There’s reason for optimism among U.S. construction firms in 2017. Economists generally have predicted a 5% upswing in the value of starts this year.

However, the industry continues to grapple with issues involving fraud, worker safety, rising materials costs and unions. And there are also a couple of politically charged issues that might give a boost to the industry (see Two Irons in the Fire below).

Here are four key challenges your company may face as the year progresses.

1. Fraud Exposure

Kroll, an international firm specializing in security solutions, commissioned Forrester Consulting to survey 545 senior executives spanning various industries to determine how fraud affected them in 2016. The resulting annual Global Fraud & Risk Report indicates that incidents of fraud among survey respondents have increased 7% since 2015. An astounding 82% of respondents say they experienced fraud last year.

The types of fraud identified in the the study are far-ranging and include:

Despite such challenges, the construction industry’s exposure to fraud appears to be declining. Fewer construction, engineering and infrastructure firms reported fraud and cyber threats in 2016 than companies in any other industry represented in the survey. Specifically, fraud was reported by an average of 12% fewer companies in construction than reported on a global scale. Cyber security incidents were reported by 8% fewer construction companies than the average for all industries. Security issues were reported by 5% fewer respondents. The total number of fraud incidents in the industry also declined by 5%.

The reason for fraud most often cited by construction executives is high turnover. Former construction employees reportedly commit:

• 33% of frauds,
• 20% of cyber security breaches, and
• 25% of general security breaches.

Construction firms fight fraud by:

• Improving employee training and whistle-blowing programs,
• Screening job candidates more closely,
• Taking measures in information technology security, and
• Enhancing risk management techniques.

Increasingly, new technology is helping firms cope with cyber security threats.

2. Injuries and Safety

Firms are addressing safety risks with increased measures to protect workers from falls, dehydration and other common hazards. However, work-related musculoskeletal disorders haven’t received the same level of attention — at least not yet.

A recent study by the Center for Construction Research and Training shows that these disorders are especially challenging among construction workers. They include muscle, tendon, joint and nerve strain often caused by unusual posture and excessive bending or twisting. Frequent exposure to vibrations may also contribute.

The study examines workplace injury and illness data from various surveys spanning 1992 through 2014. Although the number of musculoskeletal disorders reported in 1992 was nearly three times the number for 2014, they still accounted for about 25% of all nonfatal construction-related injuries. That resulted in a total wage loss of $46 million for the year.

Sick leave due to on-the-job injuries can have a major impact on a firm’s bottom line. Health experts suggest that ergonomic solutions could help limit the number of musculoskeletal disorder cases in the construction industry. Training and using equipment for heavy lifting are also recommended.

3. Building Materials

Figures from the U.S. Bureau of Labor Statistics (BLS) in December 2016 showed that the price of construction materials increased 0.4% from the month before, according to an analysis by the Associated Builders and Contractors trade association. Compared to prices the year earlier, materials were 2.1% more expensive at the end of 2016. Much of the increase was attributed to rising energy costs, which spiked 23.1% in December.

After those figures were published, Moody’s Investors Service released their outlook for 2017. It projected that 2017 will be a profitable year for the building materials market due to construction spending levels and steadily climbing prices. That translates into a growing concern for contractors, especially with workers demanding higher wages.

If prices continue to be pushed upward, companies may have to scale back on project capacity or consider other budgetary cuts to ensure a profit. The situation could be exacerbated if prices escalate beyond expectations.

4. Union Membership

Union representation in the construction industry reached 14.6% in 2016, up 0.6% from 2015, according to the BLS. That upward trend followed two years of decline. In any event, the industry maintains one of the highest union membership rates of any private sector, with only utilities, transportation and warehousing, and telecommunications outpacing it.

The BLS report also indicates that union workers’ earnings were 47% higher than those of nonunion workers in the industry, but they rose at a slightly lower rate over the year. The weekly median pay in 2016 increased:

• • 4.8% to $1,146 from $1,093 for union workers,

• • 5% to $780 from $743 for nonunion workers, and

• 9.9% for all construction workers.

In addition to pay differences, union representation among construction workers is significant to firms because of differing approaches on legislative matters, safety requirements and project labor agreements. Dealing with union representation remains a sensitive issue for many construction firms.

The upshot: Experts are indicating guarded optimism for 2017. Although the forecast is far from gloomy, there will be challenges. It would be wise to proactively take steps to help keep your firm going strong.

Two Irons in the Fire

If they go forward, a couple of President Trump’s initiatives could bolster the construction industry in 2017 and beyond.

Pipelines: The president has given the green light to the Keystone XL and Dakota Access pipeline projects that were previously blocked. Besides the construction jobs that might be added to facilitate these projects, less regulation, especially in the area of environmental issues, could also result in increased opportunities for government contracts and other projects.

Border wall: The Customs and Border Protection section of the Department of Homeland Security has started to solicit proposals for building the president’s planned border wall. Even accounting for natural barriers, the construction of the wall would be a massive undertaking and would require a large influx of capital and manpower.

But in this uncertain political climate, it remains to be seen how these will actually play out.