Webinar: How Contractors Can Survive Coronavirus
What you’ll learn
- How quarantined workers will affect projects
- How project delays will affect your right to file a mechanics lien
- Greater economic effects the interaction of these will have on the industry
Watch this expert webinar to learn easy, actionable steps to protect your construction business from the effects of coronavirus.
Download the webinar slides:
How Contractors Can Survive Coronavirus (PDF)
Thank you all for joining us today. My name is Alex, and I’m joined by Jeff over at eSUB. We’re going to talk a little bit about the hottest topic in the whole world right now: Coronavirus. Specifically, how coronavirus is affecting construction businesses, contractors of pretty much every size. We have some really cool topics to go over today. First, I want to give Jeff just a minute to introduce himself. Jeff, tell us a little bit about yourself.
My name is Jeff Sample. You guys heard that before. I am the Director of Strategic Accounts here at eSUB. We are a project management platform. I might be better well-known as the Ironman of IT, from The ConTechCrew podcast.
I’ve spent the last 20 years in technology, the last six to seven years in construction focusing on the digitization of our world. Over here at eSUB, we are a subcontractor specific project management platform. I joined them because we are for a different approach.
Now it is a more important time than ever to really lean into this consultative approach and education. That is why Alex and his team reached out, so that we could delve into that knowledge and delve into that consultative approach, and be here to help our contractors.
We are here for you, and now more than ever we just want to lean in and provide as much information as we can. I want to thank Levelset and Alex for having me on today.
Alex: Yes absolutely, Jeff. Thank you again for being here. Just a quick intro for me. I am the Director of Demand Generation over at Levelset.
All of us over there are construction payment experts. We spend every day figuring out how to help people in construction get paid. Obviously, payment is really stressful. There’s a ton of ridiculous paperwork that needs to go into every single job, communication breakdowns. Really our entire strategy is to help first. Every single person on our team is finding more and more ways to help with this. That’s why we put these webinars on.
That’s why we partner with people like Jeff at eSUB, and other construction technology companies around the whole world, just to make sure that we can deliver help to the contractors and the whole construction industry.
To just bop through the agenda real quick today. Jeff’s going to lead off with a couple processes and general safety tips that are just generally there to help you during this interesting time. Then we’re going to dive a little bit more into the way coronavirus is affecting different parts of construction.
Then we’ll kind of marry that with a little bit of the ways to fight those problems or the challenges that are being introduced by coronavirus with a quick checklist. Then we’re going to connect you to a bunch of different resources that we found pretty helpful.
Obviously, this entire webinar will be recorded, and all of the assets and different helpful bits that we’re going to introduce today will be sent out to all the folks that have joined us. Then we’ll wrap up and let everyone who’s tuned in ask a couple questions. We’ll try and get through this pretty quickly, so you all can get back to work. I know it is a very busy and interesting time to be alive.
How COVID-19 is affecting the construction industry
Just a quick overview, state of the construction industry. There’s the three bandits, as Jeff called them earlier when we were talking:
- Finding skilled labor
- Managing projects (and making sure you complete on time and under budget)
- Making sure you get paid (or make the right payments so you don’t have a problem on a job).
Those are the three really big challenges that are pervasive in construction. Now, they’re all wrapped in this fourth really difficult coronavirus outbreak that’s happening, and causing all sorts of different effects. Basically, all these things that were hard are now quite a bit harder. Right, Jeff?
Yeah. I mean it’s really unfortunate, but it’s also the state of the truth. We’re here to talk to you guys pretty frankly. I have a pretty deep background of subcontractors, but also general contractors, construction management, and owners.
This effect of COVID-19 is really putting a strain on skilled labor now, having to worry about quarantining and being sick. Project management, just documenting and getting jobs complete, that’s even harder now when you don’t have manpower, or the other things we’re going to talk about.
Then getting paid and making payments in a market that’s dropping very, very quickly. Unfortunately, this virus is really putting a strain on those already three strained things. Real critical right now for us to have some straight upfront straight talk. That’s what we’re here to do.
Yeah, absolutely. Why don’t you kick us off a little bit around just some general safety tips and social distancing.
Washington Post Article:
Why outbreaks like coronavirus spread exponentially, and how to “flatten the curve”
Leadership matters during a crisis
Cool. Well, first and foremost, this is the time for leaders. In our times of crisis, we need to look to our leaders. For all the leaders listening in, and those running companies, but also just running crews.
I’m a big Simon Sinek fan, and something that Simon Sinek says over and over is, “Leadership is not a title. It is a way that you act.” In this incredibly important time, we need to all act as leaders. On the slide before, we talked about the skilled labor gap. We know what happened to us in 2008, when we lost a lot of our workers. Now is not the time to allow this to continue that.
“Leadership is not a title. It is a way that you act.”Simon Sinek
Leaders leaning in, and figuring out ways to get that liquidity, get that cash, keep people employed, keep people productive, and find creative ways to work, whether that be work from work, et cetera, it’s critical. We are going to rebound.
Something I like to steal from my favorite podcaster, Joe Rogan, he had Michael Osterholm on recently, who is an epidemiologist. It’s the best straight talk I’ve had. It’s our job to scare you into your wits, not out of your wits. If you sit on the sidelines right now and don’t act, your business will suffer.
You have to act, and you have to act decisively. It’s not always going to go over really, really well. Leaders need to understand that some of the decisions they are going to make are for the best of their employees.
I’m going to use a little personal one here, and a little plug for Wendy Rogers, the CEO of eSUB. Her and I were having some difficult conversations leading up to canceling some events. As some of you might know, I’m a speaker. I travel. I love to get out there and interact with people. I was not happy with her trying to pull me off the road, trying to keep me at home, et cetera.
She knew it was for my best interest. We finally came to agreement not to do things. I was tough on the phone, and then next Monday morning I called her and said, “Thank you. You protected me.”
