This is Special Agent Regal, Special Agent Bradley Hall.
The time is approximately 11.15 a.m. about the start,
“consensual telephone call with Dr. Diwasang.”
China's Ministry of State Security is one of the most mysterious and powerful spy agencies in the world, but in 2017, the FBI got inside. "Wait?" "That's a notion, you know." "Hey, you ought to keep it on your elbow, I use it."
"I've never seen that much evidence in my entire career and I don't think we'll ever see that much evidence again."
"I now have several terabytes of an MSS officer, no doubt, no question of his life." "And that's the Unicorn." This is a story of the inner workings of the MSS, and how one man's ambition and mistakes open its vault of secrets. Listen to the sixth bureau from Bloomberg Podcasts, starting on February 13th on the
I-Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Bloomberg audio studios podcasts, radio, news.
“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, there's various costs involved, but one is just the cost of construction. And if the cost of construction is very high, it's hard to imagine affordability improving much on anything.
"Yes, absolutely, I can't really debate that point, but it just seems like construction is this like one area where so many different things come into place, 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
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, is it interest rates go high there?"
"Yeah, I forgot financing, that's it." "It's a big bucket." "It's a big bucket, and like we know the construction is an area across the economy, not just in New York City, where we talked about it with residential housing, there's a bit of 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, yeah." "We don't have robots building houses yet." So I don't know, I think we need to learn more, you know, and sometimes you see these
viral statistics, they're like, "Oh, the MTA spent $60 million on building an elevator or
cost $3 million to build it." "No, $7 million installing those plastic fins on the subway turn styles. I'm not even sure that qualifies as construction, but $7 million." "I'm really interested to build a bathroom, which is not fun if, like, you have little kids.
All kinds of things, anyway, we should do more about why I cost 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, a 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 and players 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 AdLots.
"Thank you for having us." "Yeah, thank you, Joan Tracy, we are grateful for the opportunity to talk today. I represent over 1,200 contractors in the BTEA who are building our skyscrapers, our subways,
building commercial buildings, hospitals, schools, about $65 billion worth of work annually."
"And I want to tell us about CAC Industries, what's your background, Michael?" CAC is a public works heavy highway contractor based in New York City in Queens. We work for the public agencies, Port Authority of New York, Department of Design and Construction, Department of Environmental Protection, MTA, Maysbury Park City.
"Did you see the high line as well?
"Yes." "That's amazing." "I do some research before I come on this podcast. I know a lot of people don't think so, but 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 a 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 where a business association and our members are employing over 100,000 workers and we're proud that we're union contractors.
You know, we're the good guys, that 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, you know, the costs, the hidden costs that go into the construction, such as construction insurance."
"I definitely want to talk about construction insurance and all this stuff, but again, just on this point of like how much is, quote, hidden costs versus how much is just labor. Maybe Michael, you could 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 components,
specifically versus measuring these, 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, that 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 of the state prevailing wage laws, which the unions rates are in line with labor
“law to 20, which are in the city contracts, so the wages and benefits, you have to be”
the employee, 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, cut corners who don't pay that fair market rate, which is where that kind of concept comes from.
And there's a lot of cost to the delays, and we'll look at our government leaders now.
We have a new mayor in the city of New York who believes that we should pay baristas for $40 an hour. So when mine talks about the cost of union labor, it's not much more, and I will be right in these are inherently dangerous jobs. But we have a mayor that wants to build more abundantly, I want 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 as far as our lining also with the governor, she has ambitious plan to build a new subway or railway from Brooklyn to Queens. We haven't built like that in like over a hundred 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% of construction costs are wasted in New Work as opposed to any other state, even expensive states like California, the cost of insurance is only about 2% for the total project cost. Well, we're spending upwards of 10, 12% definitely want to talk about insurance, but you
said something interesting there that just reminded me, you said delays to the cost, yeah,
“I sure 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 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 BTA,
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 borrow 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 narrow down, and the council speaker is also pledging
To reduce the time to a window of less than six months, that's a 25% of the a...
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, that's real reform. I'm not surprised at all to hear about delays, particularly environmental review, people like talk about this.
Let's actually talk about a little bit more granular, so like you get like some project that you want to do. I don't know, maybe something with a highway or something like that. 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. Okay. 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 our process can be very lengthy, so now we've to document the changes, then as a
contractor with one of the public agencies need to negotiate those changes, then get it approved, depending on what the agency as it could be with the controllers 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, well, no productive
work. Explain that.
The project manager is project supervision, safety directors, quality assurance personnel.
