Construction Auditing

3 Current Trends in Construction Auditing

Curt Plyler, CFA, CCA, Principal

Three Current Trends in Construction Auditing

As we enter (hopefully) a post-COVID world, construction auditing is not immune from issues
facing the wider world at large. More specifically, supply chain issues are significantly
impacting the cost of construction materials. Additionally, the Great Resignation has increased
the competition for workers. Finally, certain regions of the country have been booming,
leading construction firms to be in high demand. These three trends are discussed in more
detail below:

Materials’ cost escalations

While subcontracts are often fixed price agreements, the rapid increase in materials’ costs is driving many

subcontractors to seek change orders for this escalation. In many instances, the subcontractors are using

project delays as their justification why a reset is needed. Fort Hill has received several requests to review

materials’ cost escalation claims. A third-party auditor provides an “arms-length” way to give both sides

comfort that the request is justified and rational.

Increasing labor costs

In an effort to recruit and retain employees, construction firms are increasing wages and/or benefits.

While raises are the most common way to increase compensation, many firms are offering better overall

packages. Living and vehicle allowances are being provided for the first time, or increased, to selected

employees. These allowances should be validated at selected intervals over the course of a long project,

as they are easy to withdraw or reduce if the economic environment changes.

Increased leverage for construction firms

Fort Hill is based in the southeastern United States. Some of the larger markets in the region have

had strong economic performance coming out of COVID, and the construction firms are in demand.

As a result, there is upward pressure on General Conditions budgets, fees, insurance rates, etc. Owners

utilizing a construction audit firm to evaluate these items for an upcoming project may find construction

firms less willing to provide appropriate access to these costs, realizing they have the upper hand at the

moment in contractual negotiations.