It’s important to understand that people are going to go through the emotions. They’ve worked really hard for certain things, to achieve things that are now being taken away from them. That emotion is real. Allow them to have that, but stand your ground.
Also, finding creative ways, we’re going to talk about creative financing down the road, et cetera, how to bolster your business up.
We know you’re suffering. I also know that leaders need to vent. As an old boss of mine would say, I probably deserve it. If you need to call and yell at somebody, call and yell at me. In the face of your employees, standing your ground, maintaining leadership, and being good, it’s just going to help you.
Social Distancing: Personal & Professional
Like Alex said, social distancing, the basics of it, this article, just go to it. Show your kids. This is the way to explain this to them. One of the ways to defeat mass hysteria is through education.
There’s unfortunate circumstances that are going to happen. We are not going to stop this virus from spreading. We need to flatten the curve, for a lot of reasons. One, to keep the supply chain for our health organizations open, et cetera.
That also goes to our job sites. We need to be able to have enough manpower on the job sites consistently over time to do that. It’s super key that we learn social distancing, the basics of it, and how it works. It’s all about keeping a safe distance, and allowing the spread to slow.
Another key to this is stress mitigation, guys. Cortisol is our enemy. Cortisol is the stress hormone. If you are worried constantly, and sitting at home constantly in a state of fear, you are actually more susceptible for this virus, for any virus in particular. That doesn’t have anything to do with coronavirus. It’s just the way we work and live. Right now, maintaining a healthy environment, getting any type of exercise that you can.
There’s lots of great resources to work out in your house. If you live in areas like I do, you can stay away from people and still get outside and run. Those are the things that I’m doing. Also, maintaining connection with your employees is critical during this time. You just do it with these new tools we have. It is really great.
That just helps us. We’re interacting. I’ve never met Alex in person before, but we just had a great conversation. These new tools that we have, Zoom free is out there for everybody. Everybody’s carrying around one of these [cell phones]. It’s got FaceTime or Google Hangouts.
Hang out with your friends. Don’t let social isolation mean that you’re completely isolated from the world around you. But we’re here to talk construction, guys, and we have to talk about job site safety. Where it’s going to be possible to keep your jobs open, we need to critically use our safety procedures and get our safety people involved.
Jobsite safety tips
I am not a safety expert. There’s a Briq webinar that had one of my friends Cal Beyer on. He’s got a lot of great information, he’s offering up his information.
Remember, wearing your eye protection and wearing gloves, just because you’re wearing gloves, if you come into contact with it and you touch your eyes, your nose, you’re at risk. When you’re taking off your gloves, make sure that you’re cleaning your hands. Washing your hands, or utilizing sanitizers to get rid of it.
Around gang boxes, be very, very careful. Wipe down the equipment. Wipe down your tools before you use them. Also, try to stay out of the trailer. These digital tools that we have, you can talk to people from your truck, and you’re usually the only one that’s been in your truck.
Maintaining that safe distance of six feet is really important. We can still do that and keep working.
Also, back to that leadership. Understand and change your policies, and communicate your policies on sick leave. A bad sick leave policy can drive people to come to work even when they’re sick.
Financial stresses are what they are, and they are more palatable now than they’ve been before. You need to be able to let employees go home and self-quarantine, and know they’re going to be okay. Their jobs are going to be there.
However you have to do that, because if they don’t have that, they’re going to show up. That’s going to infect your entire team. They will get better, and they can come back to the job site much better off. That’s my general safety and social distancing. Alex, is there anything you want to add in on that? I know I hit on a lot there.
The importance of documentation
I would say you hit the nail right on the head. Those were all really great points. Let’s keep moving on to the next semi-safety related, but heavily jobsite related slide we have here around documentation.
Yeah, this is critical, guys. Documentation is critical. We all know in this business that he who has the most documentation wins. Now I would from a leadership perspective like to lead with, those who have the most documentation can have the best conversations.
Now is the time for us to lean into each other, and really discuss with our subcontractors, our general contractors, our owners, our suppliers. Open communication is going to be critical. Providing real-time real information, even if it is bad news, it’s really important to get out there in real-time.
Document work in place. This is for general contractors, this is trade contractors. You don’t know the day that you’re going to have to walk off your job site. Photos and videos speak a lot more than just writing it down.
You cannot describe a job site as well as you can take photos and videos. There’s a lot of technology out there right now for doing video walks to get this done very, very quickly. Also, writing up notes. A picture of something might say a thousand words, but adding a few notes to it gives context.
Placing that into an environment where it can be collaborated, so people can also see it, add their information to it, and really tell the story of when you walk off that job site.
I like to talk about this in the hurricane. A job site looks far different before the hurricane hits. We have to have this information sometimes to go to our insurers and get paid for the work that we’ve done. Without it, you could be at loss, and the one holding the bag could be you. There are tools, there is lots of technology out there for this.
Centralized document controls, RFIs and change orders. We know change orders are coming. We know with delays, we’re going to have to do that. We’re going to have to request information on how to proceed, et cetera, from trade contractors and from general contractors.
Having a central document control, in case someone is sick and no longer available to be a part of that, you have access to that information. You can see where the baton was left, and you can pick it up and continue. It’s going to be critical.
I cannot stress enough, this needs to be real-time. This can’t be something that’s sitting on this phone, and then that employee walks away. It’s got to make it up into the cloud, into a centralized system right away. We all saw this.
We were all looking at this virus, and taking it one way, until the night the NBA shut down. The night the NBA shut down is when this virus became real for all of us, and changes started happening on an hour-by-hour basis. We really need to have that, and we need to have it every day that you leave your job site, up sometimes to the minute.
Make sure it’s going in, in real-time, to a good place, and stored in the cloud so it’s accessible to everyone, so they can work from home, get that information. It also doesn’t mean that you necessarily have to stop working. You’ll have employees, project managers, et cetera, that can be communicating and getting in touch with people real-time. It’s really important that we document all of that. That’s the basics. There will be more information later, but that’s what I just wanted to make sure, document, document, document.
