In the years since the COVID-19 pandemic disrupted global commerce, construction firms in the United States and Canada have made notable strides in modernizing their supply chain risk management.
However, the recent resurgence of trade-related uncertainty is ushering in what one industry leader is calling an “oscillation period” for construction firms, where project timelines, supply chains, and insurance pricing can be volatile.
“Post-COVID, there’s definitely been a step-change in how contractors manage supply chains,” said Adrian Pellen (pictured), North America head of construction at NFP. “But now, we’re seeing that progress tested by renewed volatility, particularly around tariffs and inflation.”
During the pandemic, Pellen said construction companies were forced to abandon their long-standing “just-in-time” material procurement models and invest in supply chain visibility, vendor vetting, and risk diversification.
Today, that evolution continues, with firms increasingly leveraging AI to identify bottlenecks and assess geopolitical vulnerabilities. “There’s more sophistication across the board,” Pellen noted.
“Contractors are doing deep pre-qualifications of subcontractors, checking their financials, and ensuring they’re local enough to be reliable. On the material side, we’re seeing serious efforts to diversify and domesticate sourcing.”
In both the US and Canada, reshoring and nearshoring efforts are intensifying. The US has leaned into sourcing domestic lumber, particularly southern pine from the Southeast, while also facilitating cross-border steel flows with Canada.
In Canada, Pellen pointed to a growing “Buy Canada” sentiment that mirrors the US's own “Buy America” policy. This movement away from China-centric supply chains, accelerated by tariff uncertainty, is not merely a reactive measure.
“These are strategic shifts that are likely to stick,” said Pellen. “The broader trend is about resiliency: being able to adapt quickly without compromising profitability.”
Despite these supply chain improvements, the construction sector is now facing a new economic headwind: uncertainty around tariffs.
With inflation already eating into the purchasing power of government infrastructure budgets, the specter of escalating tariffs could erode margins even further.
“In the US, we’ve got that $1.2 trillion from the 2021 Infrastructure Investment and Jobs Act still flowing into the market,” said Pellen. “But because of inflation and tariffs, the impact of that funding isn’t as robust as it was intended to be.”
For private and public sector projects alike, the uncertain trade landscape introduces layers of financial ambiguity. According to Pellen, this has led to a marked increase in contractual disputes between owners and contractors, particularly over risk allocation.
The NFP head noted greater scrutiny in the contractual process because “if you commit to a price and tariffs spike mid-project, you’re suddenly dealing with much higher costs, so there’s a question of who shoulders that burden.”
At the same time, price volatility has pushed some developers to stockpile materials such as steel and lumber. While this strategy may hedge against future cost hikes, it also brings a fresh set of insurance challenges.
“We’ve moved away from the ‘just-in-time’ model, but that introduces storage risk,” Pellen said. “Stockpiling increases exposure to fire, theft, and natural disasters. So, we’re building that into our risk mitigation strategies.”
One of the less visible impacts of the volatility is project delays. Tariff-induced cost spikes can halt procurement and push back completion dates, triggering a cascade of insurance complications. For example, builder’s risk policies are priced based on expected construction value and set timelines. If a project is extended and material prices increase due to tariffs, the insurance premium is also likely to go up.
These shifts are forcing insurers and clients alike to rethink how they price and structure insurance products, Pellen said. Some clients are exploring options like automatic extensions or pre-negotiated terms for extended coverage.
“Insurance used to be around 1% of a project’s value,” said Pellen. “Now it’s closer to 2% or 3%, and in places like New York, it’s hitting 10%. That has a massive impact on project viability.”
Despite the challenges, Pellen said insurers are more engaged than ever in helping clients build in flexibility, particularly for long-term projects where inflation and tariffs are moving targets.
As construction firms navigate this “oscillation period,” the key to success lies in planning for volatility as the new normal.
“We’re advising clients to review their escalation clauses,” Pellen said. “Many policies allow for 5%, 10%, or even 15% increases. But on large projects, that may not be enough anymore. We’re negotiating for higher thresholds.”
Clients are also being encouraged to think longer-term when it comes to insurance coverage. “Delays are more likely now, so we’re asking whether it makes sense to place policies with automatic extension options or longer base durations,” Pellen added.
While the road ahead for North American construction firms is paved with uncertainty, a sharper focus on supply chain management, more sophisticated insurance planning, and a willingness to adapt contracts and strategies in real time can help them navigate forward.
