The COVID-19 pandemic is sweeping the world, and nearly every industry is trying to learn how to navigate this new normal. The construction industry, in particular, is facing unique challenges. In some countries, companies are allowed to continue operating as usual. In others, they’re finding their work restricted to critical infrastructure and emergency home repairs, or they’re forced to close their doors entirely to wait out the lockdown with other nonessential businesses.
Construction managers know that the COVID-19 pandemic will continue to create delays in both new and existing projects. Amid these unprecedented times, it’s vital to adapt so companies can survive and keep looking to the future. How can business owners learn to navigate project slowdowns in post-COVID-19 contracts and stay afloat during these tough economic times?
Navigating Essential vs. Nonessential
First, business owners need to navigate the difference between essential and nonessential businesses. This can be challenging because it’s continually changing. Currently, many construction companies might be considered necessary, allowed to carry out their business as usual or via remote operations.
However, if cases pick up across the country, future shutdowns are a concern for business owners.
The best way to navigate this challenge is to stay informed on any major changes that might be in the works. In this case, that will mean staying on top of decisions made by local and state governments since the federal government isn’t currently issuing pandemic-related mandates.
Business owners also need to have a plan in place if things change quickly to take things offline and another to get things moving again when it’s safe to do so. Now is the perfect time to conduct a thorough business assessment with your team and determine where challenges have hit the hardest and where you can hope to capitalize on future opportunities.
Review Current Contracts for Related Clauses
The next step is to review current contracts to see if any clauses could negatively impact the project. Several things could cause problems for existing contracts, especially in the face of something like the current global pandemic.
Look for things like termination clauses, damages owed for delays and disruptions and force majeure. Also known as the “act of God” clause, this is part of nearly every construction contract, giving both clients and companies the option to alter or break the agreement in certain instances. Many argue that the current global pandemic falls under this clause, leaving companies scrambling to find new contracts or preserve the ones that remain.
Important Questions to Ask
When it comes to navigating contract law during a global pandemic, there several important questions that business owners need to ask as they assess their choices. Managers and supervisors can use these queries internally, as well as with clients, depending on their needs.
Ask things like:
Does a pandemic event constitute a force majeure in the contract? Is there anything in the contract that specifically mentions a pandemic event or illness? If not, how should it be classified? What exactly do these clauses entail? Some may detail both compensation and time extensions, but the exact details will vary from contract to contract. Are there any current or upcoming local/state/federal laws to consider when applying a force majeure clause? Pandemic-related legislation is constantly changing, so it’s essential to stay informed.
With the answers to these questions in hand, business owners can converse with clients and together come up with the best course of action.
Talking to Existing Clients
The biggest challenge when it comes to navigating project slowdowns isn’t the pandemic itself. It’s talking to the clients, many of whom may be angry, frustrated and scared as they learn to navigate the world amid a global pandemic. Previously affluent clients without a budget may find themselves struggling—as much of the world is—as work slows down and payments start grinding to a halt.
Be empathetic when speaking with clients. Everyone is stressed and may be looking for ways out of their contracts to use those funds for other tasks, such as payroll or maintaining their facilities. Others might want to terminate their contracts because lockdowns are putting the projects on hold indefinitely. Whatever the case, remember that empathy is the most important thing when navigating project slowdowns and contract changes. Managers need to put themselves in the client’s shoes.
Looking Toward a Post-COVID World
There’s no telling how long the coronavirus pandemic will continue to affect the construction industry. The most optimistic projections show the world still dealing with this virus for a year or more to come. Eventually, companies will be able to look back and take lessons from the great pandemic that marked the beginning of the decade with contract cancellations and bankruptcy.
In the meantime, these same businesses need to develop a plan to deal with current clients and manage new contracts as they slowly trickle in. Things will start to look up, even if it takes a few more months or even a couple of years to reach that point. The best thing to do is make a plan now and implement it. Everything else will start to fall into place as COVID-19 rages on.
about the author
Holly Welles is a construction writer with experience covering business growth, labor, and technology. She regularly contributes to publications including Construction Executive, Trimble, and Colorado Builder.