2020 Marcum Northeast Ohio Construction Survey

2020 MARCUM NORTHEAST OHIO CONSTRUCTION SURVEY

BY MICHAEL J. FRANTZ, JR. | FRANTZ WARD’S CONSTRUCTION GROUP Mighty COVID Steps to the Bat

Until recent events, our market was relatively strong. It’s very hard to say at

the moment with so much in flux - post - pandemic respondent

Approximately half of those surveyed recognized the importance of typically ignored force majeure and cancellation provisions in contracts. Unfortunately for many, the failure to negotiate and assess these provisions left those contractors with nowhere to turn when labor dried up due to stay-at-home orders and the general unease of employees. A strong, specific and well thought-out force majeure provision would have enabled those same contractors to recoup not only time, but also the added costs incurred as a result of COVID-19-related delays. Many contractors also recognized the importance, albeit in some instances too late, of a comprehensive insurance program, including business interruption insurance, which would respond to the lost business caused by COVID- 19. Again, a thoughtful analysis of the risks facing the company and the tools available to mitigate those risks would have surely improved many of the negative results contractors experienced as a result of the pandemic. Finally, a streamlined and efficient safety plan is an absolute necessity to help reduce the inevitable COVID-19-related productivity impacts. The concept underpinning all of this is that post-COVID-19 construction professionals should give more thought to the project front-end in order to avoid risk, rather than simply react to the negative impacts of those risks. This will be a change, but if we adjust and adapt to this new normal, there will be no joy in Mudville and Mighty COVID is sure to strike out.

You are minding your own business, enjoying the successes of a generally healthy construction market, and WHACK — you catch a bat right to the face. No, not the animal, but a Cosmic Bat that forces you to adjust and adapt. As Marcum’s 2020 Construction Survey results illustrate, for many in the construction industry, COVID-19 was just that bat. Recent reports confirm the impact already being experienced by the construction industry. Several large domestic and international contractors report significant declines in profits since April. Studies by various trade organizations have found that these impacts are largely attributable to the significant loss of productivity on projects due to the pandemic and will not be short-lived. Much of the available data shows that taking necessary precautions, such as temperature checks, and following COVID-19 protocols, such as social distancing, sanitizing equipment, and strict PPE requirements, caused a roughly 20% decline in productivity by the contractors included in the studies. It appears that these new precautions and protocols are here to stay, ushering in a “new normal” on construction projects throughout the world. Marcum’s 2020 survey results show that most construction professionals are focusing on how to navigate this new normal, rather than trying to avoid it. The majority of contractors identified strategic planning as their top priority in the wake of COVID-19, followed closely by organizational planning and reducing operational costs. So, the question becomes: how do we best implement a new way of thinking in the face of reduced productivity and profits? First, construction professionals must anticipate and account for the lost productivity when bidding projects and negotiating change orders on existing projects. During this period of uncertainty, accurate bidding and estimating is going to be more critical than ever to a contractor’s success on a project. Additionally, those too-often overlooked contract terms and conditions will play a pivotal role in contractor success.

Michael J. Frantz, Jr. Partner , Frantz Ward’s Construction Group 216.515.1624 | mjfrantzjr@frantzward.com

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