For construction businesses, the pace of recovery from COVID-19 will depend on a number of variables, the most obvious being the specific schedules by which relevant local, state, and federal officials allow work to resume. But getting projects up and operating again is only the first step.
Over the longer term, construction-related businesses will likely need to rethink some of their basic operating and management approaches in order to accommodate new rules, changing standards, and shifting stakeholder expectations.
Here are eight areas where most contractors and subcontractors will encounter significant changes in the way they do business. These are also the areas where you are likely to face some of your most critical decisions as you reshape your company for the post-coronavirus world.
1. Jobsite Safety
Always a priority, safety will take on an entirely new dimension. While complete social distancing is impossible on many jobsites, there are some practical steps you can take like ensuring all workers have adequate personal protective equipment. Possible changes in safety practices include staggered shifts and coordination among subcontractors to spread out the population on the site. You may also see increased use of modular construction, robotic drone inspections, and other technologies designed to reduce human interaction on the jobsite.
It is important to coordinate with safety officials, insurance carriers, labor unions, and employees to develop a comprehensive plan for reducing worker exposure.
2. Remote Working Arrangements
After arranging to perform various administrative, central office, and management tasks remotely, some companies might be inclined to continue the practice even when it is no longer required. If yours is one of these companies, you should be prepared to regularly monitor and review the systems you put in place, paying special attention to both security issues and productivity trends. You may also encounter similar concerns in the area of customer relations, as your company relies on more telephone and video conferencing instead of face-to-face meetings with project owners.
3. Workforce Recruiting and Retention
Attracting and retaining skilled craftspeople was a long-running challenge well before the coronavirus. How the crisis will affect that issue is the subject of considerable debate. Some industry observers contend that laid off or furloughed workers will be eager to return, giving the surviving companies a pool of eager applicants. Others worry that discouraged workers might leave the industry altogether, as many did after the 2008 recession. In either scenario, you are likely to find that holding on to good workers remains a critical priority.
4. Supply Chain Issues
Potential disruptions to international trade could impact the industry for some time. In addition, the shutdown is likely to take a toll on some domestic material and equipment suppliers. If you have not done so already, now is the time to firm up relationships with vendors and identify potential alternate sources. It also makes sense to review the material specifications on every project contract to be sure all options and alternatives are considered.
5. Contract Terms
By now, most contractors will have already conducted a careful review their contracts’ force majeure provisions to determine how they allocate the various risks, costs, and obligations that occur when a project is delayed or stopped because of circumstances outside the contractor’s or project owner’s control. Be sure you are taking the required steps to protect your rights and document your claims. In the longer term, it also is prudent to consult with your legal counsel to see if you should make changes in your standard contract language to ensure you are adequately protected going forward.
As they work their way through the recovery, some contractors also are likely to explore alternative project delivery methods such as design-build projects or construction management at-risk contracts. There is no single “best” method that works for all situations, so if your company is considering a new project methodology, you should be prepared to spend considerable time and effort weighing the pros and cons.
6. Business Strategies
Your company’s long-term business and marketing strategies should get a post-crisis review. For example, many observers expect that the virus-driven surge in online shopping will accelerate the shift in consumer shopping habits that was already underway. The result could be a spike in demand for new warehouse and distribution projects.
No one can predict which industry segments will recover faster. For now, the best advice is to simply watch for signs of emerging trends in both commercial and residential activity—both locally and nationally—and be prepared to respond quickly once the pace and direction of the recovery become clear.
7. Financial Management
The COVID-19 crisis serves as a stark reminder of the value of maintaining adequate capital reserves and the importance of sound cash flow management. Now more than ever, contractors and subcontractors will need to maintain strong, transparent relationships with their lenders and sureties.
You also should stay alert to potential funding problems on projects, particularly projects that were delayed or temporarily shut down. Like all other industries, commercial lending has also undergone a significant shock. As lenders adjust to the new economic environment, certain types of projects could encounter unforeseen difficulties in obtaining financing.
8. Special Compliance Issues
At the tactical level, companies will need to closely monitor changing tax deadlines and actively manage compliance with the terms of any federal or local stimulus or support programs in which they are participating. Keep close track of application deadlines for tax credits, as well as various milestones for maintaining employment levels to qualify for benefits.
The back cover of this issue points out several of the most significant federal programs but, as noted there, the available programs and their specific provisions are changing—and are likely to continue changing for some time. It is essential to work closely with your CPA to stay abreast of new developments.
With so many variables and unanswered questions, managing through the recovery and post-recovery phases can seem like a bewildering challenge. While there is no single one-size-fits-all checklist or universal recovery strategy, recognizing and organizing the issues in this way can be a helpful first step.