So their salary is in 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 under utilized, 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 while these changes happen. And what did 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 to those symbols? Like what are these stuff? By the turf, you stick on the ground to how would you just start what happened to them.
The part of the performance that it was going to be a $4 million field replacement, then
the contractory came out to the site. There was a lot of surface repair underneath that need to happen, underlying just uneven surface or something like that. They sent it back. I had to go back before a design review council.
Really, it's something so small and so simple that you can even cost as much as it does gets the labor far too long and we need real reform.
“And 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.
If 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 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 is a 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.
Imagine it would be a little bit slower today. Hello, I'm Stephen Carroll.
“I'm in Brussels where many of Europe's biggest decisions get made.”
And I'm Caroline Hepkin in London with the hosts of the Bluebeek Day Break York podcast. We're a barely every week day keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now.
And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break. So whether it's geopolitics, energy, tackle markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning.
You can find new episodes of the Bloomberg Day Break Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple Spotify, YouTube or wherever you get your podcasts. For decades, people traveled across the world to see John of God. Desperate for Cures, no doctor could offer.
And when they arrived, they saw things they couldn't explain. This is real, this guy's actually doing surgery and it's a miracle.
I never believe that miracle's real into that point.
But behind those adoring crowds was something much darker. One of the reasons why I never went to the police is because I saw at least five or six men with guns everywhere he went. There was clear to me like, close your mouth, open your mouth and say anything. I'm your host, Martina Castro, and in the podcast two-faced, John of God.
We'll look back on a man who claimed he could perform miracles and got people from all around the world to believe him, from exactly right and Adon de Media. This is two-faced, John of God. Listen on the iHeart Radio 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. Read material. Scalfload law, economic impact, which evidently even know on the cover of the report has a picture of it's scaffold, is not about scaffolding. Not just about scaffolding, but about scaffolding per se.
Per se.
“Well, what is the scaffold law and why is this like an important priority of yours?”
Well, 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 in 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 hundred million dollars
that is wasted on frivolous claims. When you look at reinvesting that into the economy, there's a hundred and forty million dollar output. And that amounts to about fifty five million dollars in wages and over six hundred jobs. And we look at big projects like the President wants to build a pen station that's estimated
to be seven billion dollars in cost. If we would have put comparative negligence on that project, we could save over five hundred million dollars, it's half a billion dollars. So just so we understand the difference between comparative negligence and absolute liabilities. 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. I would probably be dead if we were to. All right, a three-story building, yeah, okay. One story. Okay, 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 percent of fault for my own injury,
because I wasn't wearing a helmet, and I got a head injury, the company is now 100 percent of 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 markets limited. It tells 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 ...
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, I report really, when we say
“contractors in New York or paying 10% of total construction costs in insurance, that's 500%”
more than other states. When other states is only about 2% and then at Michael mentioned the subcontractor, they get hit the worst on average. If you are a concrete subcontractor or steel painting contractor, you're paying 15% to 20% total volume of work and it's unsustainable. So New York is the only city or only state, city of state that still has this long places, 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 fell policy. And the interesting thing, Illinois, the number of fatalities declined after they put a comparative negligence model. So those that say, it's, you know, you have some trial lawyers and they really, it is a catch count for the trial far. I mean,
that was going to be my next question. So if everyone agrees that this is an antiquated law, who's actually standing in the way. We're definitely going to get into the email after this episode and they're like, your guests are totally biased. It's going to be for some lawyer and they're like, we'll come on and do a follow-up. But this raised the question, okay, the law has been around for over a hundred years. So why not? I mean, like, I can understand that that might raise, yes,
okay, New York is going to be a higher cost state. That doesn't explain the surge per se. Has something changed in the last five, 10, 20 years? I mean, 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 log existed 50 years ago, right? Right. When I was first started my business, yeah,
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 doing about one two percent 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 Mike has said is absolutely true. In New York for scuffle laws, the bodily entry claim settlements for scuffle laws six and a half times the average of other claim settlements. The sheer volume has been increased by 10 fold. 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, a 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 a 50 percent more in
car insurance compared to every other state. But our contractors are paying 500 percent more. And the governor had touched upon fraud and abuse. Just like Mike said, the governor says,
We need to address that.
auto insurance claims that are much, much less than scuffle 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 movements 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 a 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, tradesmen insurance, they filed five different re-go cases in recent years.
