When the total spending made to the construction industry was already dipping down by 1.3 percent in February 2020, the outbreak of COVID-19 has left a devastating impression on the construction industry.
In other words, with this entire crisis created around, the construction industry is not likely to withstand the situation that occurred out of the COVID-19 spread. Moreover, the loss could be measured to be a dip of 0.6 percent and 1.8 percent for residential and nonresidential construction respectively. And all this loss has occurred, post increase in the profits by 2.8 percent back in January 2020.
However, the data which has been reported during February 2020 signifies the loss which construction industry is going to face in the upcoming months. Also, shutting down some major construction projects and limited construction activities (essential construction) across multiple states of the United States is something that will lead to major economic loss, specifically to the construction industry in the United States.
But still, the idea of continuing the construction projects that fall under the category of essential construction activities can prove to be of great help in preventing the situation of the complete shutdown and deter bigger losses.
Nevertheless, working on the prospective growth of the construction industry in the United States and other parts of the world, there is an immediate need to benchmark the revival strategies and necessary steps to reopen sites post COVID-19.
Looking at the present effects of COVID-19 on the United States, the length of the crisis and challenges to the construction industry is likely to deepen.
However, dealing with all the uncertainty needs advanced and accurate planning of the revival strategies. In simple words, the construction industry needs to define a process that can help to get over the issues expected damages to the capital resources, recession, productivity, supply chain, funding, taxes, and more.
Interested in saving resources and loss? Read our blog sharing 7 important contract provisions that can help you deal with legal measures to avoid loss of liquidity.
Here we have a short revival guide for multiple aspects of the construction industry which are likely to be affected with the COVID-19.
Working in proximity to the subcontractors and adhere to the guidelines of State and Federal government to have a better control
Mapping the low revenue environment concerning profitability, cash flow, credits, and taxes.
Locate the marginal investments and discretionary expenses for reducing spending.
Divesting the assets which are underperforming or find prospective chances of mergers to revive cash flow.
Consider the scope of refinancing the debts and keeping assessment of labor costs, contingencies, and tracking of activities in contrast to demand.
Last but not the least, sticking with the guidelines and advice of the Government to reinforce worker safety plans while keeping the critical projects in running state.
Confirm the safety of the employees with special considerations for sanitation. Moreover, assess the scope of remote work or increasing distance between workers to ensure good health for all.
Forward pay subcontractors for the sites which have been shut down for encouraging the containment.
Emphasize on risk mitigation practices for the employees who need to work on the site by encouraging campaigns to inform them and reduce the chances of any further spread even if the things are under control.
Aim for potential workforce opportunities to cut the labor costs and keep track of the movements of the employees.
Lastly, try aiming to locate all the functions which can be outsourced to trim the additional expense on running the operations.
Operations & Supply Chain
Consider planning with local, state, and federal authorities along with your subcontractors to prepare for the work practices.
Try to improve the transparency within the supply chain by working on reporting functions to have better control over the resources.
Keep a real-time check on the supply chain and all critical resources, especially if your areas have seen major loss post COVID-19. (Using a tool like ProjectPro that runs on Dynamics 365 Business Central capabilities can help)
Locate alternative suppliers to avoid any fluctuation of costs due to dependency.
Make sure you have complete control and planning in place to work on cybersecurity and resilience for keeping command on susceptible information and resources.
Take advantage of automated solutions to reduce manual effort and improve productivity. Automation of repetitive tasks and investing in autonomous material could help to reduce labor costs and upgrade the safety standards at the site.
Revival in Finance
Extend your approach to finance-related documents. Make sure you have all the documents to justify the impact of liquidity & credit crunch on the present situation as well as the future.
Make sure you have a well-defined strategy to deal with impairment and disclosure. For those construction firms who had their financial year ending in January 2020, could consider any implications as Type 1 subsequent event.
Strategize for risk-related disclosures which must follow the events that may impact the present and future judgment that may also include estimates contributing to the financial reporting such as receivables, debt covenants, etc.
Maintain communication with project stakeholders and lenders to avoid any loss to the project and encourage rescheduling of debt or locating alternatives for finance.
Tax & Trade
Assess & plan major tax-related changes provisioned by the government that can affect your business and employees.
For those having extensive supply chain coordinated from international locations should restructure their supply chain to manage tax and transfer related costs. Make sure all implications related to custom, duties, finding alternative sources, or internal sourcing must be rectified.
Make sure you follow the trade and customs related impact if operating globally. It can help you carefully repatriate cash from subsidiaries located at international locations.
The business that already has access to strong balance sheets and reports could try to locate M&A opportunities. Locate tax benefits due to fiscal stimulus. The terms could include a reduction in tax, delay of TCJA provisions, and addition of depreciation, amortization under Section 163(j) purposes or for any deferred R & D expenditures.
Make sure you address mobility or immigration-related issues that employees may deal with while moving in or out of COVID-19 affected areas. Any implications related to tax on mobility must be considered to avoid any unintended consequences with taxes.
Make sure you follow the plan to work on taxes based on jurisdictions to avoid tax-related and operational issues.
Adjust your cash flow by assessing the vulnerable countries and reassess the stranded assets and cash in those areas for on-going and strategy-based repatriation.
Steps to Consider for Safe Reopening of Sites
With every construction firm looking to return to work immediately once the COVID-19 situation ends, it is very important to put together the steps that can help with a productive and safe start to the activities.
However, it still needs an intelligent approach to resources like labor and technology to land for better opportunities. Some of the essential steps which every small, mid-sized or large construction firm needs to follow include:
- Calling limited staff of workers and other employees to the site as a part of safety planning.
- Users could take advantage of project management and accounting software based on SaaS technology like ProjectPro which can help stakeholders to get remote access to the information through the cloud.
- Construction firms could also take advantage of technology like Business intelligence and BIM to manage the staff and other important activities.
- Teams who are working on-site or in the offices must be trained for effective coordination.
- Last but not least, keep a check for the continuous engagement within the staff and workers by working on the lines of communication either it be using the app to access data or tracking activities.
With COVID-19 affecting every construction company, the pipeline to accommodate past projects and deal with the existing ones also needs to be altered. Though issues like disruption to the funds and supply chain will persist, maintaining business continuity is the most significant aspect to consider. Therefore, construction firms must stick with these 5 steps or tips while returning to the sites to have confirmed productivity.
The unfolding of the crisis has deeply impacted the construction industry. Though the effects may vary based on the segment in which the construction firm sits, the construction firms which do not recline under the federal contracts are likely to experience the hardest hit.
Apart from this, the responsibility to keep up with subcontractors and planning the safety of workers are certain factors that can define the recovery post-COVID-19. However, the need to preserve the long term business objectives for construction firms needs to locate advantage by planning changes and following policies and laws that can help prevent the damage.
Besides, the use of technology like ProjectPro which is based on the capabilities of Microsoft Dynamics 365 Business Central could be a big advantage that can help in keeping track of contracts, data, finances, and other information that is vital to protect from loss.
Stay updated on all the effects, remedies, and guidelines to lead construction business amidst COVID-19. Read our series of blog on COVID-19. Or help keep your construction business in the right order with ProjectPro, Contact Us Today!