The arrival of COVID-19 created new and unanticipated circumstances for individuals and businesses. The announcement of stay at home orders and forced business closures led to changes that have had a devastating impact on the Texas economy. Individuals were no longer able to go out and frequent their favorite establishments while many businesses were shut down or operating under restrictive guidelines. The changes dealt a devastating blow to the economy as state unemployment skyrocketed to just over 12% by the end of April. Although some businesses were allowed to continue operating, demand for products and services declined rapidly. Unfortunately, the construction industry has not been immune as the number of canceled projects rises. According to the Associated General Contractors (AGC) COVID-19 survey, 36% of projects scheduled between June and August 2020 have been canceled. This has left many construction contractors with difficult business decisions to make. To help clients, prospects, and others, Calvetti Ferguson has provided a summary of the key findings below.
About the Survey
The survey was conducted online between June 9th – June 17th, 2020, and includes 179 total responses from companies located in the southern U.S. Their primary business focus includes building, highway, utility, and federal construction, and 14% of respondents self-identified as providing “other” construction services.
June COVID-19 Survey Findings
Given the current uncertainty, it is no surprise that some projects may be delayed or canceled. However, the question remains just how many have been impacted. According to the report, 42% had a project delayed in May or earlier, while 24% had projects scheduled to start in June canceled, 15% had projects scheduled to start in July canceled, and 11% had projects scheduled to start in August canceled. The good news is 40% of respondents have not experienced any project cancellations.
Cause of Project Delay/Cancellations
To understand the underlying reasons why projects were impacted, the survey inquired about the reasons for the change. According to the report, respondents cited the following as reasons: Reported owner concern about COVID-19 surrounding the project (35%), Owner’s expectations of reduced demand (35%), Loss of private funding (25%), To comply with halt orders for non-essential activity (15%), and Loss of tax revenue (10%).
Other Project Disruptions
The survey also wanted to understand if there have been delays caused by worker issues/concerns. The report revealed that 21% of respondents experienced delays due to shortage of materials, parts or supplies, 20% due to shortage or craftworkers, 19% due to news a jobsite has been potentially infected, 9% shortage of personal protective equipment, and 6% difficulty securing financing to cover cash flow needs.
Given the reduction in demand, the survey wanted to understand the corollary impact on worker headcount. It was discovered that 20% furloughed or terminated employees in May or earlier, 8% furloughed or terminated employees in June, and 15% anticipate needing to furlough or terminate employees in the next four weeks. On the bright side, 21% added workers in May or earlier, 11% added workers in June, and 16% expect to be adding workers in the next four weeks.
Return to Normal
As there are more cancellations and employee health and other risks on the jobsite, the survey asked when business is expected to return to normal. It was found that 34% believe it will take more than six months, 11% four to six months, 10% two to three months, and 16% do not know. It is interesting to note that 27% have a volume of business that matches or exceeds last years’ levels.
The survey results illustrate just how deeply construction contractors continue to be affected by COVID-19. Although many states have progressed through initial reopening, it is still unclear what impact this will have long term. As the conversation turns from survival to recovery, construction contractors should focus on planning for the months ahead. If you have questions about the information outlined above or need assistance with another issue, Calvetti Ferguson can help. For additional information please click here to contact us. We look forward to speaking with you soon.