How coronavirus will affect construction businesses
Yeah, that’s very, very helpful, Jeff, and very actionable too, which I like. Some of the stuff we’re going to cover here is very broad strokes, and I really like how specific and actionable that is for all the folks tuned in today. Making sure you’re crossing the T’s, dotting the I’s on all this stuff. I like the hurricane analogy too. That was great.
Like I said, let’s pull back from some of the more actual steps, and look at this coronavirus and how it’s affecting the construction industry around payments. Around just generally how businesses can keep moving forward and not go bankrupt, or have a really tight cash pinch, and need to lay off a ton of employees. We want to avoid all these things.
We recently released a big report on the four ways the coronavirus is going to impact your construction business, and the four checklist items you can take to go and protect yourself against that.
I’m not going to read through these, because we’re going to dive into one. We’ll dive right in, and hopefully Jeff can help me out on a couple of them as well. The first thing we want to talk about is the supply chain. Problems in material delays, it’s definitely going to impact jobs. It’s one of those things that with China creating one-third of the global manufacturing, the materials have slowed down a little bit coming into the country. The cost of the materials are starting to go up.
There’s delays in the materials getting to the job site, which is trickling down through the rest of the projects, or affecting when you pay a contractor to go out and do work and the materials aren’t there. You’re kind of taking a double hit.
There’s a huge chain reaction of potential problems popping up. Dan Kaufman, a GC over at JE Dunn Construction (no relation to me, Alex Dunn, by the way). Just someone, we happened to have seen this quote: “It’s an immediate critical path impact of up to eight weeks on a job, which is obviously paralyzing and we’re got to figure out a way around it.”
Big GCs out there are very nervous. JE Dunn Construction is listed as one of the fastest paying, easiest contractors to work with in our contractor database. They’re very concerned about this. Seeing that at a high level, we know it’s something that’s affecting a lot of the lower tiered parties as well, between materials suppliers and the people they’re supplying to.
I don’t know what you think about this, Jeff. Do you have anything you want to add, but we know that the supply chain is definitely something that is causing some problems.
Well, we’re talking about how people can continue to work and be actionable. That’s where my head is always at. There’s going to be an interesting problem when it comes to this. These delays that we’re seeing are actually not going to happen right away. We’re starting to see that they’re going to come. The way these things are laggard, we might be actually at the point where we can start having people back on job sites by the time this actual supply chain problems hit us.
One of the things that’s going to be really important for you as teams that you can start to play with right now, because I know you have people out there that do this, is looking at where you do have supplies, looking at where you do have people.
Starting to predict that when work comes up in say six weeks, four weeks, eight weeks, where do I have the most ability to do work and be the most effective? Start playing with those scheduling softwares. I say playing, because you’re running scenarios.
It is a tool, but you’re messing around with it. You’re really starting to figure out that, okay, if we go to work in three weeks, how many employees do I have, how many places can I go, and where do I have supplies? Alex, you and I were talking about this beforehand. One of the real insults to injury that could happen here is that we finally get people back, and now we don’t have supplies. So we have crews standing on job sites costing us money that aren’t being productive. It is our job to get ahead of that, and be prepared.
If that means bringing some of this to your prefab facilities for subcontractors, maybe doing that. Prefabricating where you can. Doing those things in closed environments, or getting those supplies to other places is going to be critical. Really think that through, and put some of your team members on it. I know you’ve got some project engineers out there, folks, that really love to play with scheduling software and scenarios. Now’s the time to do it. It will make them productive, and being productive right now goes back to all those other things we talked about on lowering cortisol and keeping people happy, so real critical.
Quarantines & shut-downs
Yeah, absolutely. Thank you, Jeff. Related to some of this communication and planning, obviously quarantines are a huge issue that are affecting much every part of construction outside of the supply chain itself. When you think about Boston, who recently announced that all construction projects are at a halt. There’s cities in California and other parts of the country that are peeling back and stopping construction. The County Recorder’s Office, I think we have a list of over 50 or 60 on our website right now, that just continues to grow of these County Recorder’s Offices shutting down.
Inspections and permits and liens, and notice of commencement, all of these documents that are really important, and processes for construction jobs, there’s another hurdle in your way to do it. If you need to file a lien, now you have to learn how to e-record it. You have to become a trusted filer. There’s all sorts of little obstacles that pop up with these different quarantines.
Obviously, your workers being quarantined are falling sick, keeping people from coming to work. Obviously lender sureties, governments, developing companies, they’re all kind of pausing and not being able to be as productive and move forward as fast as they want to. Jeff, do you have anything you want to add on that?
Well yeah, I think it’s important too that we start to talk about our offices too. Our office employees can really cripple our businesses as well, as they get sick. Moving to work from home is going to be super important. If you haven’t already started a plan around that, you need to start a plan around that.
Again, I’m available for free consultations around helping people do that. I’ve been doing that for a couple of my friends’ companies here. Let’s do that. Let’s slow the spread of the virus down. For those that have to be on job sites, again, being clean, et cetera, is going to be key.
Also knowing from a legality perspective, Alex, what you talked about with knowing where you can move forward and where you can’t is going to be just as important in predicting what work you can do when it’s time. No one is going to tell you to go forward with something that you haven’t had some of that key documentation done for. It’s key that we know that, and we work around it, so really important. Back to you.
Yeah. I liked your point about the office workers, not just the field workers. There’s an intricate exchange of documents required on every single project. From the initial contract, to the invoices, to the notices and change orders. There’s so much going on.
When those folks in the back office go work from home, communication starts to break down. We don’t have all of the crazy quick meetings in the hallway to update people. It just doesn’t happen. Making sure the communication stays on-point, almost over-communicating is really good. Jeff, did you have something you want to say there?
