Important financial considerations for contractors before restarting construction projects
Since March, most of the world, including the construction industry, has been in some form shut down following the COVID-19 pandemic. Depending on your state, you may have been forced into full shut-down, partial shut-down, or been able to continue operating with additional health and safety considerations.
Now, as much of the country heads back to work, construction projects may be hitting the restart button. How the restart affects the projects’ financial aspect will be important for a stable operating budget and a good outcome. Below are some financial considerations you’ll need to address before restarting to protect yourself and your clients’ projects. You may have more information to consider prior to reopening, depending on the size and scope of your projects and the location.
Financial considerations for restarting construction projects
Review your contracts – During this volatile time of local economy stop-and-start, projects will possibly face both internal and external setbacks, shifts in cost, and staffing challenges. Reviewing your agreements with your clients and understanding where you can see future adjustments in time or costs and how you expect to take them into account is a key first step to the restart process.
While most contracts are protected from the ramifications of pandemic-related delays thanks to force majeure, it is still your responsibility to mitigate delays to the best of your ability. As projects halt and restart, identifying, separating, and tracking all of the costs during each stage is essential especially for fixed-price contracts. Without proper documentation of tracked and segregated costs by task and period, you may find yourself facing contract disputes.
Focus on good accounting – Good accounting would be one of the keys to preserving the sustainability of your projects and justifying changes with your clients. Each adjustment and change order will need to be accounted for and documented in order to protect yourself throughout the length of your projects during this uncertain time.
Do your due diligence – With suppliers, vendors, and subcontractors, you’ll need to do your due diligence in maintaining timelines and budgets to the best of your ability. Communicate regularly with all interested parties to navigate delays so you can plan ahead and make decisions and place orders in a timely manner. You may need to do some research and find alternate products, suppliers, and contractors that still meet project budgets to keep things moving.
Document everything – Documentation will be essential throughout the restart process to show how you’ve attempted to maintain schedules and costs through finding alternative vendors/suppliers when necessary, lining up subcontractors where needed, and requesting or fast-tracking permits through municipalities. As stated, in some respects you are protected by force majeure, but in order to ensure contract compliance, you need to document it as well. Documenting every conversation and move you make with your suppliers, subcontractors, and permit providers will strengthen your contract position.
Reach out for assistance with projecting and forecasting your financials during this restart period and beyond.