As the COVID-19 outbreak spreads, the construction industry is on high alert. The coronavirus is already interrupting or delaying supply chains from Asia and around the world. Construction businesses are losing labor to quarantines. State and local officials across the U.S. have begun issuing stay-at-home orders, and shutting down everything but “essential businesses.” Restaurants, bars, gyms, and other businesses are being forced to close. But what does a shutdown or shelter-in-place order actually mean for contractors and suppliers? Is construction considered an essential business?
What does “essential business” mean?
The federal government has their own definition for critical infrastructure. While they don’t require states to follow their guidelines, most states base their definition on CISA’s list of critical infrastructure sectors.
The Cybersecurity and Infrastructure Security Agency (CISA), a branch of the Department of Homeland Security (DHS), maintains a list of what they consider “critical infrastructure sectors.”
CISA issued coronavirus guidelines to help governments and businesses “ensure that employees essential to operations of critical infrastructure are able to continue working with as little interruption as possible.”
These are industries that CISA considers essential:
- Chemical Sector
- Commercial Facilities Sector
- Communications Sector
- Critical Manufacturing Sector
- Dams Sector
- Defense Industrial Base Sector
- Emergency Services Sector
- Energy Sector
- Financial Services Sector
- Food and Agriculture Sector
- Government Facilities Sector
- Healthcare and Public Health Sector
- Information Technology Sector
- Nuclear Reactors, Materials, and Waste Sector
- Transportation Systems Sector
- Water and Wastewater Systems Sector
What about construction?
The construction industry didn’t specifically make CISA’s list. However, when you dig a little deeper, it’s clear that construction is an essential part of each one. The transportation sector is made up of highways, rail systems, and mass transit infrastructure. The water systems sector includes pipelines, plumbing, and wastewater treatment plants. The healthcare sector needs hospitals. And so on.
Every single critical sector needs contractors and suppliers to provide materials and build facilities that they use to deliver essential, life-sustaining services.
Construction industry leaders have called for government leaders to add construction to the list of essential businesses. According to a joint statement from the CEO of the Associated General Contractors of America (AGC) and the President of North America’s Building Trades Unions, “Government officials at all levels should treat the construction industry and the work it performs as vital and essential to the critical industries that must remain in operation.”
In another joint letter, the leaders of three large equipment manufacturing & distributor trade groups asked the Governor of Alabama to expand the state’s definition of “essential:”
“As our nation continues to confront the ongoing and evolving challenges caused by the COVID-19 pandemic, we urge you to consider the essential role that equipment manufacturers, suppliers, distributors, and service technicians play in guaranteeing a steady supply of U.S.-produced food, fiber, feed, and fuel, maintaining our nation’s roads and bridges and other important infrastructure assets, and keeping the nation’s energy infrastructure secure and resilient.”
Construction in critical sectors
In March 2020, CISA published a PDF guide to help identify “essential critical infrastructure workers during COVID-19.” The guide dives into much deeper detail on each critical sector, listing specific positions considered essential during the COVID-19 outbreak, including “staffing operations centers, maintaining and repairing critical infrastructure, operating call centers, working construction, and performing management functions, among others.”
In the guide, they do provide a list of workers they consider critical – but the descriptions are frustratingly vague. Construction work that supports these critical sectors often appear to be an afterthought.
Below are selections from the DHS list of critical jobs that could be considered the work of contractors and suppliers in the construction industry. More often that not, the descriptions simply list workers who “support” activities or infrastructure. An argument could clearly be made that construction projects are an important part of support work. But we really shouldn’t have to work so hard to demonstrate that construction businesses are critical to the safety and security of these industries.
Healthcare & Public Health
Surprisingly, the DHS doesn’t mention any construction-specific operations or work within the healthcare sector. This is especially interesting considering that hospitals across the country are mobilizing contractors and suppliers to build field hospitals.
Law Enforcement, Public Safety, First Responders
- Workers – including contracted vendors — who maintain, manufacture, or supply digital systems infrastructure supporting law enforcement emergency service, and response operations.
Food and Agriculture
- Workers who support the manufacture and distribution of forest products, including, but not limited to timber, paper, and other wood products.
- Employees engaged in the manufacture and maintenance of equipment and other infrastructure necessary to agricultural production and distribution.
- Workers who maintain, ensure, or restore, or are involved in the development, transportation, fuel procurement, expansion, or operation of the generation, transmission, and distribution of electric power, including call centers, utility workers, reliability engineers and fleet maintenance technicians.
- Propane gas service maintenance and restoration, including call centers.
