.240 do your preliminary work, the drawings don't match up with 0:09:41.320 --> 0:09:44.760 actual field conditions, which then result in changes to the 0:09:44.800 --> 0:09:47.880 contract and that process can be very lengthy. So now 0:09:47.960 --> 0:09:51.800 you have to document the changes. Then as a contractor 0:09:51.840 --> 0:09:54.520 with one of the public agencies, need to negotiate those 0:09:54.640 --> 0:09:57.800 changes then get it approved. Depending on what the agency is, 0:09:57.800 --> 0:09:59.760 it could be with the Controller's office in the City 0:09:59.800 --> 0:10:02.200 of New York, or if it's at the MTA with 0:10:02.280 --> 0:10:05.440 the board or whoever approves it at the MTA, and 0:10:05.559 --> 0:10:10.880 all those steps take time. While those delays are being incurred, 0:10:11.520 --> 0:10:16.400 contractors are then experiencing indirect overhead costs that are assigned 0:10:16.400 --> 0:10:18.960 to the project. Well, no productive work explain it. 0:10:19.000 --> 0:10:20.360 What are these indirect overhead cost? 0:10:20.400 --> 0:10:26.679 Project managers, projects, supervision, safety directors, quality assurance personnel. 0:10:26.679 --> 0:10:29.680 So their salaries and their fees continue to run. 0:10:29.920 --> 0:10:32.679 You can't reassign them to another project while they're waiting. 0:10:32.800 --> 0:10:35.160 Correct, they're assigned to a project. You don't know when 0:10:35.720 --> 0:10:38.680 those processes will come to an end, so it could 0:10:38.679 --> 0:10:41.560 go very expeditiously, it could be delayed longer, depending on 0:10:41.600 --> 0:10:45.319 how complex the changes are. So that project staff sits 0:10:45.360 --> 0:10:51.560 there in theory underutilized, and then, as is our contractual right, 0:10:51.720 --> 0:10:55.200 we will file a claim with that contracting agency for 0:10:55.240 --> 0:10:58.160 those additional costs coupled with that and I don't know 0:10:58.200 --> 0:11:01.560 how these costs are calculated. The agent see internally also 0:11:01.679 --> 0:11:04.920 has those same costs for the people on those projects, 0:11:05.440 --> 0:11:09.359 whether in house staff or through third party consultants, accombination 0:11:09.440 --> 0:11:13.520 of the two. So those costs all get compounded while 0:11:13.559 --> 0:11:14.640 these changes happened. 0:11:14.720 --> 0:11:16.839 And what are the last projects I've funded as a 0:11:16.880 --> 0:11:20.720 council member was to pay for turf in a park 0:11:20.880 --> 0:11:25.240 like just like a running athletic field replacement, simple replacement. 0:11:25.280 --> 0:11:27.480 It was funded fully in the budget. I left the 0:11:27.520 --> 0:11:30.840 council in twenty seventeen. They only cut the ribbon on 0:11:30.880 --> 0:11:34.439 that project being fully completed just in twenty twenty four. 0:11:34.760 --> 0:11:37.040 So what happened to those sing like, what are these 0:11:37.040 --> 0:11:39.319 studying by the turf? You stick it on? 0:11:40.840 --> 0:11:41.320 What happened? 0:11:41.360 --> 0:11:43.320 The Parks Department said it was going to be a 0:11:43.400 --> 0:11:47.719 four million dollar field replacement. Then the contractor came out 0:11:47.760 --> 0:11:50.400 to the site. There was a lot of surface repair 0:11:50.480 --> 0:11:55.600 underneath that needed to happen underlying, you know, just you know, 0:11:55.760 --> 0:11:58.240 uneven surface or something like that. They sent it back. 0:11:58.280 --> 0:12:01.360 I had to go back before Design Review Council. I mean, 0:12:01.800 --> 0:12:04.719 it really is something so small and so simple that 0:12:04.760 --> 0:12:06.959 shouldn't even cost as much as it does. Gets the 0:12:07.040 --> 0:12:09.840 lave a far too long, and we need real reform 0:12:10.040 --> 0:12:14.359 in city government. I believe government leaders are finally addressing 0:12:14.480 --> 0:12:17.480 this as an impediment to building abundantly. 0:12:17.600 --> 0:12:20.040 Really, yeah, so this just reminded me. This is something 0:12:20.040 --> 0:12:22.840 else I want to ask, But when you mentioned site reviews, 0:12:23.240 --> 0:12:26.840 is there something unique or sort of inherent about the 0:12:26.880 --> 0:12:29.200 way New York City is laid out and built and 0:12:29.280 --> 0:12:32.600 its geography that also makes it more expensive. I'm thinking 0:12:32.640 --> 0:12:35.840 like in Manhattan, obviously we have crowded buildings. Is some 0:12:35.880 --> 0:12:38.400 of Manhattan on reclaimed land? I can't remember now. 0:12:38.600 --> 0:12:40.960 Well, Battery Park cities all reclaim land there. 