I did too. Here’s another one that… I was just talking to a friend about this last night online, the BIM world. Now is an opportunity too, with job slowdowns, if you have BIM and designers out there, and your work’s slowing down… It’s the one time in life we’ve always been told, we never have enough time for everything. We never have enough time to BIM it. Well, now you have time to BIM it. In BIMing it, you might be able to predict ways to prefabricate better, or provide value engineering to the owners, to the general contractors. Dig in where you can.
We are a community here. I love that Alex and his team are doing it, and so are we. It’s not just about us. It’s about all the people we’re connected to. I know going BIM and going remote is very scary, but there’s a lot of BIM folks out there that are offering that resources up to guide you through that. Again, it’s a community effort, leaning in together. Just a thought there on keeping productive, and in the end actually, why don’t you enjoy the time you have to get some of this BIM work done ahead. Just a thought I had.
Yeah, absolutely a good idea. It’s definitely more fun to go and do some BIM than it is to watch the economy have all the problems it’s having right now. It brings us to our next point, which is the wider economic impact of the coronavirus right now. There’s obviously a pretty elevated risk of recession for the next three to six months. I don’t need to go into detail on this. All of this stuff, the consumer confidence, less discretionary spending, potential legislation, there are positive and negative effects in all of these areas. Especially if we think about positives, some of this legislation’s really great.
Tax credits to be able to help contractors or people keep their employees on board, in theory it’s fantastic. In practice, in a lot of cases, what we’ll dive into in a little bit is contractors don’t have cash on-hand all the time. They’re financing each other’s projects, and acting as banks. When these things happen, they don’t have enough cash on-hand to wait for a tax credit. They need the cash today. We’ll get into that a little bit more, but I wanted to see if Jeff had anything he wanted to add here.
Yeah. I mean we can talk a little bit more about that, but if you really want to learn about the wider economic impacts, Alex and I know quite a bit. I’m going to point you over to Briq, br.iq (see link above). They had Cal Bayer that I referenced before, James Benham, the host of TheConTechCrew, a good friend. Then Moti Jungreis, Moti, sorry if I got your last name wrong there, Vice Chair and Head of Global Markets for TD Securities. He gave a really good overview of it. It’s something I recommend that you guys take some time to listen to, if you can.
Important there, and it’s important to find ways to be creative. I know a couple local bankers here that are really interested in supporting our local economy. Now’s the time for them to do it. One other thing too is, you’ve got to make lemons out of lemonade. I thought that there was a lot of people in 2008 that said, “I woulda, coulda, shoulda this.” Now might be the time for you to go back over those woulda, coulda, shoulda’s, and learn how you might act differently now. It might save us.
I also think that this impact, while possibly greater than ’08 in its current state, will actually rebound faster, and we’ll see a lot of this come through. I think you’re looking at a lot shorter of a time frame. I don’t think we knew as much back then as how long the recovery would take, and I think it took longer. I think this one will be faster, but go to those experts.
Legal Disputes & Protections
Yeah, definitely. Well, we definitely want it to be faster. That’s for sure. We’ll do everything we can to get it there. The last and fourth point that we have in terms of the major effects are just the legal disputes and protections. In construction, especially when we talk about subcontractors and sub-tier parties, there’s a lot of leverage at play between them and the folks above them making payments, whether it’s the owner or the GC.
These tensions and protections in these uncertain times can get exacerbated a little bit. We have folks that are going to walk off the job because of quarantine, or they can’t complete on time because of material delays. Or a payment isn’t coming, so people aren’t going to finish the job until they get paid. The quote here at the bottom, “With these razor-thin margins, any payment hiccup can mean the difference between staying in business or closing up shop.”
It’s really important that you understand, we’ll talk about how to fight this in a little bit, but understanding that this stuff is going to start happening. That you have to think through, thinking ahead as opposed to, Jeff was saying, think about what has happened in the past. Definitely do that, but also think about how you can apply that into the future. Jeff?
No, I agree with it. This might be the time, as we’re watching the markets change, to go technological too. I mean I think this is an opportunity. Sometimes people try to throw up the panic button, and throw everything around themselves and sit in a bubble.
We learned in ’08 that actually wasn’t the right thing to do. Implementing technology was a great way to move forward. I’ll use just for instance the real estate business. Right now, you can’t walk people through homes. I guarantee you, you’re going to see an uptick in people using, of course the technology just went right out of my head just now.
Matterport, which is a way to digitally scan the entire environment, and virtually walk people through and talk to them, 360 tours, exactly. From Chris Mondue, thanks Chris. 360 tours to doing the Matterport scans.
One person’s need to get out might be another person’s opportunity to get in. We saw Warren Buffett do a lot during those times. I’m not suggesting that’s what we do, but I’m saying there might be opportunities for technology to advance us. Keep your eyes open.
Construction Cash Flow Survey
Absolutely, absolutely. Those are the four major things we wanted to cover in terms of the general effects. As they’re affecting, I want to peel back into the end of last year. Levelset, our company, ran a big survey. We surveyed over 500 construction companies. We wanted to understand how payments were working and how their cashflow was working. I just wanted to dive into this to give another layer to understand where cashflows are at in general in the industry. The first thing we realized was, basically no one’s getting paid upfront.
When we talk about these coronavirus challenges that we’re having, if people aren’t getting paid upfront, and they’re sinking in investments to get these projects started, and then they pause or there’s delays, that cash crunch is going to get a little tighter.
We also learned that a lot of people in construction aren’t even getting paid in full for their jobs. 40% of contractors don’t get the entire contract amount paid by the end of the project. That’s either because of retention, or retainage, or unfulfilled change orders, or back charges, whatever it may be.
