2020 was a challenging year for many industries, including the construction industry. Texas contractors have particularly suffered, with a large number of Lone Star State contractors declaring bankruptcy in the first few months of 2021.
The following Texan construction companies and contractors have already filed for bankruptcy as of April 2021:
Chapter 7 bankruptcy
- Davila General Contractors, Austin (February 9)
- Gulf Coast Asphalt Company, Houston (March 26)
- Lauren Engineers and Constructors, Inc., Abilene (April 8)
- PPG Construction, Dallas (January 19)
- S Gunby Millworks LLC, Houston (April 1)
Chapter 11 bankruptcy
- Allied Equipment, Inc., Odessa (March 18)
- American National Carbide Co., Tomball (March 26)
- Aston Custom Homes & Design, Dallas (February 1)
- Farr Builders, LLC, San Antonio (February 22)
- Greater Houston Pool Builders, Stafford (March 26)
- Steps America, Inc., Frisco (January 15)
- Two Guns Consulting & Construction, Odem (March 9)
- US Construction Services, Dickinson (February 19)
According to a March 2021 Dallas Morning News article, Texas’ building sector has been hit hard by the fallout from the COVID-19 pandemic — specifically commercial building.
Data from the Associated General Contractors of America (AGC) indicated that Texas was still 51,900 construction industry jobs short of its pre-pandemic numbers.
That number far outpaces any other state’s loss — California is second, with 36,200 jobs short. The AGC report states non-residential contractors have dealt with “widespread project cancellations and postponements, soaring materials costs, and lengthening delivery times” during the pandemic.
The Houston area — including The Woodlands and Sugar Land — lost the largest number of construction jobs between February 2020 and February 2021, totaling a loss of 37,600 jobs — a 16% decline. Midland, Texas had the fourth-largest job rate by the numbers, with 11,600 jobs lost — 31% decline, putting it at third overall in percentage.
Odessa, Texas saw the highest percentage construction job decline at 40%. Longview and Laredo, Texas also had large percentage declines: 23% each.
The AGC also released a construction inflation alert in April 2021.
“The construction industry is currently facing an unprecedented mix of steeply rising materials prices, snarled supply chains, and staffing difficulties, combined with slumping demand that is keeping many contractors from passing on their added costs,” AGC stated. “This combination threatens to push some firms out of business and add to the industry’s nearly double-digit unemployment rate.”
The alert also noted that the extreme winter weather that hit Texas in February caused price increases and extended lead times for construction companies. Widespread power failures and broken pipes affected businesses of all kinds in the state.
The AGC concluded its alert with advice to contractors: “While contractors cannot unclog ports or rescind tariffs, they can provide project owners with timely and credible third-party information about changes in relevant material costs and supply-chain snarls that may impact the cost and completion time for a project that is underway or for which a bid has already been submitted.”
Law360 reported in March 2021 that Texas businesses in many industries saw multiple bankruptcy filings in 2020. Houston reported 1,363 Chapter 11 filings in 2020, compared to just 361 in 2019.
Attorneys interviewed by Law360 told them the high bankruptcy numbers aren’t simply COVID-related. They cited the willingness of the Houston judges who handle chapter 11 bankruptcy cases to make themselves easily available to debtors, something that is not true of bankruptcy courts in other locales.
That said, COVID-19 economic fallout is a significant part of the equation.
“The number of bankruptcy filings overall is driven by the current economic conditions (which include the effects of the COVID-19 pandemic and the price of oil and of gas), coupled with a move away from investment in (and lending to) certain sectors (including oil and gas and brick-and-mortar retail),” commented Elizabeth M. Guffy, the Houston-based senior counsel of Locke Lord LLP.
Houston construction attorney Philip Racusin emphasized the importance of any contractors maintaining their right to file a mechanics lien for payment — and to make sure they always have everything down in writing.
“It’s vital that they timely file a lien to protect their right to be paid by the contractor or owner, as applicable,” Racusin said. “As for changes on the horizon, I am seeing more unscrupulous people take advantage of contractors or blame everything on a contractor or material supplier when things go wrong as a way to recover some of their losses.”
“The number one tip I’d share is to ensure that as a contractor or material supplier, that you have a written contract—not just a bid or estimate—with any customer or client, especially on larger jobs. That written contract should clearly set out your scope of work, including what is not within your scope of work, relevant disclaimers, warranty disclaimers, and any other terms that are important should something go wrong,” Racusin continued.
“An experienced attorney can work with you to develop a form contract that can work for most situations. It is not enough to simply expect that there will be no issues. It will be much more difficult and expensive to defend yourself if you have no written contract.”