Water & Wastewater
Like the healthcare sector, the DHS doesn’t specifically list any construction as essential business in the water sector. The guidelines only list “employees needed to operate and maintain drinking water and wastewater/drainage infrastructure.”
Transportation and Logistics
- Workers responsible for operating dispatching passenger, commuter and freight trains and maintaining rail infrastructure and equipment.
- Workers who support the operation, inspection, and maintenance of essential dams, locks and levees.
- Workers who support the operation, inspection, and maintenance of essential public works facilities and operations, including bridges, water and sewer main breaks, fleet maintenance personnel, construction of critical or strategic infrastructure, traffic signal maintenance, emergency location services for buried utilities, maintenance of digital systems infrastructure supporting public works operations, and other emergent issues.
- Workers such as plumbers, electricians, exterminators, and other service providers who provide services that are necessary to maintaining the safety, sanitation, and essential operation of residences.
- Support, such as road and line clearing, to ensure the availability of needed facilities, transportation, energy and communications.
Communications & Information Technology
- Maintenance of communications infrastructure – including privately owned and maintained communication systems – supported by technicians, operators, call-centers, wireline and wireless providers, cable service providers, satellite operations, undersea cable landing stations (including cable marine depots and submarine cable ship operators), Internet Exchange Points, and manufacturers and distributors of communications equipment.
- Engineers, technicians and associated personnel responsible for infrastructure construction and restoration, including contractors for construction and engineering of fiber optic cables
- Installation, maintenance and repair technicians that establish, support or repair service as needed.
- Data center operators, including system administrators, HVAC & electrical engineers, security personnel, IT managers, data transfer solutions engineers, software and hardware engineers, and database administrators.
- Workers supporting the provision of essential global, national and local infrastructure for computing services (incl. cloud computing services), business infrastructure, web-based services, and critical manufacturing
- Workers supporting communications systems and information technology used by law enforcement, public safety, medical, energy and other critical industries
Well, would you look at that. First time construction is specifically mentioned!
Other Community-Based Government Operations and Essential Functions
- Workers to ensure continuity of building functions.
- Workers necessary for the manufacturing of materials and products needed for medical supply chains, and for supply chains associated with transportation, energy, communications, food and agriculture, chemical manufacturing, nuclear facilities, the operation of dams, water and wastewater treatment, emergency services, and the defense industrial base. Additionally, workers needed to maintain the continuity of these manufacturing functions and associated supply chains.
Workers who “maintain the continuity” of manufacturing functions is quite vague. It seems pretty logical that construction on a manufacturing plant or warehouse is necessary to keep it running.
The list includes “workers at nuclear facilities,” which could theoretically include a contractor or material supplier working on a construction project at the facility. But again, like so many other descriptions, this is extremely vague.
This section doesn’t list any construction-specific activities.
- Workers supporting the chemical and industrial gas supply chains…
- Workers supporting the safe transportation of chemicals, including those supporting tank truck cleaning facilities and workers who manufacture packaging items.
Defense Industrial Base
- Workers who support the essential services required to meet national security commitments to the federal government and U.S. Military. These individuals, include but are not limited to, aerospace; mechanical and software engineers, manufacturing/production workers; IT support; security staff; security personnel; intelligence support, aircraft and weapon system mechanics and maintainers.
- Personnel working for companies, and their subcontractors, who perform under contract to the Department of Defense providing materials and services to the Department of Defense, and government-owned/contractor operated and government-owned/government-operated facilities.
Do states consider construction essential during COVID-19?
Here’s the problem: Each state defines essential business differently. Neighboring counties or towns may even disagree, or use different language entirely. The DHS doesn’t require any state to use their guidelines, though many do reference it. But, perhaps because the federal government’s list of critical work is so vague, many local officials prefer to be more specific.
Below are some examples of the rules that states have adopted in response to the coronavirus.
Arizona, California, Louisiana, Texas: Construction is essential business
In Arizona, Governor Doug Ducey released a list of essential services that are allowed to continue operating during the state’s stay-at-home order. Arizona allows construction as part of “essential infrastructure operations,” including, but not limited to, “construction required in response to this public health emergency, hospital construction, construction of long-term care facilities, public works construction, and housing construction…”
California uses the DHS list, but gets a lot more specific. According to CA, construction activities are essential. Under Essential Workforce, the state includes “Construction Workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction).”
Illinois considers construction essential, too. According to Executive Order No. 10, “Essential Infrastructure includes, but is not limited to…construction (including, but not limited to, construction required in response to this public health emergency, hospital construction, construction of long-term care facilities, public works construction, and housing construction).”
Texas declared coronavirus a public health disaster, but stopped short of issuing a statewide stay-at-home order. Instead, the declaration provided guidelines to help limit the spread of the disease.