These people are going in and doing a $100,000 job, and walking out the door with $85,000 or $90,000. It’s hard to say that the margin of error is, but because of these cash crunches people are also selling their invoices, or doing factoring, or going to get loans to cover it and paying interest. It’s creating even more challenges. This is when the economy was doing great. We’re seeing that these cashflow issues are affecting payroll. People’s competitive nature to go and grow their business, and bid on jobs at a competitive rate.
They can’t go take on these projects, because they’re having a hard time getting cash in the bank and growing the business quickly. The cash is just not coming fast enough on the projects they’re doing. They’re not getting paid upfront, and they’re not getting paid in full. At the end of the day, they go and they take out these loans, whether they’re small business loans or personal credit.
I was very surprised with the amount of businesses that dip into their personal savings or credit lines just to keep on the rails. It’s definitely, at a good economic time it was not a dire situation but not a great one. Now that things are getting worse and harder for the construction industry, I think it’s worth it to kind of shine a light on this. Then transition back into some ways we can solve it. Jeff, is there anything you wanted to add to that?
Yeah, we’ve been acting as banks for a long time in this industry. I think a lot of, from the suppliers on up everybody does this. Something that I learned recently too, your owners in a lot of respect are also public companies at some point in time too here. We’ve talked over and over about open communications. Now is the time to really into transparency and everybody talk. A couple of days one way or another can help a publicly traded company on their quarterly calls, et cetera.
A contractor floating for a week, versus floating indefinitely, a very different experience for that contractor. It’s really important that we talk. We were referring to some of the suppliers before, they may have the opportunity to be the float in some cases. It’s a good time to talk to them as well. I’m not putting this on anybody. I think it’s time that we all share. I also think this is bringing to light something we’re seeing that we need to figure out. Maybe we’ll figure that one out later. For now, lean into each other and realize the strains are going to everyone.
Coronavirus Survival Checklist for Contractors
Yeah, absolutely. Awesome. Here’s our general high level checklist for contractors to help them survive in this time. I’m going to dive right in without going over these bullet points, because we’re going to talk about them a little bit. The first one obviously is what I mentioned when we were talking about legal disputes. Getting an inventory and addressing all of these potential legal issues that might be lurking in the wings, lingering from the past, or fast approaching on the horizon. Pretty much going through every contract you have, every invoice you have, looking at that fine print.
Trying to find examples that could have negative impacts on your jobs or your projects that you’re working on. Notice provisions are a huge one. Making sure, like a lot of contracts require that you give notice in a very short period of time in the event that there are delays or there are change orders. If you don’t get ahead of that right now, it’s going to cause problems down the line. Can contracts be voided, is a big question we get at our expert center a lot. There’s the force majeure provisions that exist in a lot of contracts.
It’s really important that you read those, and you understand how these delay provisions can affect your rights and your obligations during this epidemic of coronavirus. Then finally is that communication piece that we keep harping on. Create new agreements, have those conversations. They might not be easy, but I think it’s very important that everyone is having those conversations, and making sure that we’re not setting ourselves up for a bigger argument or a legal dispute down the line.
The last point is obviously consult a construction attorney. We have an attorney network here at Levelset, hundreds of attorneys that answer questions all day on our expert center. A number of them, I think we have like 10 or so of these attorneys are willing to give 30 minute consultations. Follow up with me after this webinar if you’re interested. We can connect you with a construction attorney in your area who’s willing to give a free consultation if you’re dealing with any of these issues.
You can always ask a question anonymously as well in the expert center, if it’s something you don’t feel comfortable talking about right away. Those are some options for you guys to get some help if you have a legal issue that’s lurking. Reach out to us, we’ll get you in touch with an attorney for a free consult, or just ask the question in the expert center. You’ll get a response pretty quickly. Jeff, did you have any additions or thoughts to the addressing legal issues?
It might not be legal issues, but something that you really tipped me off to that I didn’t even think about beforehand was T&M, time and materials for everybody.
Right now, as we try to break down job sites, as we try to prepare, there’s going to be a lot of need for us to document and be requested to do things that weren’t in those contracts that are going to have to be done as time and material basis stuff.
Whether it be closing down the jobs, closing up areas that could be susceptible to weather over time that you would normally do.
Get those documented, signed off and agreed on together, and in a place where you can act on those. I had a conversation with a contractor recently that they were only getting paid on about 60% of their T&M as it was, let alone now when they’re coming in, in rapid fire succession. Use a tool, find a tool, do something with that. Again, same as the legal advice. I’m here for advice on that one as well. Reach out.
All my contact information will be in there. Make sure you’re documenting that piece, because you’re going to be asked to do a lot that might be outside of the scope of those contracts. If you haven’t been able to create a new contract around it, documenting it is going to be critical. You just brought that up, and I think it’s really important.
Yeah. I would also say, we live in the subcontractor and sub-tier world of construction more than the GC and owner world. This is also such an interesting time for good general contractors to shine, and to reach out to their subs with, “Here’s some provisions.”
These relationships are so important between the general contractor and sub. It’s really important that sometimes the sub doesn’t have to take the first step and feel like they’re making the ask, and that the GC is just coming to help and make sure that they maintain that relationship as well. It’s just the kind of side point that I’d say.
I’d agree with you there, Alex. To those GCs, I hope we weren’t GC bashing in any of that. I agree with you. In fact, I’ve always been so impressed with their logistical capabilities. I think their logistical capabilities as we come out of this and as we go through this are going to be super, super critical.
I’ve always been, I mean I’ve seen some contractors using cool technology like Synchro and whatnot to figure things out. I think now’s an important time for those things. I think it’s a great time for those, see them at risk, there’s general contractors to shine. I agree with you.
Yeah, absolutely. The next point is just getting strict about lien rights. Sometimes, lien is the four letter word of the construction industry. Nobody likes filing liens. The best way to not file a lien is to file the preceding documents that help protect your lien rights. Understanding how lien rights work is obviously the first step. They differ in every state, in every project role. There are so many nuances, and they’re super complicated. Once you kind of get the grasp on them, there are plenty of services out there. Obviously, Levelset does this. Plenty of lawyers do this, all sorts of stuff.