0:12:40.840 --> 0:12:44.280 We go reclaim land and it's mostly an island with 0:12:44.520 --> 0:12:47.480 few ins and outs, right, So I imagine there are some 0:12:47.520 --> 0:12:50.040 restrictions on how much material you can actually get into 0:12:50.040 --> 0:12:53.280 the city. Does just the physicality of the city make 0:12:53.320 --> 0:12:54.040 it more expensive? 0:12:54.120 --> 0:12:56.960 Yeah, all that's built into the contract costs. So when 0:12:57.160 --> 0:13:00.559 we're getting vendor quotes for different types of materials that 0:13:00.600 --> 0:13:04.959 will go into a construction project, most of the manufacturing 0:13:05.000 --> 0:13:07.760 base is not within the Five boroughs, right, So it's 0:13:07.760 --> 0:13:11.160 coming either from upstate out on Long Island, New Jersey, 0:13:11.240 --> 0:13:15.319 maybe Pennsylvania, Southern New Jersey. You have the cost of 0:13:15.360 --> 0:13:19.679 that transportation into the Five boroughs, right. So this if 0:13:19.720 --> 0:13:23.040 you're a vendor who's manufacturing somewhere in Central Jersey, well 0:13:23.640 --> 0:13:27.040 you probably can make multiple deliveries within the state of 0:13:27.040 --> 0:13:31.280 New Jersey, where maybe that same freight carrier can only 0:13:31.360 --> 0:13:34.439 make one delivery a day into the five boroughs. 0:13:34.640 --> 0:13:37.160 By the way, Ken Burns's brother, he made a great 0:13:37.200 --> 0:13:39.440 documentary about New York. It's like a ten hour eleven 0:13:39.440 --> 0:13:43.240 hour documentary. And there's a whole section on the speed 0:13:43.400 --> 0:13:47.800 with which steel got from the Bethlehem steel Mill to 0:13:47.920 --> 0:13:50.560 build the Chrysler building or something like that. Is just 0:13:50.600 --> 0:13:54.000 an unbelievable logistics I imagine it would be a little 0:13:54.000 --> 0:14:13.360 bit slower today. Let's get to insurance and all of 0:14:13.360 --> 0:14:16.520 that stuff. You even brought us a nice report material 0:14:16.640 --> 0:14:20.480 scaffold Law Economic Impact, which evidently, even though on the 0:14:20.520 --> 0:14:22.640 cover of the report has a picture of a scaffold, 0:14:22.840 --> 0:14:24.960 is not about scaffold. 0:14:24.480 --> 0:14:26.440 Not just about skefla, not about. 0:14:26.280 --> 0:14:29.440 Scaffold per se per se. But what is the scaffold 0:14:29.520 --> 0:14:32.240 law and why is this like an important priority of yours? 0:14:32.240 --> 0:14:35.880 Well, look, if a worker was to fall off the scaffold, 0:14:35.960 --> 0:14:38.520 then the scaffold law would apply, and it's to any 0:14:38.680 --> 0:14:42.840 height related injury. A New York contractor, New York City 0:14:42.880 --> 0:14:46.360 contractor is held one hundred percent liable and in forty 0:14:46.440 --> 0:14:51.560 nine other states, it's comparable negligence. So what we found 0:14:51.560 --> 0:14:55.520 through that economic impact study was that every hundred million 0:14:55.600 --> 0:14:59.840 dollars that is wasted on frivolous claims, when you look 0:14:59.880 --> 0:15:02.440 at reinvesting that into the economy, that's one hundred and 0:15:02.480 --> 0:15:06.640 forty million dollar output, and that amounts to about fifty 0:15:06.680 --> 0:15:09.520 five million dollars in wages and over six hundred jobs. 0:15:09.600 --> 0:15:12.520 And we look at big projects like the President wants 0:15:12.560 --> 0:15:15.960 to build Penn Station that's estimated to be seven billion 0:15:16.040 --> 0:15:19.240 dollars in cost. If we were to put comparative negligence 0:15:19.440 --> 0:15:23.200 on that project, we could save over five hundred million dollars. 0:15:23.240 --> 0:15:24.600 That's half a billion dollars. 0:15:25.120 --> 0:15:29.160 So just so we understand the difference between comparative negligence 0:15:29.240 --> 0:15:32.400 and absolute liability. So if I'm a construction worker working 0:15:32.720 --> 0:15:35.840 on a skyrise or something and I am not wearing 0:15:35.840 --> 0:15:38.280 my helmet and I fall off a sixty story building, 0:15:38.280 --> 0:15:41.040 I would be dead. But let's assume that I get injured. 