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COVID-19 Industry Insights: Construction

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This BP Blast is the first in a new series of industry-related COVID-19 updates. In the coming weeks, additional articles will be published that highlight more of our core industries. To access all of our COVID-19 coverage, please visit our resource library online.

March 26 COVID-19 Update for Construction:

Construction in Washington State is now firmly in uncharted waters with the emergence of the coronavirus pandemic. How construction companies respond changes almost by the hour. Information varies daily on what is and is not an “essential” function, state and federal relief program information is flooding your inbox, and the news cycle has never been more intense. We are monitoring all of these inputs and will be providing regular updates as the local and national response to the pandemic further unfolds. Here is what we know, and what we will be learning more about:

Change in Governor’s Directives:

In Washington State, Governor Jay Inslee released a memo on March 25th clarifying his “Stay Home, Stay Healthy” directive, specifying what is essential in construction and what is not. This dramatically changes the outlook on construction activity in Washington State. Most non-emergency construction activity appears to be suspended for at least two weeks. This includes non-emergency road and highway projects, non-emergency residential construction, and even suspension of activities for IT related development that does not support essential business in the state of Washington. For a summary of what is essential, click this link.

What Construction Companies Can Do:

Work on job-sites around the region is rapidly being suspended. Far be it from us to advise you on how to manage the logistics of this unprecedented de-mobilization in construction, but we are here to help however we can. These practical ideas should be taken into consideration as you work through this (let’s be honest) nightmare:

–   Take a risk-based approach to reviewing contract documents as it relates to work stoppages and your rights as a general or subcontractor. Know your rights and responsibilities for cost overruns and project delays.

–    Review insurance policies for delays and interruptions; consult with your broker on key findings or concerns.

–    Review contract documents for force majeure and other legal text; consult with your legal counsel as needed, including providing appropriate notice to owners.

–    Ensure you have the ability to capture costs for delays and de-mobilization in the general ledger and job cost detail in a distinct classification – this could be very important down the road.

–    For a helpful checklist on preparing for a slowdown/shutdown, click here.

Employee Pay, FMLA and Washington State ESD Guidance:

The first thing on many contractor’s plate is how to compensate employees in this environment. The Families First Coronavirus Response Act mandates paid sick leave and expanded family and medical leave for COVID-19 related employee absence. For more information on the Act, visit Berntson Porter’s summary. The Washington State Employment Security Department has a number of resources for your employees who are unable to work at this time:

–    If your employees are or were directly impacted by COVID-19, ESD has adopted emergency rules as summarized here.

–    If employees are laid-off as a result of Governor Inslee’s stay at home order, they are also eligible for unemployment benefits. Guidance on how to apply for benefits under those circumstances is also found at the same link.

Employer concerns over COVID-19 are not limited to just compensation. For further considerations, including employees who will continue to work during the Stay Home directive, this FAQ resource is provided by Archbright, a respected local workplace consulting group.

Federal & State Tax Guidance, Relief & Stimulus:

The “Coronavirus Aid, Relief, and Economic Security Act” (CARES) stimulus package will boost the economy with over $2,000,000,000,000 in relief. (A trillion is a lot of zeroes). There will be stimulus in the form of a “recovery rebate” for individuals, loss carrybacks for businesses, expanded small business loans, loan subsidies for businesses, grants, and much more. For tax-focused summaries of what is anticipated right now in the CARES Act, see the following links:

  • Berntson Porter’s CARE Act Newsletter
  • The IRS announced last week that most Federal Tax filing deadlines have been extended by 90 days. For details, visit our update here.
  • Several state and local agencies are providing tax relief to businesses impacted by COVID-19. This information is also changing frequently. Click here to access our summary newsletter from March 19th.

Small business loans:

In addition to the programs that will become available under the CARES Act, the Small Business Administration (SBA) already has emergency loan programs available to small businesses impacted by COVID-19. With generous repayment terms and low interest rates, this program may be an opportunity for smaller contractors impacted by the pandemic. For a summary of the program’s details, visit our recent newsletter.

Other:

While most construction company owners and financial managers are scrambling to understand all of the murky facts and information, don’t lose sight of taking care of yourself and your families. You are busy with the logistical challenges of job site suspensions all while anticipating legal, accounting, and payroll challenges – you’re looking after your people. Self-care and the health of your family is equally as important, and there are a large number resources online for guidance on this topic. A story published this week in the Harvard Business Review gets to one of the root issues right now – We might be too busy to notice we are subconsciously grieving, and acknowledging it may be cathartic. Read the full article here.

We are in uncharted territory, but together taking these extreme measures will help “flatten the curve” and protect some of the most vulnerable in our state from the virus. There is no crystal ball, but noted construction economist Anirban Basu opined earlier this week that COVID-19 will likely trigger a “short but vicious” recession in the United States, but that we may start to recover as early as the third quarter of 2020.

In the meantime please continue to follow Berntson Porter’s Coronavirus updates and connect with your Berntson Porter representative – we are here to help!