Most of the construction industry involves people venturing out, interacting, moving things around, and engaging with a million facets of the industry on a daily basis.
The coronavirus crisis has shaken the construction industry to the core. Most construction companies are either worried about the well-being of their employees or not being able to complete projects on time due to a lack of labour and material.
Once the crisis is over, construction companies will move to deal with the spillover financial impacts that it has left in its wake. Most of the construction industry involves people venturing out, interacting, moving things around, and engaging with a million facets of the industry on a daily basis.
With the lockdown in effect, most of these activities weren’t possible. No wonder the construction industry came to its knees during the crisis and is still reeling from its effects.
Many parties who are on the paying side of the construction would want to manage claims in a way that benefits them. Owners who are supposed to pay general contractors and general contractors who have to pay subcontractors would show opportunistic intentions to gain a financial advantage (sometimes at the expense of others). Parties responsible for paying might also choose to pay gradually over the course of time.
For instance, the projects that have been delayed but have not been pushed significantly ahead of their contractually-required deadline because work is ahead of schedule before being delayed. This kind of project would make it difficult to extract delay damage funds. and if you seek finance for your construction projects, you can consult with a construction finance broker in the covid times.
There will be instances when projects will fail and get taken over by a lender, leading the contractor and subcontractor to fight over who recovers what.
If you are on the receiving end of it, you should seek out receivables no matter what. In a good economy, receivables are as good as cash. But in case of a bad economy, you should let go of this notion. You must perform a review on a weekly basis and should be focused specifically on how much amount is due for each project.
Not to mention, the amount left to be earned for a specific project as more work is performed, as well as the ageing of the receivables, should also be considered.
Lien and bond claims must be made early regardless of whether the assertion of these legal rights might cause a negative reaction for other contracting parties. If you have lien or bond rights, you should learn to preserve, pursue, and defend against lien and bond claims.
You should not only focus on preserving and asserting your lien and bond rights but preserving and asserting your lien defence.
You should also carefully and thoroughly review your contracts (both the new ones and the ones already in place). This will help you ensure a few things: that everything is in compliance with all the contract requirements, that everyone follows the notice provision, and that they are familiar with the dispute resolution process.
You should also familiarise yourself with government policies for financial assistance. For instance, the Small Business Administration (SBA) offers an emergency funding program that has been in place before the Coronavirus outbreak.
Another important thing to remember is to know your customer. Knowing your customers is important for two reasons: if you are performing work for an owner or upper-level contractor, then you are effectively advancing your credit. Working with someone you don’t know is a risky endeavour in today’s times.
Secondly, the entire construction industry is based on contracting chains. More often than not, the party you are legally working with is different from the party that you are ultimately working for. Knowing who you are working for and with will help you successfully assert payment claims and lien and bond claims.
Lastly, know that cash is king. With cash on your side, you have the ability to weather the storm as well as the ability to take advantage of the opportunities that arise.
The financial issues of coronavirus will become uppermost once the health issues and the projected delays are addressed. In truth, moving past the curve and managing, preserving and defending claims of the lenders, construction owners, contractors, and suppliers will be supreme. This can be managed if the parties remember the lessons learned during the 2008 financial crisis, and that will help them move past the trouble and get ahead of the curve.
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