0:15:41.760 --> 0:15:45.400 I would probably be dead, all right, three story building, yeah, okay, 0:15:45.560 --> 0:15:47.680 one story okay, But I'm not wearing my helmet, even 0:15:47.680 --> 0:15:50.480 though my employer says I should be wearing a helmet. 0:15:50.600 --> 0:15:55.480 And then I, you know, file acclaim. The absolute liability 0:15:56.280 --> 0:16:00.920 rule basically says that you can't divide blood between the 0:16:00.920 --> 0:16:03.280 company and the worker. Is that right? So instead of 0:16:03.280 --> 0:16:05.520 being ninety percent at fault for my own injury because 0:16:05.520 --> 0:16:08.000 I wasn't wearing a helmet and I got a head injury, 0:16:08.360 --> 0:16:10.720 the company is now one hundred percent at fault. 0:16:10.920 --> 0:16:14.920 That's absolutely right. And in other states they do comparative 0:16:14.920 --> 0:16:18.720 netligence and it's really driving up the cost of insurance 0:16:18.800 --> 0:16:21.440 so much so that insurance don't even want to write 0:16:21.480 --> 0:16:22.960 insurance in New York anymore. 0:16:23.120 --> 0:16:24.120 The market's limited. 0:16:24.240 --> 0:16:26.560 It tell us about the insurance market for you, because 0:16:26.560 --> 0:16:27.560 this is a good thing for us. 0:16:27.600 --> 0:16:32.280 So I mean, there's zero purchasing power. Contractors make a 0:16:32.320 --> 0:16:37.320 significant investment in safety. I promise you there's nothing more 0:16:37.360 --> 0:16:41.120 important to the contracting community than for every employee to 0:16:41.160 --> 0:16:44.040 go home safe to their family, loved ones, or whoever 0:16:44.040 --> 0:16:45.920 that may be. At the end of the day. I 0:16:45.960 --> 0:16:50.200 know everybody cares about that. But when we go to 0:16:50.440 --> 0:16:54.600 renew our insurance every year, and the large insurance carriers 0:16:54.880 --> 0:17:00.680 look at what this market for them is considered or 0:17:00.800 --> 0:17:04.320 the least favorable market to write insurance. So much so 0:17:04.400 --> 0:17:06.960 that carriers don't even want to write insurance in this 0:17:07.040 --> 0:17:10.760 market anymore, and if they do, deductibles are really high. 0:17:11.680 --> 0:17:15.480 Rates are really high, So on a percentage base of revenue, 0:17:16.119 --> 0:17:21.439 we're talking about five, six, ten x other states with 0:17:21.600 --> 0:17:25.560 much higher deductibles. So now contractors carry the cost of 0:17:25.600 --> 0:17:29.360 those deductible payouts in their bids, which goes into these 0:17:29.359 --> 0:17:33.920 public work bid numbers. So that's where you exponentially see 0:17:34.000 --> 0:17:38.040 the higher cost of construction. But it actually take it 0:17:38.040 --> 0:17:42.240 a step further. All the subcontractors and vendors that are 0:17:42.240 --> 0:17:44.399 going to be working on our jobs also have the 0:17:44.440 --> 0:17:50.800 same problem. And typically the subcontractors are smaller contractors by 0:17:50.840 --> 0:17:54.480 either volume or revenue or employees, so they're typically paying 0:17:54.480 --> 0:17:58.439 a higher premium on a percentage basis. So those numbers 0:17:58.440 --> 0:18:01.400 are also baked into our contract pricing. 0:18:01.640 --> 0:18:05.919 Yeah, our report really when we say contractors in New 0:18:06.000 --> 0:18:10.160 York are paying ten percent of total construction costs to insurance, 0:18:10.480 --> 0:18:12.840 that's five hundred percent more than other states, when in 0:18:12.840 --> 0:18:15.439 other states it's only about two percent. And then Michael 0:18:15.480 --> 0:18:19.040 mentioned the subcontractor. They get hit the worst on average, 0:18:19.160 --> 0:18:23.320 if you were a concrete subcontractor or a steel painting 0:18:23.440 --> 0:18:27.520 contractor you're paying fifteen to twenty percent your total volume 0:18:27.760 --> 0:18:29.440 of work, and it's unsustainable. 0:18:29.680 --> 0:18:33.200 So New York is the only city or only state city, 0:18:33.359 --> 0:18:35.840 state that still has this long place. Is that right? 