No one could have foreseen the economic downturn caused by the Coronavirus pandemic, and few industries were prepared for such a shock. As with most industries, the construction industry has found itself in uncertain times, both financially and in terms of safety. Different states have handled construction work in varying ways. Since shelter-in-place began, New York has changed its guidance multiple times, adding to the confusion over what is considered to be “essential construction.” However, your state is determining essential business; there are a few things construction companies can do to stay afloat during this unpredictable time.
Review & Revise
Review your company’s expenses. Run a fine-tooth comb through all non-essential expenses and look for ways to save. Have employees contribute suggestions for cost savings as well. Make contingency plans for a variety of situations that could arise and have those plans ready to be put into action on short notice.
Do a Deep Dive on All Current Contracts
Know your contracts. Ensure you have an accurate understanding of all potential costs, obligations, and options. Specifically, pay attention to force majeure and liquidated damages clauses as well as notice requirements. Your thorough understanding of contract conditions is absolutely essential.
Stay Up-to-Date on COVID-19 Regulations
Seek professional counsel on what qualifies as “essential” in your particular location. Be aware of risk factors for such determinations, such as the risk of spreading the virus among workers and whether individual construction projects are considered more essential than others. Be prepared to enact your contingency plans for site closures—document everything. Be sure to take copious project notes as well as pictures and videos of project sites in the event of a dispute later on.
As the situation evolves, you’ll need to keep tabs on your backlog and adjust your budget accordingly. Keep in mind how vulnerable your client pipeline is to the economic downturn.
Be Mindful of Evolving Government Relief Measures
Pay attention to the latest government relief measures to help businesses and workers. Relief efforts already in place now require certain small businesses to provide sick and family leave for employees in exchange for a payroll credit to cover the cost of these additional benefits. The CARES Act is helping small businesses to keep employees on the payroll through June by offering forgivable loans. All contractors are eligible for payroll tax deferment until 2021 and 2022, which can help with short-term cash flow issues. By staying informed, you ensure your company is positioned on solid ground once the economy is up and running again.
Now is an excellent time to review your standards for the pre-qualification of subcontractors. Assess whether those companies you subcontract with will be able to withstand the loss of revenue they will likely incur. Will they still have the ability to fulfill their obligations despite the impact of the economic downturn?
The times are uncertain, and the ever-evolving nature of the situation can add a great deal of stress for those in the construction industry. However, by focusing on these areas, you can help to ensure your company is ready on the rebound.