For many contractors, the last 10 years have been pretty good, and it looked like the momentum was going to continue through 2020 and even into 2021…then COVID-19 hit! You should take three steps now to help offset the negative impact this situation is causing:
Re-evaluate the factors you use in your pricing / bidding
- Direct labor costs could be impacted by productivity changes due to manpower availability, additional time for putting on and removing PPE, sanitizing processes, maintaining appropriate physical distancing among other changes.
- Direct material costs could be impacted by supply chain disruption which can impact production schedules, material cost escalations and even material availability.
- Indirect costs including labor burden, equipment burden and overhead burden should also be evaluated to consider the impact of fixed and variable cost changes as a result of COVID-19. The factors used to calculate burden rates may have changed since the factors were originally calculated. Annual direct labor costs and hours, equipment repairs, shop materials, idle time and overhead factors based on annual revenue are just some examples.
Manage change-orders on existing work
Review contract language to evaluate eligible and appropriate changes to the owner’s contract for schedule changes, changes in costs and even changes in availability of specified equipment. Also be prepared to manage any change orders between general contractor and subcontractors. Also review outstanding purchase orders.
Accurate reporting is always important and the impact on the work in progress schedule should be updated to consider the change in the estimated costs to complete considering the items above. Updating company budgets and re-evaluating overhead costs should also be part of the current tasks.
Construction is a challenging industry performed by skilled men and women in all types of situations. COVID-19 has impacted the world and the way work is conducted. The construction industry has always faced adversity with innovation, a can-do attitude and helped to re-build our communities.
Our teams at BerganKDV are rallying together and working around the clock to ensure we’re up and running so you can be up and running. Whatever situation you’re faced with, at any time, you can call our task force and we’ll get you the answers, the listening ear and/or the quick support you need: 888-356-2295 or firstname.lastname@example.org.