Probably I've heard them say that they invested over $16 million 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 are bad actors, they saved over $2 billion and the numbers keep growing. And one law firm sub-in-a-soaked 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 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 their borrowed from workers' cop cases. And so that is reassuring to see
“action happen. And we've reaching a critical mass at this point. So I think that's why”
now we're hopeful for reform. 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 addon. Okay, there's one or two percent now, it's 10 percent. 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 talked to your insurance broker. They would come back with three or four quotes all roughly the same.
Would 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 $755,750,000 now per occurrence. I mean, significant, significant changes. We're 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 accident, so you have limited insurers to actually choose from, which means they now have all the pricing power. 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 Zurich, which is a worldwide
insurer and they stopped ensuring small contractors and they'll only do a 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 of the things 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.
Then they would have to buy job specific or site specific policies, which are...
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-cost 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 her and her budget, auto insurance, you know, we mentioned the trial lawyers and how this is really a catch count for them. But, you know, they'd like to paint the insurance companies as the bad actors, but we've looked in places like Florida, for example, they had a similar no-fold auto insurance policy like New York currently has and they changed the policies there and they've given ratepayers double-judged refunds. So there is this situation, it's narrow,
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 sub-way 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 whole tide 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 okay falling six inches, but then some injury arises months later and ends up in a lawyer's desk and the contractors then sued, they'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. If there was a big rent button that would just demolish the internet, I would smash that button with my forehead. From the BBC, this is the interface, the show that explores how tech is rewiring your week and your world. This isn't about quarterly earnings or about tech reviews. It's about what technology is actually doing to your work, your politics, your everyday life, and all the bizarre ways people are using the internet.
Listen on BBC.com or wherever you get your podcasts. And when they arrived, they saw things they couldn't explain.
This is real, this guy's actually doing surgery and it's a miracle. I never believe that
miracle's real until that point. But behind those adoring crowds was something much darker. One of the reasons why I never went to the police is because I saw at least five or six men with guns everywhere he went. There was clear to me like close your mouth, the open your mouth will say anything. I'm your host Martina Castro and in the podcast two-faced, John of God. We'll look back on a man who claimed he could perform miracles and got
people from all around the world to believe him. From exactly right and Adon DeMedia, this is two-faced, John of God. Listen on the iHeart Radio app, apple podcasts, or wherever you get your podcasts. I find this argument to be very compelling and the high cost of ensuring it's 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 there's 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 a cost of $60 million to build an elevator somewhere, is that real or
is that clickbait? What's going on there? I'm out on a warehouse, $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 cast 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, 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 little bit. 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 and materials and everything, but I get the impression that like build...
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. Yeah, $4 for like turf on. And you did, and I laughed before when you mentioned the skyscraper, the Chrysler building and the Bethlehem stealing, how that was probably put together in less than a year, the Empire State Building, and today we're building mega towers that were taken three,
four years. And while they're important projects and they're very expensive projects,
we were able to do it in such a short time frame back then. Of course you save money when you live reduced the time back to that track. It was in tune of a 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 the 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 market place where the low bidder, right? Typically when you get the job, which means we're the cheapest price, 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
is, 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 Chism Park, they just may or mom Domicut the ribbon, but DDC is”
pointing to that project that's coming in under budget in a short 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 strict rules and laws are in place, it would make everything much safer or safer for the worker or less injuries. There's nothing more important than safety. That's the cornerstone of the work that our contractors do. They want their workers to go home as safe as they were when they came to work that day. We're even focusing on culture on the job site and total wellness. That's important. So we need to continue to be forward thinking. But the data, the data set,
the results in New York are equal to other states. Oh, on in terms of our rate of fatalities. In fact, New York has higher rate of fatalities despite this law in comparison to state like New Jersey or the average in the country. You know, when we have nearly 12 fatalities per 100,000 workers, whereas the national average is under 10. And so we're 20% 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, 2023, this like intense scarcity of skilled tradesmen and various things, electrical, etc. How is that? Is that a big issue still a major constraint right now finding available labor? I think in aging workforce, at least I mean without 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 o...
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 with, you know, the advent of AI and all these jobs. But like for you, look 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 open. Yeah, I mean, available flow of labor is one of things that's kept me up at night since I started my business. Okay. We converted to a 100% employee on company a couple of years ago. So much so that I included the trades people, so the collectively bargained employees to 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. 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% 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, chatGPT kind of... 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 all just fault. But it came out of nowhere
for white collar workers could it come out of nowhere for blue collar? I think so. I don't think it's going to replace the workforce. Actually, it was at a construction conference a couple of weeks ago. And my biggest takeaway is AI is in replacing employees. But employees who use AI will replace the employees who aren't. Do you see that like other in your firm or are you getting value from it?