The first part of pretty much every lien process is sending something called a preliminary notice. They can be called 20 day notices in Florida or California. I forget all the different names, pre-lien, notice to owner. There are so many different things they’re called.
In general, what they do is they say, “Hey, I’m on this project. I’m doing this work, and I need to be paid eventually.” In some cases, if you don’t file those, you lose your lien rights. In other cases, they’re completely voluntary, and they help you get paid faster. They’re a very useful document.
Keeping an eye on your deadlines throughout this process is really important. Again, understanding how the rights work. In some cases, you have 365 days to file a lien after you finish a project. Other times, you have 30 days, or 60 days. It’s different everywhere, so just really understanding what documents you need to send, when you need to send them, so you don’t lose your rights. Then communicating with your clients and customers more than usual. There’s a quote here at the bottom.
This was an anonymous quote from someone who filled out a survey that we’re running right now. He said, “My motto is, I’m not my client’s bank. Therefore, all payments need to be paid when requested.”
That’s all well and good, unless the person that needs to pay you isn’t being paid, and they don’t have cash. Handshakes are great, these relationships are important, but at the end of the day you are running a business and it’s really important you protect your right to get paid as much as possible.
Lien rights are a really great way to do that, and they don’t have to be offensive or reactive. It just can be part of your process to increase the communication, increase the visibility, and have a good process for just making sure you get paid. Jeff, do you have anything you want to add to lien rights?
I love that motto at the bottom there. “My motto is, I’m not my client’s banker, therefore all payments need to be paid when requested.” That was in those good times, and that was in those times when we were a little bit more back and forth of one another. Although I agree that we all do. It’s critical now to get paid, but also continuing to communicate, and knowing contractually, and being on top of it. If there’s one thing we’ve got, we’ve got people waiting to do things and looking to do things in the office. Keeping an eye on this is critical.
Yeah, definitely. It’s a frustrating part of the paperwork process, but it’s really important. We highly stress it at Levelset. Our customers that start doing this get their payments a lot faster, and have a lot less problems. That’s why we exist.
Jumping in, what’s this next one? Keeping your eye on your customers’ payment history. This is actually pretty new technology that we released recently. It’s important that you’re able to know. Sometimes you work with a GC, and they are always paying you on time, every time they pay you.
Coronavirus hits, and all the money dries up. They don’t have those funds. Being able to see when a payment problem is happening on your job with another sub, or another contractor, another supplier. Seeing that payment problem on a completely different job you’re not on but the GC is running it. Being able to have that visibility and that omniscience of seeing all these projects going on is really important, and relatively new. We have a product we put out. You can check it out at levelset.com/contractors. It’s completely free.
It’s basically, the best way to put it is a Glassdoor for contractors. You can go and see how GCs are paying. Are they having payment problems? How do other people rate their payment speed? These are really tools for GCs. It’s like I said earlier, it’s a great time for them to shine. Use these pages to tout how good you are to your subs. Use these pages to show that you have good payment practices and processes. Everybody wants to say they have good payment practices. That’s what this is here for, is to allow these contractors and general contractors to have more visibility, and be on the same playing field when it comes to payment. Jeff?
Yeah, no better way to shine than through your partners. The partners tell the truth about you, and it’s a great way to utilize it. We need these kind of, I’d call it crowdsourced. That kind of crowdsourced ranking. We see it quite a bit in Glassdoor, and other areas on places to go work. It’s a really cool product to have out there. It’s going to help us in the long-term.
Yeah, absolutely. Like I said, it’s completely free. You can pop in there. If you don’t see your contractor on there, feel free to request a page. We’ll get it added within a couple minutes. Then you’ll be able to see any sort of payment history or issues that are bubbling up during this time. Hopefully not issues, hopefully everyone hasn’t had too many bad issues yet. Our next and final checklist after being able to monitor your contractors is increasing your cash cushion. Cash is king.
Increase your cash cushion
We talked about some of those survey results. Margins are thin, cashflow is slow. People aren’t getting paid in full. Now the coronavirus has come and put a further weight on everyone’s shoulder. There’s some ideas here on the left. We offer some of these services through Levelset. If you guys want to have that conversation, like I said just reach out after this webinar. I’ll let Jeff talk through some of these. I know he knows a good bit about them. Take it away, Jeff.
Well, working capital loans is where you want to start. This is where that, you can’t wait. You’ve got to act now. If you don’t take quick action and apply for those working capital loans right now, they’re drying up. The good news is, the interest rates are really low. The Feds just dropped the interest rate again to try and stimulate the economy, but you’ve got to act. This is how you float your employees. This is how you float through some things. I know that’s difficult and a hard thing to hear. I referenced Simon Sinek earlier. There’s a reference to his book, The Infinite Game.
This too, our world will go on. Construction will come back. The winners of this game, the only way you can win is by continuing to play. Cash is king, and it will help you continue to play this game, and continue to move on. Something you really need to think about. Then buying materials with longer terms. Like I said, some of these are publicly traded companies. They’re larger, they have some of the ability to absorb this. Get out there and talk to them. It’s funny, we talk about this in our local businesses right now. Go buy gift cards, so that they have the cash on-hand now.
You’re doing the opposite. They’re giving you supplies or letting you buy these supplies with a longer payment term to keep you moving, to keep cash in your hands right now. They know they’re going to get that cash later. That helps them at their earnings calls, their projections, et cetera. There’s a real way for this to work out, if we come together and work together. Call them up. Don’t be afraid to ask that question. To our suppliers, and to our generals, and to our subs, be open to have these conversations.
