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August 2026 |  Issue 16

Recent Tariffs Increase Construction Costs and Contract Risk

Recent federal tariffs continue to increase material costs and pricing uncertainty for the construction industry. Tariffs on steel, aluminum and copper can affect structural steel, metal roofing, HVAC equipment, electrical components, fasteners and construction machinery. Even contractors purchasing domestically manufactured products may see increases as manufacturers and distributors adjust prices, shorten quote periods and add tariff-related surcharges.

The most recent development involves a new 50% tariff on specified Canadian imports scheduled to take effect on August 19, 2026. The covered products include construction materials such as cement, paint, plywood and fiber cable. Contractors that rely on Canadian materials may face direct price increases, but the broader market impact could extend to competing domestic products and projects that do not directly use Canadian imports.

Contractors should not assume that tariffs automatically entitle them to additional compensation or time. Recovery will depend on the contract’s price-escalation, change-in-law, force majeure and notice provisions. Contractors should document supplier increases, provide timely notice, confirm whether bids include potential tariffs and negotiate specific relief for future governmental trade actions.

 Takeaway: Tariffs have become a contract-administration issue. Contractors should identify tariff exposure before bidding, preserve supplier documentation and negotiate clear price and schedule protections. Without appropriate contract language, the contractor may bear the increased cost.

Case Law Update

Contractor Waives Claim by Failing to Give Timely Notice

Arnell Construction Corp. v. New York City School Construction Authority, 249 A.D.3d 657 (2d Dep’t May 2026).

Brief Facts

Arnell Construction sought approximately $2.44 million in compensation for allegedly unpaid change-order work performed on a renovation project for the New York City School Construction Authority. The contractor submitted a notice of claim in January 2021 and later commenced an action for breach of contract. The SCA moved to dismiss the action because the contractor had not timely satisfied the applicable notice-of-claim requirement.

Holding

The court affirmed the dismissal of the contractor’s breach-of-contract claim. Under New York Public Authorities Law § 1744(2), a contractor must present a notice of claim to the SCA within three months after the claim accrues.

A contractor’s claim generally accrues when its damages become ascertainable. Depending on the circumstances, that may occur when the contractor substantially completes its work or submits a sufficiently detailed invoice identifying the work performed and the amount owed.

The court found that Arnell Construction served its January 2021 notice of claim more than three months after its claim had accrued. The contractor therefore failed to satisfy a statutory condition precedent to maintaining the lawsuit.

The court also rejected the contractor’s waiver argument. Mere acknowledgment or consideration of a late claim does not excuse a contractor’s failure to comply with the statutory deadline.

 Takeaway: Contractors performing public work must separately track statutory claim deadlines, even when change orders remain under review or the owner continues discussing payment. Ongoing negotiations, correspondence, or administrative review may not extend the deadline or establish waiver. Contractors should identify when damages become ascertainable, provide the required verified notice immediately, and avoid relying solely on contractual change-order procedures.

Daily Report Presumption Provision

Background

Daily reports often become critical evidence when a project dispute arises. They may document manpower, work performed, delays, and directives from the owner or design professional. However, daily reports frequently become contested months or years later, particularly when one party claims that the reports were inaccurate, incomplete or self-serving.

A daily report presumption provision encourages the parties to review project records while the events remain fresh. If the receiving party does not object within a stated period, the report becomes presumptively accurate. The provision does not make the report conclusive, but it shifts the burden to the party challenging it and discourages late disputes over routine project documentation.

Contract Provision

Daily Reports and Project Records. Contractor may prepare and distribute daily reports documenting labor, manpower, equipment, materials, deliveries, weather, site conditions, inspections, work performed, delays, disruptions, directives and other material project events. Each daily report shall be deemed presumptively accurate unless Owner provides Contractor with a specific written objection identifying the disputed information within five business days after receipt. A general objection or reservation of rights shall not be sufficient. Failure to timely object shall not make the report conclusive, but the report shall constitute prima facie evidence of the matters stated therein. The parties may rely on daily reports, photographs, time records, delivery tickets, equipment logs and similar contemporaneous records in evaluating claims for additional time or compensation.

