The COVID-19 pandemic has turned many industries, including construction, upside down. Projects are delayed or put on hold while others have been outright cancelled due to government orders. But proactive contractors are using this time to establish efficiencies by organizing the contracts and processes they have in place to position themselves for success when the rebound arrives.
Here are four things you can do right now if your project is delayed that can prepare you for an economic upswing.
1. Buy in smaller quantities, more frequently — With current uncertainty surrounding the state of the nation and economy, it has become crucial to safeguard yourself and collect the money you are owed for materials and labor. Now more than ever, it’s important to stay on top of your material costs. Unfortunately, some contractors have found themselves in a situation where they’ve purchased too much, and they’re sitting on materials that they can’t build. If it hasn’t been built, it can’t be billed for.
However, it’s important to learn from these mistakes and start purchasing materials in smaller quantities, complete the work, then immediately bill for it so you don’t get stuck with excess supply. As the economy revs back up, smaller, incremental and more frequent, purchases will be the new normal, at least in the short term.
2. Send notices and pre-liens to ensure payment — Construction success relies on relationships and good communication. During this unprecedented time, many projects are delayed in states where construction is not considered essential. Even states where construction is considered essential, certain types of construction may not be. If that’s the case, project delays extend the length of the project, so it’s important to send regular (and on-time) pre-lien notices to your GC’s or property owners to maintain open communication and to clearly state that you’re a subcontractor on the job.
On our podcast, Build with Billd, we sat down with Levelset’s CEO, Scott Wolfe, who explained, “When you send a notice, you’re helping connect the community a little bit better so that people know who everyone is. And that smooths payment.”
Above all, realize that sending pre-liens is not designed to be confrontational, but rather the diligent thing to do to protect your business and suppliers. Honest communication and transparency can improve your relationship going forward. It’s better to be upfront with your GC than to surprise them later on with a filed lien. At the end of the day, this will help protect you and ensure you are getting paid for the work you have done. And, while filing a lien might seem hasty, it is easily one of the best fail-safe ways to ensure that you’ll get the money that is owed to you during these times of uncertainty.
3. Use your downtime wisely — Project delays offer unwelcomed downtime, so use this time to improve your business by encouraging employees to further their education and safety training. In fact, workers can even cover 10 to 30 hours of OSHA training online while they are stuck at home.
You may also want to revisit your own jobsite safety practices. It’s widely known that new safety and cleanliness regulations will be mandated once work continues. So, it’s a good time to make sure systems and policies are in place to help you transition to the new construction industry norm.
Taking the time to research project management and technology platforms, such as Procore, would be a great way to set yourself and your team up to get organized and be more efficient moving forward. You may also have operational changes where you embrace automation and allow office staff to work from home, and you may need to seek out new local suppliers, too.
While you’re assessing policies and procedures for the future, look at business costs and make sure your overhead is in line with your new projected growth. Remember, some companies will come out of this down cycle leaner, stronger and ready for opportunity; make sure you are one of them.
4. Seek legal counsel and know your rights — COVID-19 has brought challenges that many contractors did not see coming, making it more important to revisit the contracts you have in place to protect your business moving forward. With that in mind, it’s better to be over-prepared and take this time to cover your bases from a legal perspective than to be left high and dry when the storm clears.
Be proactive and review your contracts with legal professionals to ensure your business is protected. One major topic to bring up would be the discussion of force majeure clauses. Force majeure clauses come into play when there is a superior external force that causes the delay of the project, outside of the contractor’s control.
Although COVID-19 was definitely outside of everyone’s control, we had never seen a situation like this in our history, so from a legal standpoint, it hasn’t necessarily been something that contractors have had to include in our contracts before.
This might include making specific language changes to your contracts, like including the words “pandemic” and “disease” to your contracts moving forward. Be sure to discuss and seek legal counsel on how to go about making changes in your contracts to make sure that force majeure clauses cover COVID-19 moving forward. Even if you are not entitled to compensation now, these clauses in future contracts will protect you going forward.
Preparing for the Reopening of the Economy
We know it’s probably not happening as fast as we would like; however, there is some forward movement when it comes to reopening the economy.
As businesses begin to reopen, it would be a good idea to take time to assess all of your fixed costs and where you may be able to cut and become more efficient, which can include building infrastructure and strengthening your business procedures. This doesn’t mean cutting costs that make you more efficient such as technology; rather, costs that may no longer provide the same value to the business, such as association costs or sponsorships.
At the end of the day, if you are consistently financially planning, reviewing your contracts, evaluating the way you are purchasing materials and taking the steps to better yourself during this period of downtime, you’ll set yourself up for success as the economy starts to reopen and delays start to resume.
Christopher Doyle is the founder, president and CEO of Billd, a payment solution for the construction industry.