Although the novel coronavirus (COVID-19) pandemic has walloped most U.S. businesses, how your business recovers will largely be construction-industry-specific. For example, most construction companies need to address disruptions to project schedules and overseas supply chains. They may need to renegotiate building contracts and find replacements for workers who are no longer available due to travel restrictions. Depending on your niche, the fallout from COVID-19 could last months and possibly even years.
Here are some tips on handling five major obstacles to help make a full recovery:
1. Worker Health and Safety
Although health and safety already were priorities in the construction industry, you need to continue keeping workers safe from the COVID-19 virus. This means cleaning more often and more thoroughly, mandating social distancing on worksites and requiring masks and gloves, even when a particular job doesn’t require them. Follow guidelines set by your state and local governments and health authorities such as the Centers for Disease Control and Prevention.
You should realize that even if you take all possible precautions, a crew member may call in sick. Ask if the worker has the virus and, if so, immediately quarantine potentially exposed coworkers and clean all work areas thoroughly. Sidelining crew members may seem drastic if you’re already short on skilled labor and running behind schedule. But consider the possible consequences of not quarantining employees — including spreading the infection in your community and legal liability issues.
2. Supply Chain
According to recent estimates, almost 30% of U.S. building product imports come from China. And some projects use as much as 80% Chinese materials. Although the Chinese economy is reportedly recovering from its own COVID-19 fight, strained relations with the United States could make it harder for you to get the goods you need when you need them.
Seek out alternative suppliers in countries that that have fewer supply chain interruptions. Of course, you may need to pay higher prices and wait longer for delivery — at least initially. But if you diversify your supply chain, your business probably will be more resilient to future disruptions.
3. Customers
The post-COVID-19 world will be just as challenging for owners and customers as it is for you and your workers. Customers may be angry about delays and cancellations or may no longer have the funds to complete the projects they’ve hired you to build. If possible, try to reassure them and devise mutually agreeable new timelines and budgets.
Even if you offer concessions, some customers may try to pull out of their commitments, including for jobs that are nearly completed. In such cases, work with your legal advisors to determine the best course of action.
4. Travel Restrictions and Quarantines
Some states and countries have eased the restrictions on movement and travel they implemented when the COVID-19 pandemic began. But many still maintain some form of restriction, and if infection rates increase again later this year, they could reinstate their original bans and quarantines. So if any of your employees have been working from home, you may want to keep them there for the foreseeable future. Similarly, make tele- and videoconferences a permanent part of your project management toolkit.
Out-of-state jobs could remain challenging if the state restricts movement and local hotel accommodations aren’t available. And if you rely on migrant labor or need to arrange a visa for a foreign professional such as an architect or engineer, expect more delays and other obstacles.
5. Legal Claims
The extent of the COVID-19 crisis was generally unforeseeable, but many legal experts believe that construction companies could be held responsible for any delays or cost overruns. If you haven’t already done so, review your current contracts to determine rights and responsibilities. You may have questions about legal terms relating to scheduling, completion, delays, damages and other matters. Be sure to discuss them with your attorney.
It’s particularly important that you understand the ramifications and take note of any force majeure provisions that allow work to be suspended or terminated in the event of certain extenuating circumstances. Be sure to follow any notification requirements in the contracts.
If current contracts don’t provide your business with adequate protection, make sure future contracts do. They should offer protection in the event of a continued disruption, including a recurrence of epidemic-level COVID-19 cases and official lockdowns.
Expect the Unexpected
In the coming months, your primary challenge as a contractor will likely be uncertainty — financial, economic and social. If there’s anything you should expect from the COVID-19 virus, expect more twists and turns.
For help developing contingency plans and taking other steps to maintain financial health, contact Principal Tom Bailey via our contact form.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.
