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Considerations for Contractors during the Pandemic

Posted by Carlin Culbertson on Mar 31, 2020 4:12:07 PM

Contract Delays, Unavailable Employees, Material Cost Increases, and Collecting Accounts Receivable

In Ohio and other states, construction is an essential business and jobs have been able to continue with various restrictions.  However, that doesn’t mean that projects are still going as planned or are business as usual.  Some states have even shut down construction, so who knows what’s next.  Some questions we’ve been getting from clients are below, along with recommendations on how to address.  Most of these are legal questions, so we’d recommend contacting your attorney to explore further if you think anything may apply to you.  However, we wanted to get some basic information out to help get you started.

Considerations for contractors during the pandemic1. Contract delays

Some projects haven’t experienced delays, while others have due to shut downs, personnel not being available, materials being delayed, etc.  And from talking with various contractors, if there hasn’t been a delay yet, there very well could be in the future as availability of materials tightens due to the various supply chain disruptions throughout the world.

In these instances, it is best to go through the contract language to see if there are any clauses that address situations like this.  “Force Majeure” clauses would likely be the most common contract language that may address this, but there can be other options depending on the state’s laws and Uniform Commercial Code rules.  The most critical thing regardless of contract language is addressing the issue early.  Contracts may have communication requirements you have to meet to be covered under certain clauses, or may require attempts to remedy the issue that you need to document to show you tried, etc.  Or your contract doesn’t have any language that addresses the situation.  This is why it is critical to reach out to your attorney, specifically one that specializes in construction law, to start strategizing about what to do if these issues have happened or if they might happen down the road.  If you need help finding someone, let us know and we can assist with connecting you to someone that can help.

2. Employees

Employees could be in self-quarantine and unable to work on site.  Or employees may express discomfort and hesitation with working on site based on their proximity to each other, sharing of available facilities, and a host of other factors. Obviously if employees aren’t comfortable working on the job site, or can’t because they are ill, this can cause contract delays and issues.  This is another area where you should contact your attorney to see what remedies may be available due to delays related to not having the planned number of available employees.  Also, be aware that employment law and current requirements by the state and/or municipal government and related government entities will dictate what needs to happen on the job site to allow employees to work safely, so be aware of those.  A lot of trade organizations and law firms have provided guidance on recent rules changes and developments, so if you aren’t signed up with your trade organization or law firm for updates, I would recommend you sign up or email alerts.

3. Price Increases

As mentioned above, the various supply chain issues that have occurred could very well drive up the pricing for some materials along with delaying their availability.  The pricing of other services could also increase.  Some contracts may have language that addresses these situations.  There are strategies to address this as it occurs on projects even when there isn’t a global pandemic, and it is likely going to be a significant issue with some contracts depending on the materials required and where they were sourced from.  Again, it is important to check the contract and discuss with your attorney to determine the best approach if this does become an issue, and what documentation would be needed so you can make sure you start collecting it.

4. Upcoming Contracts and Bids

This is short one but consider both above items with any contracts that have not been signed yet, upcoming bids, and contracts that may not have started yet.  Addressing these possible issues now might save you some trouble in the future.

5. Invoicing and Accounts Receivable

Get your invoices out as quick as possible and watch your accounts receivable.  Your job owners, general contractors, or whoever you’re working for could be going through cash flow issues you are unaware of.  If you have old AR or know you’re working with a slow-payer, now is the time to address those issues before their balances get too large.  Also consider upcoming contracts and which ones may be more of a risk than others from a payment standpoint and start planning on how to address those challenges.  How much credit are you willing to extend, when do you need to stop work, etc.?

If you need assistance, please reach out.  Construction is shut down in some states, while others have imposed various restrictions, and in some cases job owners are stopping or delaying projects, so there’s a lot to consider right now.  Planning ahead will give you the best chance of making it through any challenges as they come up, and even if we aren’t experts with your specific situation, we can help put you in touch with someone depending on the issue.  If you haven’t already, I’d suggest signing up for our alerts to keep up to date. 

Topics: Construction, COVID-19

Carlin Culbertson

Carlin Culbertson

With over 15 years in public accounting, Carlin has extensive auditing experience serving a wide variety of clients in various industries, including construction, manufacturing, mining, biotechnology and distribution.