Construction audit trends for 2025 and beyond

As we progress through 2025, the construction industry faces a landscape marked by volatility and rapid change. There are several emerging trends that are reshaping capital construction projects and audit programs. In this article, we’ll delve into three of these trends, offering strategic guidance to navigate the complexities ahead.

1. Economic and regulatory uncertainty

New policies on rebalancing trade have introduced significant uncertainty in the construction sector. As a result, the construction industry is grappling with fluctuating material pricing and unpredictable supply chains. Tariffs on key materials like steel and aluminum are driving up costs and causing delays. Executives must place greater emphasis on risk assessments, inventory management and supplier reliability. Contracts should include escalation clauses to manage price increases and ensure transparency in cost adjustments. Developing contingency plans and maintaining sufficient budget allowances are critical to absorb unforeseen fluctuations.

Regulatory rollbacks, policy shifts and potential freezes on new regulations are creating a dynamic environment. Federal funding priorities are shifting towards traditional infrastructure and energy sectors, potentially reducing support for green projects. Project professionals must stay informed about these changes and adjust their strategies accordingly.

2. Technological advancements and data security

The adoption of advanced technologies, including artificial intelligence (AI) and cloud software, is transforming the construction industry. While these technologies enhance efficiency and productivity, they also introduce significant risks, many of which are uncharted with little to no precedent on mitigation strategies. Cyberattacks and data breaches are major concerns, as construction companies handle vast amounts of sensitive data. Ensuring the integrity and security of AI systems is crucial, as biased or poor-quality data can lead to inaccurate predictions and decisions. Clear guidelines, robust data security measures and intentional human oversight are essential to mitigate these risks.

3. Labor market challenges

Labor shortages and workforce constraints continue to impact the construction industry. The aging workforce, declining interest in trades among younger generations and economic fluctuations are contributing to these challenges. Increased labor costs and potential project delays are significant concerns. Executives should ensure that contracts address labor shortages and overtime costs and implement strategies to attract and retain skilled workers. Detailed documentation and proactive project management are key to mitigating the impact of labor market volatility.

Navigating the road ahead

The construction industry in 2025 is navigating a complex and rapidly changing environment. Staying ahead of these trends requires a proactive approach to risk management, contract adjustments and strategic planning. By understanding and addressing the key challenges outlined in this article, executives can ensure their organizations are well-prepared to thrive in this dynamic landscape.

To effectively navigate these challenges, it's crucial to take immediate action by:

• Reviewing and updating your contracts to include robust escalation clauses and clear definitions of force majeure. Known events like tariffs should not be considered force majeure. Contracts should be updated to reflect current market conditions and ensure that project pricing accounts for volatility. Remember, a good contract facilitates collaboration between owners and contractors and is essential to resolve issues and ensure fair pricing.
• Strengthening your audit programs to ensure thorough risk assessments and detailed documentation. Auditors must focus on performing thorough risk assessments, verifying cost increases and ensuring detailed documentation of financial transactions and project changes.
• Collaborating closely with your teams to attract and retain skilled labor and develop contingency plans to mitigate supply chain disruptions. Material procurement strategies, such as bulk purchasing and seeking alternative suppliers, can help control costs. Change order management should be rigorous, with clear guidelines for allowable costs and support documentation.
• Investing in advanced technologies while prioritizing data security and integrity. These technologies can be utilized to streamline processes and create efficiencies. Protocols for data security will need to be updated as well.

By proactively addressing these trends, you can position your organization for success in 2025 and beyond. Reach out to trusted advisors, leverage the latest insights in the marketplace and implement strategic changes today to secure a resilient and prosperous future for your construction projects.