“Is anyone doing anything with like tech or anything? So is anyone using it for? We're wrong”
if we had our prof 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 what we're looking at is coming. I mean,
I've 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. Catapillar has technology, the heavy equipment manufacturer, where someone can sit, let's call it like what we grew up with a video game. Like 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 for actual catapillar machines
at four different locations, just sitting in like what I would call an arcade machine with no operator in the seat. Yeah, interestingly enough, you know, I mentioned Zurich earlier, Zurich insurance will only ensure a project in New York if they're 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
the workers to 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 live venture group doing these
coast resiliency project on the lower side of this 1.3 billion dollar 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 sites safer. Yeah,
What about, again, just about current conditions?
cost of everything served a lot immediately in the wake of the pandemic. You're getting a relief of the pace of price increases gone, slowed it 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 saying right now on just acquisition of materials? Yeah, I have not seen prices come down. Okay, you know, it's no different when there was like a fuel search charge, right? If they're the oil
market spiked and every vendor would put a fuel search charge on deliveries, somehow those
fuel search charges never go away. What about other like just other raw materials, like other things
that are 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 in coming out of COVID there”
is 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 good results. 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.
“Yeah. 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 owners reps and we'll get complaints from our contractors that owners reps are delayed to 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 about it on more than one type of project that could you know could be a school being built or a bridge being painted. Michael and Elizabeth, thank you so much for coming on Adloz. There's a lot of fun.
Thank you for having us. That was great. Thank you for having us. Thank you for having us. Tracy, that was a fun conversation. I like and felt like I learned about the city in some way. You know what I'm saying? I learned a lot about absolute liability. Yeah, absolutely liability.
“I was interested. 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. Yeah, or would you especially at a time when interest rates are high because they compound to extra. Right. And also it seems like there's a potential problem of incentives here. Right. Like if I am a consultant working on a project and I am still getting paid the projects 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 work plate. I mean, it would be one thing. I guess if like New York had like half the accident right, is the rest of the country. And then you say, okay, well, look, like you could point to
a law like this and say, this is clearly making causing everyone to take safety board 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 more or about to make an enemy on a child far. Yeah, we're going to get emails from lawyers saying we want to do a rebuttal episode. But my gut is that there's price 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 camera 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 a standard practice everywhere. It's super interesting to think like, okay, yeah, you want to have cameras because if there's an accident, then you could 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. The AI can detect it directly potentially that's interesting. And then, of course, there's going to be all these questions about surveillance
Whether people like that.
Yeah. Yeah. So it's going to come on very fast. I know I keep saying this, but we really should
“do more on insurance. We'll figure out. We're sure to do more. You know, like if we keep saying it,”
like, we are, you know, no. Yes. But even more, I agree. I agree. I agree. Show you leave it there. Yeah, let's leave it there. Okay, this has been another episode of the
All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Jill, why
isn't all you can follow me at the store where fellow or producers, Carmen Rodriguez at Carmen Armond-Dashll Bennett at Dashbot at Kalebrooks at Kalebrooks. For more odd logs content, go to bloomberg.com/odlots where the daily newsletter and all of our episodes.
You can chat about all of these topics 24/7 in our discord discord.jg/odlots.
And if you enjoy all thoughts, if you want us to do even more on insurers, then please leave us a positive review on your favorite podcast platform. And remember, if you are a bloomvark subscriber,
“you can listen to all of our episodes absolutely at free, all you need to do is find the bloomvark channel”
on Apple Podcast and follow the instructions there. Thanks for listening. , the news doesn't stop on the weekends. Context changes constantly. And now bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new bloomberg this weekend. I'm Christina Rafini. We'll bring you the latest headlines in depth analysis and big interviews.
All the stories that hit home on your days off. And I'm Lisa Mateo, watch and listen to bloomberg this weekend for thoughtful, enlightening conversations about business, lifestyle, people, and culture. On Saturday mornings, we put the past week's events into context examining what happened in the markets and the world. That on Sunday as we speak with
“journalist, columnists, and key political figures to prepare you for the week ahead. Join us”
as soon as you wake up and bring us with you wherever you're weekend plans take you. Watch us on bloomberg television. Listen on bloomberg radio, stream the show live on the bloomberg business app or listen to the podcast. That's bloomberg this weekend. Saturdays and Sundays starting at 7am Eastern. Make us part of your weekend routine on bloomberg television, radio, and wherever you get your podcasts.