I said it at the beginning. It’s not to scare you out of your wits. It’s to scare you into your wits. Difficult conversations are going to be the norm for a while, but they’re going to help us transform this industry. That is that moment that we have right now. I’m going to kick it back to you, Alex. The rest I was learning on, so I’m happy to listen to on learning these.
Yeah. I wish I knew more about it, to be honest. Again, after this webinar if you reach out to us, we can connect you to the right people within our organizations to help you further understand these. Like I said, we do offer some invoice factoring services, buying lien amounts from customers who need cash now. This stuff is possible. We’re trying to find more and more ways to help get cash directly into the hands of people who need it, to keep business running as usual as possible.
This is kind of the final frontier of the presentation, the final bullet point. Making sure you guys have something in your coffers that can help you sustain this project, even if you have to press pause now. Clearing out the closet, getting rid of employees, not practicing good leadership is going to leave you in a way harder place down the line. Get ahead of this stuff. Get some cash cushion. Check on your contractors’ payment. Send those preliminary notices. Make sure you understand all your contract clauses as you’re going through this time.
Those are going to be the things that are going to make sure that you come out the other side alive, or your business. Hopefully, everyone comes out alive through the virus as well. It’s a very hard, and a very stressful time for everybody. The final notes here are, we’re going to send this out. We’re going to make sure all this stuff is linked together and easy for you guys to access.
After the presentation, you guys will see it in the next 12 to 24 hours. It will come through to your email. We just want to open it up to any questions from the audience. Here’s our contact information as well. Like I said, just shoot us an email. Jeff, I think he said he’ll give his cell phone number at some point so you can call and yell at him.
Feel free to call and yell if you need to. I mean that in the best sense of the term. Getting your angst out and being clear-headed, having someone that you can vent to is really important. Back to that leadership, at the end of this, the people who put people first, the companies who put people first and truly back that up are going to critically win, and survive and thrive. It’s possible. It’s just a new world. Take care of yourselves. Go for it, Alex. It looks like you got a question.
Yeah, there is one question here from Arthur. Thank you for asking. Like I said, throw us all you got, folks. Arthur asks, “What good are liens on public projects?” A mechanic’s lien is a way to take ownership or take stake in the project you’re working on for the physical improvements you’ve done on the real property. Mechanic’s liens do not exist for public projects, however, bond claims do. A public project usually has a bond taken out to ensure that the parties are paid.
If you’re working on a public project, and the project is not paying as it should be, you do that the right in most cases to file a bond claim. Which is the equivalent of a mechanic’s lien, but for public or government projects, if you’re working on a town center, or a highway, or something funded by the federal or state government. Any other questions out there?
I’d like to throw it out too, if you guys have technology questions. Like I said, I’m doing 30 minute free consultations. All right, I like this one. “What is BIM?” Ah, we should be careful of that sometimes. BIM is building information modeling. It’s classically known as the 3D modeling of an environment. Taking 2D CAD plans that we used to build from, and actually turning them into 3D elements. It’s actually a database in the end, to be honest. It’s the future of the way we design and build. It has only come so far.
A good one for you would be, if you want the resources, I’ll send you and I’ll add this in. If you go to theb1m.com, they have a BIM basics that you can walk through that’s fabulous. It’s a great way to learn. If you haven’t, and you need a little time away and you want to share some learning with your children, theb1m is the best place to see the greatest construction projects on the planet, and really connect with them. It’s a great learning environment. It’s also done with a real, I’d call it movie quality to it. There’s one on pre-fabrication that blew my away. I showed my children it, and they loved it. That’s that theb1m is.
That’s awesome. Tom just typed in, and he was giving a pro tip about the President Trump’s announcement of the $50 billion relief package for small business owners affected by the outbreak. He included the links and stuff, so we’ll add this to the profile to help you guys find that government assistance for those tax breaks, and different ways the government is stepping in to help. We’ll include it in there. The phone number for anyone who is interested right now, while Jeff is reading the next question, is 1-800-659-2955 for the SBA Disaster Assistance Division.
That’s awesome. I got another one here from Susan. “We are a small company, about 25 employees, a subcontractor on large construction projects. Our materials are custom ordered, and we don’t get paid on most projects until the GCs get paid, leaving us upfront costs for long periods, and getting stuck paying for non-returnable materials when GCs don’t pay. We’ve told our GCs that we’ll no longer order materials without an advance payment or a joint check.” I think that’s an important one.
Susan, that’s an example of those difficult conversations that have to be had. Those GCs need to understand that 25 employees and staying afloat is going to be very difficult for you. Getting in there and getting ahead. It might also be, if you’re doing that kind of custom work on construction, the owners might be interested in pre-ordering materials for you and getting involved in that.
I know OS2.0 is a project by the owners to start doing supplies upfront. It might be a great way for you to get past the GC and into the owner, and get them to understand the problems that you’re dealing with. I think it’s a great process that you’re doing, but I think there’s a little bit more around those difficult conversations that might be available to you there. I hope I answered that.
Definitely. I’m not sure where you are located, Susan, but I know Texas has a bunch of protections for specialty fabricated materials on construction projects. Especially in the lien rights process and making sure you do get paid for those specialty fabricated materials, like cabinetry or special light fixtures and things like that. That’s something I would definitely direct you to our expert center at levelset.com/payment-help, or just to go levelset.com and click, Ask a Question.
That’s something that a lawyer could probably help you with, or in that consultation maybe help you with a clause you could add to your contracts around some of those specialty fabricated materials, if you are in Texas. That’s just one idea that I can speak to. Again, the expert center is a good place to go.
Hey, Alex, I want you to read the Arthur Fisher. I’m going to take the anonymous one here. There’s someone asking about being on a large job site with 200 subcontractors. They want to push forward, but you don’t feel it’s a safe environment. I think this is really important. I think what I would say here is that a couple things have to happen. It will cost hundreds of millions of dollars, or tens of thousands of dollars per day for a shutdown. However, getting your safety groups together, so with 200 subcontractors there’s a lot of safety managers on that project.
