With coronavirus cases on the rise, many states are implementing rules and regulations to help construction professionals work safely. Sites and business owners have to develop safety plans for returning to work. These construction safety plans aren’t free – companies will need to cover costs related to social distancing regulations, the purchase of proper PPE, mandatory temperature checks, and increased sanitization measures.
Here, we’ll look at some of the expenses that construction businesses will need to meet for compliance with COVID-19 regulations, and how to cover the cost.
The costs of construction’s COVID-19 safety plan
It’s great to be back to work. Most construction jobsites across the nation have opened up for business, though under some restrictions. Even so, we’re feeling the benefits of increased productivity. Businesses are starting to gain control of their cash flow again. It’s the start of some normalcy, and it’s good to see.
There have been a few changes to our average workday, however. It’s not exactly like it used to be, with social distancing and staggered schedules becoming more common. In particular, the construction industry has to adapt to these changes, and it can be a challenge. Most construction employees can’t work from home. There are no offices to self-isolate in, and staggering workdays will reduce manpower and productivity by half.
The new regulations have required most companies to come up with plans for heading back to work. These need to be written policies that each employee must be aware of and obey. The plans include social distance rules, the implementation of temperature checking technology, and proper signage.
Policies take planning and manpower to write, and that requires money. Luckily, a company can scale one policy across most of its jobs.
Social Distancing on the Job Site
Before COVID-19, social distancing on the job site would have been laughable. No one is laughing now. The new rules and regulations surrounding our return to work require social distancing whenever remotely possible. For collaborative industries like construction, social distancing can be a real challenge that borders on impossible.
The key to social distancing is proper education and scheduling, but it’s still a challenge. Depending on the task at hand, some trades may have to work together, and there’s no way around that. Some regulations require installing plastic barriers whenever two workers have to be in close quarters. This costs money in time and supplies, and it certainly makes the task take longer.
Jobsites need to designate one area as a break room where employees can maintain social distance as well. Depending on the size of the crew and union regulations, that might have to be a very large space. It could even require renting a tent.
Also, someone needs to be around to monitor the breaks for proper social distancing, taking that person away from their regular duties. These are additional costs that contractors are shouldering.
One contractor reported that he’s now scheduling twice the amount of time that he used to for taking the same deliveries. Social distancing at elevators and other pinch points has increased the unloading time by 100%.
Another contractor brought up the cost of materials, keeping the material supplier in mind. If the time frame doubles on every site, suppliers deliver half as many loads in a day. That’s a 50% reduction in business from social distancing alone.
Add in sanitization costs on their vehicles and offices, and the cost of delivering materials will go up.
Cost increases from PPE
You might as well look at Personal Protective Equipment (PPE) like a materials cost. The challenge is it takes a lot of good, proven data to estimate how many masks and gloves you’ll need on a job. You need data, but you also need supply, and N95 masks are still hard to come by.
Some suggestions from OSHA and state regulations suggest other means of environmental control to minimize the need for N95 masks outside of social distance situations.
According to those agencies, construction sites should rely more on air scrubbers, HEPA filters, and increased dust control measures. This is to save N95 masks for situations where close contact is unavoidable.
These additional measures result in rental fees, materials costs, man-hours for setup, and other draws on the bottom line.
Temperature-checking equipment and programs are also a significant expense. To best incorporate this regulation, some companies are paying contractors to monitor employee temperatures throughout the day.
They establish thermal cameras in bottleneck areas and at the entrance to the site to ensure that no feverish employees step on site.
The alternative to hiring a contractor is buying the equipment and paying an employee to operate it. While this is an option, it’s still expensive. It may also open a company to liability that might not be worth it in the long run.
Sanitization takes a new meaning
Before, sanitization meant cleaning up hazardous spills and getting the new guy to sweep the deck throughout the day. Under construction’s new COVID-19 rules and regulations, the process and costs are far more extensive.
Hand-washing stations are now required on most construction sites across the nation. This is a significant challenge on sites that don’t even have running water yet. The company owner has to buy or rent stand-alone, self-contained water systems and set them up in designated areas. This is yet another added expense.
Hand sanitizer is in higher demand than ever. Most projects are now required to have hand sanitizer stations set up throughout the site. It needs to be visible, accessible and maintained.
