Research funded by two key union contractor associations, covering the electrical and sheet metal trades, recently found an average 18% pandemic related impact from reduced productivity and added expenses. It is quite likely that other contractors, both union and non-union, might experience a similar impact
The Productivity loss is real
The productivity loss stems from a number of causes. For example, workers may remain home due to lack of child-care, or to tend to a sick family member.
Those that do work may find delays and slowdowns due to social distancing and other covid-related requirements. Delays in receiving materials and supplies as well as additional inspections and cleaning will also impact productivity. Overtime may result from many of these issues, further increasing costs.
Profit margins for contractors in normal times are hard to maintain, but it is especially difficult now, especially for smaller contractors. Without relief, many businesses will suffer serious setbacks, and some will never recover.
What can you do about it?
Not every contractor will be able to offset these added costs, but you certainly should try.
Subcontractors can seek relief from their general contractors, and they in turn can seek redress from owners. According to many attorneys and consultants, the pandemic could trigger a wave of cost-related lawsuits, and some company failures are most likely inevitable.
Your first priority – measure the exact impact
While relief may or may not come, you are unlikely to be successful if you cannot quantify the cost increases and/or revenue impact on your projects. For that reason, you should task your financial staff and outside accountants to do an analysis of pandemic-related costs, and carefully estimate and document the impact, line-item by line-item.
Also ask your attorneys to scrutinize your contracts, to identify and clauses that might entitle you to adjustments due to events such as covid-19. At the end of the day, you may or may not prevail, but without these steps, failure is almost guaranteed.
We’re here to help
While your first line of defense on pandemic-related cost issues will be your accountants and lawyers, we’ll be happy to share, with their permission, ideas from our other clients in a similar situation to yours. Please feel free to reach out and contact us at (914) 667-7700 x122.