The general contractors, it’s probably a multi general contractor environment. Getting them all together, and determining a safe way to proceed is the best way to do it. Get your groups together, decide on how you can spread work out to keep people far apart, and continuing to work. Also, begin to adjust the schedules so you can slow down payments in certain places. You can stop the bleeding, so to say, but continue to move the job forward. Again, going back to those logistical experts, taking safety and logistics in mind, and combining them together to create an environment where you are continuing to more forward as safely as possible.
Explaining to those owners that this is about, if all 200 of those subcontractors get exposed, and no one can hit the job site, there’s no way to prevent this. Slowing down to continue to work is super critical. I hope that helps answer that question. I would also say guys like Cal Bayer, I know my co-host Rob McKinney are all out there to help answer that. There’s a group actually, you can find them online. They’re called the Safety Superheroes. I bet you they’d love that question too.
Awesome. Thank you, Jeff. I’m going to answer this one last question from Arthur. He asked, “Is pay when paid a legal concept? I’m guessing he’s asking, is it legal to put that in your contract? Pay when paid clauses are obviously usually in a contract that says, “I have the right to not pay you until I am paid.” I’m not a lawyer, and I don’t play one on TV. Generally, it’s a mixed bag whether or not these clauses are allowed. In general terms, several states have ruled that pay when paid clauses function as just timing mechanisms.
There’s a few states where pay if paid clauses are unenforceable, major ones being California, New York, Ohio. There are far more states when pay when paid clauses are allowed, but it’s only as a timing mechanism. Like I said, it’s kind of a mixed bag, depending on where you are in terms of how those clauses within contracts can work. One thing I would say is, again, thinking about your mechanic’s liens rights and holding those rights.
If someone isn’t getting paid, say you’re a subcontractor on a job, the owner isn’t paying the general contractor, and the general contractor isn’t paying you, and you have a pay when paid clause. You should still be able to exercise your mechanic’s lien right in most cases to secure your right to get paid. That’s not bad on you or the GC. It’s bad on the owner who is holding payments from the GC. Or if the GC might not be telling you the truth, and is withholding payments because they need to fund other projects.
Again, having those mechanic’s lien rights in your pocket, being able to exercise them as needed is going to protect your right to get paid, even when there is a pay when paid clause, or a pay if paid clause within your contract. We do have a really great blog post at levelset.com/blog/what… Let’s see, what is it called? Just go on our website and search pay when paid, what does pay when paid mean? You will find lots of more intricate legally described answers than I can give over a Zoom call.
Yeah. That’s my two cents on pay when paid. It’s a sticky situation, and it depends where you are. As long as you maintain your lien rights, you’re probably going to be okay. I guess we have time for one more, but we should probably wrap up, Jeff. It looks like we have a final question around the acts of God in contracts.
Yeah, I think this is an important one for you. It’s about acts of God. They filed a prelim, that contract gets canceled, but their company’s already done shop drawings or mock-ups in place. How can they protect themselves with money they’ve already spent? Are they still able to collect on that money?
Well, one thing I mentioned earlier was the force majeure clause, which is kind of around the acts of God. Just looking at your contracts that you have in place on these projects you’re worried about. Bringing them to a lawyer for one of those free consultations I mentioned. That’s a good first step. Then before I pass it back to Jeff for his thoughts, I would also mention that mechanic’s lien rights in most cases are for the physical improvement of property.
If you aren’t actually physically improving real property, it becomes a little bit more murky in a lot of cases. However, there are sets of mechanic’s lien rights for architects, and land surveyors and things like that, in those more specialty trades. That you can reach out to us about or ask the question on the expert center more specifically. That is another great question for the expert center.
Yeah, Alex, I would have to fully agree with you there. Or if you’re an electrical contractor, a NECA contractor, an MCAA contractor, they have resources as well. I would go to them, because they’ve really experienced this as well. One of the good things, and one of the things that we should have said probably earlier, Alex, is we don’t know everything.
That’s for sure.
Knowing what you don’t know is really important. Pushing people to the right legal and experts is critical. We’re just here to pass that information along. That’s a good one for your lawyers there. I would go right to Levelset for their free legal advice. That’s worth 30 minutes right there. That probably plays out on multiple jobs for a lot of people. The lawyers getting involved early and understanding it, can again be a communication piece. It’s critical. I think that is it. I think that’s all we got.
Before I let you take it back, Alex, I really want to say thank you. This has been an opportunity to spread information, to really get out there and lean into the industry. From eSUB over here, we appreciate you at Levelset allowing us to come over and have this conversation. To everyone who joined us, 125 people, I know you’re dropping off quick because you’ve probably got other stuff to do. To all of you for joining us, thank you. Reach out, use us. Now is the time to lean in. We’ll all get through this, but we’ll only do it if we do it all together. Thanks, Alex, and thanks to Levelset for having me.
Yeah, absolutely, Jeff. Thank you, and thank you everyone who showed up. It was a really fun webinar. It was actually my first webinar, so I had a good time doing it with y’all. Jeff, you’re a seasoned pro, so thanks for holding me up and keeping me alive. We’re going to make sure to send this stuff out to everybody. A recording of this webinar will be available, and all the resources as well. Keep your eyes peeled. As our motto says, payment help is here if you guys are having trouble getting paid.
We have the expert center, we have contractor pages. We have live chat on our website. We have actually a free account that we’re giving to people during the coronavirus. I can’t believe I didn’t mention it earlier. If you want to start protecting your lien rights, sending out notices, there is an account with your name on it that you will not have to pay for. Reach out and let us know.
Yeah, hit me at esub.com, or firstname.lastname@example.org, 30 minute free consultations. Happy to be here to help you guys.
Absolutely. Have a good day, everyone. Thanks for joining.