Builders faced countless uncertainties when the coronavirus pandemic led to massive public shutdowns in March 2020. Returning to construction after the shutdown is a decision that requires careful consideration of risk management factors. Here are some ideas on how construction businesses can resume work post-COVID-19 shutdowns.
1. Contact, Communicate and Coordinate
Getting back to construction work is viable if you have the resources and appropriate insurance coverage in place. The first step is for your financial analysts to contact the financial teams of businesses with which your company entered a construction contract. Sharing the financial condition of your business is crucial to convincing a construction crew to resume work on your project. Make sure you’re able to make payments for a specified time frame to continue construction after the shutdown.
Your financial experts should further contact vendors in your supply chain to ensure subcontractors can pay suppliers in the next few months. Find out if suppliers have access to the materials you need in the near future. As long as supplies are not low or jobs aren’t affected by supplies, you can move forward and check other criteria for resuming work on a construction project.
The next step is to check with the surety bond provider for flexibility in financial metrics. The uncertain economy poses risks of project disruptions, so the more flexible your plan, the better. Know your liquidity requirements to avoid surprises down the road that may limit securing other work.
Working closely with the bank will also reduce or eliminate unexpected financial shocks. Whether you need a government or bank loan, you should establish a close relationship with a financial institution to help stay on top of your options. Letting bankers and financial advisors know your near-term financial needs is essential for getting back to construction work.
It’s still unclear how social distancing will impact construction project timelines. There aren’t enough current scenarios to draw from to estimate how much limiting staff will affect output or performance. Limiting crew members for big projects may have multiple drawbacks that affect project funding.
It’s crucial to coordinate communication in an optimized way so that members can get answers to questions in real-time. Both the owner and contractor need to stay in close contact, as construction projects often require periodic adjustments.
2. Check Your Cash Flow
Getting back to construction work can happen once the client confirms working capital is available to pay for project needs of at least the next few months. If you are an entrepreneur launching a startup and hiring a construction crew, you need to take proactive steps to ensure cash flow to pay for upfront expenses. Your management team should provide you with monthly and quarterly cash flow data to ensure you’re able to meet near-term costs.
You should then develop cash flow projections in an Excel spreadsheet for each week over the next three months. Forecasting estimates should further substantiate the probability metrics. By letting the contractor know there is a 100 percent probability of cash flow for every week of the next quarter, you will gain the firm’s confidence that financial difficulties will not slow the job down.
By keeping track of these metrics, you can keep the bank updated on your financial outlook, availing assistance from the bank, and acquiring a line of credit to cover shortfalls.
The construction industry has continued to work on projects throughout the pandemic, but some clients are not in a position to meet all the needs specified in prior contracts. Providing reports on your cash flow estimates to contractors is essential to keep a project moving on schedule.
Are you looking for an experienced construction company in the Bay Area? Contact the experts at Proforma Construction to learn more about how we can resolve all your construction needs.