Community opposition has become a material risk for many large construction projects. Data centers, manufacturing plants, multifamily developments and major infrastructure projects increasingly face public concerns regarding traffic, environmental impacts and changes to surrounding neighborhoods. These concerns can affect zoning approvals, permits, utility commitments and project financing long before construction begins.

Recent data center development illustrates the issue. Communities across the country have challenged proposed projects based on their anticipated demand for electricity and water, construction traffic, generator noise and proximity to residential areas. In some jurisdictions, local governments have considered or adopted temporary moratoriums while they evaluate zoning and infrastructure requirements. Other projects have experienced rezoning disputes, litigation or additional conditions imposed during the approval process.

For contractors, community opposition may appear to be an owner or developer problem. However, it can quickly become a construction problem. Public resistance may delay permits, prevent the issuance of a notice to proceed, restrict working hours, and alter site-access plans. Contractors may also face enhanced reporting requirements, additional inspections or commitments made by the owner during public hearings.

These developments can create substantial costs and schedule consequences. A delayed zoning or environmental approval may postpone mobilization while labor, equipment and material commitments remain in place. New permit conditions may require redesign, additional scopes of work or different construction sequencing. Limits on construction hours may reduce productivity, while expanded traffic-control obligations may require additional personnel and equipment. A utility may also condition service on expensive system upgrades or delay energization until infrastructure improvements are completed.

Contractors should determine which party bears these risks before signing the agreement. The owner should generally remain responsible for obtaining zoning approvals, land-use entitlements, easements and permits that depend on ownership of the property or the proposed use of the facility. The contract should also address responsibility for community commitments, utility upgrades and conditions imposed after the contractor submits its price.

A contractor should avoid agreeing to comply broadly with all “community requirements” without knowing what those requirements

include. Commitments made by an owner during zoning hearings, development negotiations or public meetings may exceed ordinary code requirements. For example, an owner may agree to limited work hours, designated haul routes, noise monitoring, local hiring goals or infrastructure improvements. Those commitments should be disclosed before bidding and incorporated into the contractor’s scope only when the price and schedule account for them.

The contract should provide additional time and compensation when community opposition or governmental review delays approvals or creates new requirements that the contractor could not reasonably anticipate. Contractors should also preserve their rights through prompt written notice. Even when the owner acknowledges the underlying issue, failure to comply with contractual notice requirements may impair a later request for additional compensation.

Owners and developers may use community benefits agreements to address concerns before construction begins. These agreements can include commitments involving workforce opportunities, infrastructure improvements, environmental mitigation and ongoing communication. In exchange, participating community organizations may agree to support or refrain from opposing the project. The U.S. Department of Energy recognizes community benefit agreements as voluntary mechanisms through which developers may provide financial and nonfinancial benefits to affected communities. Their effectiveness depends on clear obligations and meaningful participation by relevant stakeholders.

Contractors should request copies of any community benefits agreement, development agreement, zoning condition or public commitment that may affect construction. They should also identify a single owner representative authorized to communicate with public officials and community groups. Contractors should generally avoid making independent promises concerning project operations, employment, traffic or environmental performance unless the owner specifically authorizes those commitments.

 Takeaway: Community opposition can affect far more than project approval. It can change the contractor’s scope, restrict productivity, delay utility service and create additional cost. Contractors should identify community-related conditions before bidding, confirm that the owner retains responsibility for project entitlements and obtain clear time and cost relief when public review or new governmental requirements affect the work.

Upcoming Speaking Engagements & Events

• Clemson University, Roofing Class, Clemson, South Carolina, August 26-27

• FRSA Board and Committee Meetings, September 2-4, Palm Coast, FL