0:18:35.960 --> 0:18:36.080 Yes? 0:18:36.520 --> 0:18:39.720 What happened in other states when we saw it go away. 0:18:39.960 --> 0:18:43.760 So the last state to reform the so called scaffol 0:18:43.800 --> 0:18:48.480 law absolute liability standard was Illinois in nineteen ninety five. 0:18:48.880 --> 0:18:51.640 So this is one hundred and forty year old law. 0:18:52.280 --> 0:18:56.720 It's antiquated, it's broken policy. Even both the Democrats and 0:18:56.760 --> 0:18:59.680 the Republicans when you speak to them one on one, 0:19:00.000 --> 0:19:04.360 they know this is bail policy. An interesting thing Illinois, 0:19:04.720 --> 0:19:09.359 the number of fatalities declined after they put a comparative 0:19:09.359 --> 0:19:13.040 negligence model in. So those that say it's you know, 0:19:13.080 --> 0:19:16.320 you have some trial lawyers, then there really it is 0:19:16.520 --> 0:19:19.720 a cash count for the trial. Why I mean that was. 0:19:19.720 --> 0:19:21.800 Gonna be my next question. So if everyone agrees that 0:19:21.840 --> 0:19:24.840 this is an antiquated law, who's actually standing in the way. 0:19:24.920 --> 0:19:27.520 You're definitely going to get any email after this episode 0:19:27.680 --> 0:19:30.200 and they're like, your guests are totally biased. There's gonna 0:19:30.200 --> 0:19:32.679 be from some lawyer and they're like, come on and 0:19:32.760 --> 0:19:36.359 do a follow up, But this raised the question, Okay, 0:19:36.400 --> 0:19:39.280 the law has been around for over one hundred years, 0:19:39.800 --> 0:19:42.240 so why not. I mean, like I can understand that 0:19:42.240 --> 0:19:44.560 that might raise Yes, Okay, New York is going to 0:19:44.640 --> 0:19:48.000 be a higher cost state. That doesn't explain the surge 0:19:48.040 --> 0:19:50.960 per se. Has something changed in the last five, ten, 0:19:51.480 --> 0:19:53.280 twenty eight years. I mean New York used to do 0:19:53.320 --> 0:19:55.000 a lot more building, or used to build a lot. 0:19:55.119 --> 0:19:58.200 Has something changed such that the law has more teeth 0:19:58.320 --> 0:19:59.200 or bites more. 0:19:59.040 --> 0:19:59.399 Than it did? 0:19:59.480 --> 0:20:02.439 I mean, and you talk about the disappearance of certain 0:20:02.480 --> 0:20:03.480 insurance carriers. 0:20:04.119 --> 0:20:05.600 The law existed fifty years ago. 0:20:05.520 --> 0:20:08.360 Right right when I was first started my business. Yeah, 0:20:08.359 --> 0:20:11.800 a little over thirty years ago. You know, insurance was 0:20:11.840 --> 0:20:14.280 an add on the bid where you didn't really focus 0:20:14.320 --> 0:20:16.919 about it. We're talking about one two percent of the 0:20:16.960 --> 0:20:20.760 contract price, and that held true maybe up until even 0:20:20.840 --> 0:20:24.040 ten years ago. And in the last ten years we've 0:20:24.040 --> 0:20:28.880 seen a significant rise in the cost of insurance. And 0:20:29.720 --> 0:20:35.639 I think it directly correlates with frequency of claims, third 0:20:35.640 --> 0:20:39.560 party claims, payouts of those claims, and how either a 0:20:39.640 --> 0:20:44.800 judge or jury awards damages in those cases. There's been 0:20:45.600 --> 0:20:50.080 well documented cases of staged construction accidents on sites. 0:20:50.280 --> 0:20:53.359 What Michael said is absolutely true. In New York for 0:20:53.480 --> 0:20:57.920 scaffold laws, the bodily injury claimed settlements for scaffolows six 0:20:57.920 --> 0:21:01.080 and a half times the average of other claim settlements. 0:21:01.520 --> 0:21:06.200 The sheer volume has been increased by tenfolds. We're talking 0:21:06.200 --> 0:21:09.800 about in fifteen years. And that's why these insurers are leaving. 0:21:10.119 --> 0:21:12.359 You know why, Now, why do we think we have 0:21:12.440 --> 0:21:15.480 a real opportunity, Not just because we have this economic 0:21:15.520 --> 0:21:19.120 impact report that shows is exactly how much we're spending. 0:21:19.440 --> 0:21:23.240 Because government leaders are finally talking about the fraud and 0:21:23.280 --> 0:21:26.320 abuse that's happening. Our governor and her state of the 0:21:26.359 --> 0:21:31.240 state a last month called on insurance reform for the 0:21:31.280 --> 0:21:34.720 automobile industry. Now half of the consumers in the state 0:21:34.840 --> 0:21:38.520 are car owners. Right, they're driving. They could relate to 0:21:38.760 --> 0:21:41.639 us paying so much more. But we're paying fifty percent 0:21:41.720 --> 0:21:44.439