When you consider how difficult it is to keep hand sanitizer in stock in a store, you can imagine how expensive it is to have several stations set up on a multiple-story project.
The sanitization of tools, surfaces, vehicles, and bathroom facilities are also new norms for companies that want to stay in compliance. Someone needs to sanitize break rooms and other employee spaces right after use. Construction companies are also encouraging employees not to share tools.
“Make Me”: The high cost of non-compliance
Construction professionals that plan to head back to work without taking COVID-19 regulations seriously could find themselves in some very hot water. Not following the rules put in place could result in fines — big ones.
- In March 2019, when only essential construction was open, NYC put penalties of $10,000 per instance in place.
- By late May, Philadelphia inspectors were patrolling construction sites looking for violations that amount to $2,000 per instance.
- In Michigan, companies that knowingly and willingly violated state Occupational Safety and Health regulations were susceptible to a $70,000 fine per day.
Those penalties are the costs we can quantify. A site in violation of a state order could find themselves in worse trouble. Building inspectors that witness violations are not likely to step foot on a site, making it far more difficult for projects to continue at a profitable rate.
One contractor I spoke with told me that he’s been on some job sites where all they’ve done is add a few sinks and some bars of soap. The GC made no requirements for social distancing or sanitization. Outside of some rather lax states’ regulations, this approach is likely to throw some red flags.
On top of the inspection issues and fines, violations can result in the complete shutdown of a construction site for 14 days at a time. That’s a cost that’s not easily accounted for, and its impact on a job site is significant.
In most cases, those two weeks can be the difference between profit and loss. They can significantly increase the amount of time it takes for contractors to get paid and create positive cashflow in the wake of these increased costs. In some cases, it could even lead to a bankruptcy on the job site.
Covering COVID-19 Safety Costs
It’s not all doom and gloom, though. The article did start by mentioning the light at the end of the tunnel. There are some ways you can try to cover some of these costs so they don’t eat up all of the profit you’ve built into a job.
Indirect losses are harder to quantify, so they’re harder to plan for. Direct costs like PPE are easier to manage.
Use EIDL Funds for PPE & safety expenses
Currently, Paycheck Protection Program funds aren’t forgivable if used for PPE, but the SBA does offer a lesser-known option. The Economic Injury Disaster Loan (or EIDL for short) program allows you to apply for a loan up to $150,000, and its funds can pay for general operating costs.
Speak to your accountant to determine if this option works for you.
Ask the GC or Owner to cover the cost
Ultimately, a fine and delay on a job site will cost the GC or owner, so why not try to put the burden on them to furnish PPE? Instead of paying for your crew’s PPE out of your pocket, speak to the GC or owner to see if they’ll supply the protective equipment and sanitization materials.
Build COVID-19 cost into construction estimates
Since some jobs will require more equipment than others, carrying the costs as overhead doesn’t make much sense.
If regulations now require these extra costs, it makes sense that the cost of doing business should go up. Building the costs of PPE and rental equipment into your estimates is one way to make sure you’re not shouldering the burden yourself.
Educate your employees
While not everyone takes social distancing and PPE seriously, you should educate your employees about how important it is at work. Their mistakes can result in fines that amount to more than their salary.
Educating them on your safety plan is the best way to ensure your company avoids getting hit with extra costs and expensive penalties.
Protect your payments
Not only has COVID-19 increased the cost of construction safety compliance, but it has also increased the risk of non-payment and payment delays. If you’re not getting paid for your work, it’s hard to cover your expenses.
Since a COVID-19 safety plan will require extra costs, it’s even more important to protect your payments. Protecting your lien rights will get you paid faster and help maintain positive cashflow.
The Bottom Line: Protect your bottom line
When you’re increasing the amount of money that you have to float on a job due to new regulations, it becomes even more critical to protect your payments. If your cashflow is starting to slow down due to payment issues, these regulation costs will stunt your company’s growth and spell disaster.
Start sending preliminary notices on all of your jobs. You’ll be letting the paying parties know who you are, what your job is, and that you know your rights. This is a professional first impression that the decision-makers will pay attention to. In most states, they are required to protect your right to file a mechanics lien.
Filing a mechanics lien for cash owed to you is the fastest way to get paid for money owed to you in the construction industry. If you’re not protecting your payment rights, you could be leaving cash on the table and hurting your business.