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VBX Survey Gauges Contractors Reaction to COVID-19 Shut-Down

Posted: 4-17-2020

by Brenda Romano

San Antonio (Bexar County) – In early April, the Virtual Builders Exchange (VBX) conducted a survey of its members to gauge reaction to the COVID-19 shut-down in Texas.  The response was brisk with over twenty percent of member companies completing the survey and adding extensive comments outlining their concerns.  “We had hoped for a good response, but we were very surprised by how fast our members responded and more surprised at the number of comments they added,” said VBX CEO Michael Tollette.  “Clearly, the construction industry is very concerned about how long this shutdown is going to last and what it’s doing to the economy, not just locally, but nationally as well,” he said.

Following the response of its members, VBX decided to broaden the survey by inviting over 40,000 non-member contractors in Texas to respond as well.  VBX gleaned the list from its extensive database of companies throughout Texas that have participated in projects listed in its Virtual Plan Room service.  “Most of our members have been in business for a long time and they’ve been through a lot of ups and downs, so we were curious to see if there were any differences in their perceptions compared to others working in the Industry,” explained Tollette.

Although the non-member response was considerably lower (less than 3 percent), the overall results of the two surveys were closely aligned, reflecting consistency of opinion between the two groups.

The dual surveys provide insight into the frustrations of the construction industry, including general contractors, sub-contractors, suppliers and industry service providers.  Although General Contractors represent about fifteen percent of all non-residential construction businesses in Texas, nearly double that number of GC’s responded to the surveys of which nearly sixty percent of respondents were either owners of their companies or in senior management.

Over ninety percent of all respondents indicate they are concerned about the shutdown’s impact on their business with nearly sixty percent saying they are “Very Concerned’.  Only four percent of all respondents said they are “Not Concerned.”

The majority of both members and non-member companies (79 percent) have managed to keep their workforce intact over the past 30-days with only 15% reporting lay-offs of either full-time or part-time employees.  A smaller number (six percent) of companies added new employees to the payroll during the same period.

In addition, most companies (75 percent) hope to avoid lay-offs even if the shutdown extends for another month, although nearly 1/4th of GC’s (23 percent) indicate layoffs may be necessary if restrictions continue another 30-days.

The vast majority of construction businesses are considered “small businesses”, employing well below the threshold of 500 employees established by the Federal Government for relief programs administered by the Small Business Administration (SBA).  Yet, less than half of respondents (46 percent) indicated they have applied for the Paycheck Protection Program (PPP), although nearly 20 percent are still considering that option.  Even fewer construction-related companies have applied for the Emergency Injury Disaster Loan (EIDL) with only 13 percent reporting they have applied, although about ¼ are still considering it.  That delay may prove to be costly given the recent announcement that PPP funds have been exhausted and no further applications will be taken unless Congress approves additional funding.

Early in April VBX reported that nearly half of the projects in its bidding pipeline were being placed on hold, cancelled or extended.  Results of the surveys corroborated that finding with 49 percent of respondents confirming that at least some of their work is now on hold and another 17 percent reporting that many of their projects are now on hold.

The only significant difference between VBX members and non-members appeared in the question regarding backlog, referring to the amount of work for which a construction company is already contracted to perform in the future.  Over half of VBX members (52 percent) indicate they have more than 90-days of backlog with only 12 percent saying they have less than 30-days of backlogged work.  About a third (29 percent) of non-members reported more than 90-days of backlog with another third (30 percent) saying they have less than 30-days of backlog.

The combined results indicate that about 60 percent of construction companies have less than 90-days of backlogged work, suggesting serious ramifications for the construction industry if the economy remains in lockdown and / or backlogged projects fail to materialize.  “While contractors are clearly holding off on triggering layoff’s right now, if projects they have in the pipeline fail to materialize, they will likely be forced to reconsider that position,” Tollette noted.

While over 60 percent of the construction industry says they are most worried about capital, project delays and the impact on future bid opportunities, those fears are compounded by concerns about families and employees.  When asked about their most pressing concern, over a third (35 percent) of respondents cited the safety and security of their family and employees, fears about the duration of the pandemic and the need for a cure to prevent another outbreak.

According to Michael Tollette, the results of the COVID-19 surveys will be shared with local construction associations who are working with government leaders to craft a plan for reopening the Texas economy.  “We have a long-standing relationship with local construction associations and great respect for the work they do in representing the construction industry to our elected officials,” said Tollettte.  “Our business is dedicated to finding and reporting on construction opportunities so working with elected officials is outside our arena. However, we hope our survey results will be useful in figuring out the best way forward for all of us,” he concluded.

