BUSINESS DEVELOPMENT
T
he first five months of 2020 showed an uptick in U.S. construction spending overall, according to recently published construction forecast reports by Deloitte, FMI, and the U.S. Census Bureau to name a few. But this was at a time when COVID-19 was not spiking as it is now and before the onset of the
those trucks disinfected properly? Are all passengers wearing masks in the vehicle? Is it necessary for each worker to drive separately? -- keeping in mind that lack of reliable transportation to job sites is a key reason why construction companies cannot secure enough workers. Additionally, for added safety, temperatures need to be taken at
The Impact of COVID-19
on Construction By Karen Barbour, founder and president of the Barbour Group, LLC.
June 2020 social unrest and protests. In cities such as New York, construction stop orders were put into effect for several months with some just reopening as recently as May. Across the United States, many construction sites closed (for two weeks or more of quarantine) once any worker tested positive for COVID-19. The delays are costing construction companies and owners more than just lost profits. June’s impact to the construction industry may have an unanticipated dampening effect to construction that may take several months to manifest. Only time will tell. Tracy Steedman1, an attorney in Maryland with Adelburg Rudrow, in a recent webinar hosted by the Alliance for Hispanic Commercial Contractors2 strongly emphasized to the participants how COVID-19 has created multiple layers of new safety measures for job sites. While it may be possible for workers to socially distance from each other on a job site, it is not uncommon to see four or more workers arrive in one work truck. Questions to consider: Are
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least every day and tracking of any infected worker must be diligent to stop any spread of the virus to the entire construction team. If a worker has a temperature and needs to leave the site, how will that worker find transportation home? These are just some new job safety issues born by COVID-19. Further, the stimulus checks are creating higher pay for construction workers than what they would receive if they went to work, creating havoc on an already diminishing labor pool. To offset the cost of retained labor and overhead expenses during COVID-19, Paycheck Protection Program (PPP) funds were quickly sought after and secured by many contractors throughout the US. Construction was the biggest business sector that received PPP funds – 13% of the $342.3 billion in total3. According to 20 contractors polled for this article, several received PPP funds in the $1.3 million to $1.5 million range (having revenues up to $80 million), while others received funds in the $150,000 to $800,000 range (having revenues
up to $20 million). The fund amounts varied depending on how much work the contractors self-performed and the levels of skill and pay of their employees. Some surety companies are treating the entire amount of the PPP funds as a current debt, despite the long-term payout and loan forgiveness option. Others, like the SBA Office of Bond Guarantees, are treating 25% as a current liability and deferring the remainder as long-term debt. Only a vfew sureties are treating the debt as pure capital. With irresistible interest rates, project owners are spending more. The “Value of Construction Put in Place – Seasonally Adjusted Annual Rate” by the U.S. Census4 shows that residential construction is up - $543 billion in May of 2020 versus $538 billion in May of 2019; and that non-residential construction is down - $812.5 billion in May of 2020 versus $814 billion in May of 2019. Of the $812 billion reported in May of 2020, $106.9 billion is being spent on Highway and Street, $117.8 billion being spent on Power, and $104 billion being spent on Educational construction. Recently a heating and air construction client expressed concern that there is very little new construction starting now. If those concerns materialize, then there will not be any significant work for the major subtrades the first quarter of 2021, causing a shift for more contractors to bid aggressively on renovation work to capture much needed revenue. Federal construction, according to Deloitte’s “2020 Engineering and Construction Industry – A Mid-Year Update,” is poised to spend $2 trillion over the next 10 years on infrastructure upgrades.5 However, for small business contractors, the contract awards are taking too long. The school of thought is that the funds will take a long time to be allocated. For example, a United States Postal Service office took bids at the end of April 2020 on