The City of Austin is under a stay-at-home order (as is Travis County) with only essential businesses and services allowed. While Austin initially only allowed “some types of construction activities are Critical Infrastructure,” and shut down commercial and residential construction projects, the city reversed that decision on April 2, 2020. Austin now considers all construction to be essential business.
New York, Pennsylvania: Construction isn’t life-sustaining
In Pennsylvania, the governor signed an order to shut down all non-life-sustaining business, beginning on March 23. The governor’s order says “No person or entity shall operate a place of business in the Commonwealth that is not a life sustaining business regardless of whether the business is open to members of the public.”
The order specifically states that construction is not considered life-sustaining. Pennsylvania does follow the DHS guidelines; if work isn’t specifically mentioned by the DHS, it’s not considered “life-sustaining.” As we already covered, the DHS doesn’t actually list many construction activities specifically. For contractors and suppliers that are doing work to support “life-sustaining business,” it’s probably worth submitting a waiver request to keep working.
New York initially considered construction an essential business, but Governor Andrew Cuomo walked that back. His executive order on March 27th shut down all “non-essential construction” and listed what the state currently allows:
- All non-essential construction must shut down except emergency construction, (e.g. a project necessary to protect health and safety of the occupants, or to continue a project if it would be unsafe to allow to remain undone until it is safe to shut the site).
- Essential construction may continue and includes roads, bridges, transit facilities, utilities, hospitals or health care facilities, affordable housing, and homeless shelters. At every site, if essential or emergency non-essential construction, this includes maintaining social distance, including for purposes of elevators/meals/entry and exit. Sites that cannot maintain distance and safety best practices must close and enforcement will be provided by the state in coordination with the city/local governments. This will include fines of up to $10,000 per violation.
- For purposes of this section construction work does not include a single worker, who is the sole employee/worker on a job site.
Governor Cuomo’s original order allowed “Construction, including (a) skilled trades such as electricians, plumbers; (b) other related construction firms and professionals for essential infrastructure or for emergency repair and safety purposes.”
Massachusetts: Construction requirements vary
Massachusetts also issued an emergency order limiting work that’s not part of what it calls “COVID-19 Essential Work.” Fortunately for contractors and suppliers, this includes “Construction Workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction).”
However, as we mentioned, rules aren’t uniform across states – or even within them. The City of Boston took a step further, shutting down all non-essential construction projects, and requiring them to secure project sites by March 23. The city only permits “essential construction:”
- Emergency utility, road or building work, such as gas leaks, water leaks and sinkholes
- New utility connections to occupied buildings
- Mandated building or utility work
- Work at public health facilities, healthcare facilities, shelters, including temporary shelters and other facilities that support vulnerable populations
- Emergency work necessary to render occupied residential buildings safe and healthy
- Work immediately necessary related to life safety systems
- Work which ensures the reliability of the transportation network
- Other work necessary to render occupied residential buildings fully habitable
Contractors & Suppliers: Time to Act
The construction industry has already seen a significant impact from the COVID-19 epidemic, and it’s likely to get worse before it gets better. As more states, cities, and municipalities restrict economic activity to “essential services,” construction businesses need to be ready. Contractors and suppliers should take specific steps now to protect their payments and limit the coronavirus’ financial effect on their business.
What to do if construction is canceled
If your construction projects just got shut down, the best thing you can do right now is file a mechanics lien. We’re in uncharted territory here. The last thing you want is for construction to come back online, only to find out that you missed the filing deadline to protect your payment.
If you need cash, take advantage of SBA loans and other cash help for construction businesses. Governments and financial institutions are acting quickly to inject cash into the economy and support struggling businesses. Do what you can now to access funds before they dry up.
What to do if you’re still working
If you’re working in a state or city where construction projects are still going full steam ahead, then take full advantage of it. And take every step you can to make sure you get paid for your work — and get paid faster. The only thing that’s certain right now is that nothing is certain. Set up a strict payment process to send preliminary notices, invoice reminders, demand letters, and other documents on every single project. Pay close attention to your deadlines to file a mechanics lien or bond claim.
In the middle of the COVID-19 chaos, the contractors that do the best job preparing, communicating, and documenting are the ones that will be first in line to get paid. They’re the ones most likely to survive.
More coronavirus resources for construction businesses:
- File Your Mechanics Lien Before Coronavirus Impacts Your Job
- Contractor Guide to Small Business Administration (SBA) Loans & Cash Help During Coronavirus
- COVID-19: How to Get Paid During Project Suspensions and Terminations [Webinar]
- How Contractors Can Survive Coronavirus [Webinar]