They ’ re buying hedges on some of those materials , too , to protect themselves from upward price swings , as has been seen with lumber .
Staying disciplined with bids
Natarelli has been advising his contractor clients to not let shrinking backlogs compel them to bid work too low going forward , especially considering the increased costs , and the increased difficulty of finding labor during the COVID-19 pandemic .
“ One of the biggest challenges our contractors have is they need work , and they ’ re bidding work , so I ’ m having conversations with them about labor and efficiency and increasing pricing on these jobs ,” Naterelli said . “ Now , that ’ s not easy , especially when everybody ’ s running at the jobs . But best-in-class contractors are really trying to maintain the discipline to make sure that they bid these jobs appropriately .”
Reading the fine print
The pandemic , and its continued duration , has also led contractors to read through contracts with a fine-tooth comb and trigger force majeure clauses where they can .
“ The cost of construction is now changing because of all these different precautions ,” said Steven Lesser , an attorney and chair of the construction law and litigation practice group at law firm Becker & Poliakoff , who represents owners . “ Contractors are making COVID-19 claims as to owners saying , ‘ Hey , because of this pandemic , it ’ s a force majeure event and I had to incur additional costs and expense .’”
A sticking point in making those claims , however , is that while owners may extend project timelines , they have been reluctant to cover additional costs or change orders due to COVID-19 . That ’ s caused some contractors to revisit the language in those clauses . “ I think that force majeure clauses are going to have to be more broadly written to pick up pandemics and transmission ,” Lesser said .
Cutting costs
On the business side , contractors have been tightening their belts and settling in for an extended period of slower business .
Marker , for example , has been reviewing health care benefits and policies , and making sure she has a close eye on expenditures going forward . At Rockford , Napper polled employees about wellness benefits , and was able to cut the cost of gym memberships , which staff weren ’ t using during the pandemic . And Goodrich , like others , said cutting business travel and leveraging technology , such as Zoom , for daily meetings , has helped to trim costs .
But Goodrich is also communicating with his investors , bankers and customers to make sure they know where he is , so that if he needs to tap their support , he can , especially if cash flow goes negative in early 2021 .
“ We have a great relationship with our bank , and we haven ’ t had to use our line of credit very often ,” Goodrich says . “ But we ’ ve been communicating with them to let them know what we ’ re doing , and what our strategic plan is .”
16 DITCHMEN • SEPTEMBER 2020