Cost-cutting: the Impact of COVID-19 in the Construction Industry

construction industry

Construction companies are facing the same struggles. Companies are forced to delay projects due to a limited workforce. Costs of materials are high. State restrictions limit their mobility or transportation. All of these result in canceled or postponed projects. Indeed, the pandemic has greatly affected the construction industry.

The construction industry had to limit its operations during the pandemic. What struggles did the contractors face? How are they going to cut their costs to recover post-pandemic?

Protocols and Beyond: Effects on the Industry

Restriction protocols forced delays in construction projects. Companies had to limit their workers per project. The Bureau of Labor Statistics noted a huge decline in the unemployment rate of construction workers in the first half of 2020. Some states reported the highest number of COVID-19 positive cases among all industries.   Here are other factors that affected the construction industry this year:

  • Cancellation/Suspension of Private and Public Construction

Because of the pandemic, clients canceled or delayed some projects. Public work projects were set aside to allot the budget on pandemic-related needs. Some private clients are also affected by the pandemic.

  • Restrictions on non-essential activities

States have different regulations when it comes to what’s essential and what’s not. In some states, contractors can push through with their projects with no restrictions. Yet, some states declared it non-essential. Thus, contractors had to postpone their projects.

  • Shortage of Construction Materials, Delays in Delivery, and Higher Cost of Materials

There were also shortages and delays in the supply of materials. This is because of the limited mobility of people and public transportation. And because there is a shortage, materials are more expensive. This adds extra cost on the part of contractors. It also causes delays in the completion of projects, which in turn affect revenues.

  • Inefficiency and Reduced Productivity Rates

Stricter safety measures also affect how the construction is going. Securing permits took longer due to the necessary safety precautions. Even site inspections required extra processes to protect the workers. This prolonged process also causes delays among projects. Quarantine protocols among workers, which take up to 14 days, also affect the workflow.

    Cost-cutting during the pandemic

Vaccinations are now rolling in the U.S. Most industries are also reopening. With this, the government has relaxed restrictions. Construction projects are already continuing. However, the contractors are still recovering from revenue loss in the past months.

What should construction companies do to cut costs now that operations are back? Here are some tips:

  • Negotiate with your client

Everyone has been affected by the pandemic. Even your clients for sure have their own financial problems. It will work better if you and your client can be a little more flexible with your terms. It depends on whether you have a fixed-price contract or a time and material contract. If you are bound by the latter, your terms are more flexible. If you can negotiate prices, budget, and deadlines with your clients, the better.

  • Plan with your subcontractors

There are subcontractors skyrocketing prices and taking advantage of the pandemic. If you’ve already estimated the costs, talk to your contractor. See if you can cut the material costs. Think of creative solutions. Check alternatives that are lesser in cost to achieve the target budget.

  • Reduce your use of equipment

Analyze your workflow and see what you can reduce. If one machine can do as many tasks, then invest in that. In Arizona, stores are selling more backhoe loaders to construction companies. Backhoe loaders are efficient in completing heavy construction work with less supervision.

  • Review your workflow

Check your site and see if you can simplify the work dynamics. This will allow you to see if you can cut costs on materials, processes, and hiring people. Do this without sacrificing the quality of your construction work. This may mean laying off some of your workers. Yet, if you have to do this for cost-cutting purposes, then it will be understandable.

  • Consult with your lawyer

Go over your project contracts with your lawyer and review force majeure clauses. Force majeure protects all parties in case of unforeseen and uncontrollable events. These events serve as an excuse to delay the delivery of obligations bound by the contract. Your lawyer should guide you in dealing with your subcontractors and clients. Discuss how to avoid a possible breach of contract.

These might be tough times for the construction industry. However, if you follow these cost-cutting tips, you will bounce back in no time. With more states reopening, construction works will be back sooner than you expected.

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