Industry News

1. What is your primary business type?

  • The types of companies that responded to the surveys are fairly consistent with the demographics of the construction industry in general with a slightly higher number of general contractors represented and slightly fewer Service Providers.

2. What is your role in the company?

  • Nearly 60 of all respondents occupy senior roles in their company with over a third (39 percent) indicating they own or manage the company.

3. How concerned are you about the economic impact of COVID-19 on your business?

  • The majority of those surveyed (58 percent) indicated they are very concerned about the economic impact of the pandemic on their business. An additional 38 percent indicated some level of concern. Only 4 percent of respondents say they are not concerned.
  • Among VBX members, General Contractors indicated a slightly greater level of concern with more than 60 percent categorizing themselves as “very concerned”.
  • Among Non-Members, Sub-contractors indicated a higher level of concern with 64 percent categorizing themselves as “very concerned”.

4. What steps have you taken with your workforce over the last 30-days in response to the COVID-19 pandemic?

  • Despite growing concerns, the majority (79 percent) of the construction industry has managed to keep its workforce intact over the past 30-days with only 15% laying off full-time or part-time employees.
  • Finally, six percent of those responding actually added full-time employees to their payroll over the previous month.

5. What plans do you have for your workforce if current COVID-19 restrictions continue over the next 30-days?

  • Although the majority of respondents (75 percent) remain committed to retaining their employees, more contractors (20 percent) anticipate that lay-offs may be necessary if restrictions continue for another 30-days.

6. Did your company apply for a loan under the Paycheck Protection Program (PPP)?

  • Less than half of construction companies (46 percent) have applied for a loan under the Paycheck Protection Program (PPP), with 17 percent saying they are still considering the option.
  • Only a small number (2 percent) of respondents indicated they tried to apply but ran into problems.

7. Did your company apply for an Emergency Injury Disaster Loan (EIDL)?

  • Even fewer construction companies (13 percent) have applied for assistance under the Small Business Administration’s Emergency Injury Disaster Loan program (EIDL) although 24 percent say they are still considering it.

8. Have any of your projects been placed on hold due to the COVID-19 pandemic over the past thirty days?

  • Nearly 70 percent of all respondents say their projects have experienced some degree of disruption due to the pandemic, with nearly 20 percent of those indicating that many of their projects are now on hold.
  • A third of those surveyed say their projects are still proceeding.

9. How much new work do you currently have back-logged?

  • Nearly 60 percent of those surveyed (combined) indicate they have less than 90-days of backlog, with one in five contractors reporting less than 30-days of Backlog.

10. What is your biggest concern about the COVID-19 situation?

  • The economy remains the greatest concern for contractors trying to navigate the COVID-19 pandemic, with 62 percent expressing fears about the impact on future bidding, working capital, and project timelines.
  • A fourth of respondents (25 percent) listed the health of their families and employees as their top concern with another 10 percent saying they worry about the duration of the pandemic and the restrictions imposed on the public by it.

Perhaps the greatest insight into the complexity and uncertainty surrounding the COVID crisis can be found in the words of respondents themselves.  The following is a random sample of comments grouped by company type.  All responses were submitted anonymously.  

Comments:

What is your biggest concern about the COVID-19 situation?

GENERAL CONTRACTORS:

Health and safety of our employees.”

“Companies holding on tight to their money for new or remodel construction.  Work will slow down in the future.”

“That our government has ruined our economy or damaged it so severely that we have lost many opportunities we would have had.  Eventually it will take a toll on materials and slow existing jobs down.”

“Some of my friends with small businesses are really hurting. One has closed and will never be able to reopen. There needs to be a solution found soon so that we can all get back to some semblance of normality and get the economy back on track.”

“A single worker for a single sub getting sick, regardless of what the sickness is. It is assumed to be COVID so if the sub has 8 employees and one guy gets sick, all 8 are removed from the job and those activities cease to happen.”

“Delays, Subcontractor insolvency, supplier disruption, Owner default. CASH.”

There is a good chance that quite a number of jobs will either be shelved or put on a long holding pattern. We run the risk of people coming available with no jobs to start. If that happens, we will be forced to lay off more people.

“The hole in cash flow between finishing projects and projects that get started again.  Assuming that projects will start again.”

“Our economy will take too long to bounce back from the ignorant restrictions put on us by the government.Many lost businesses will be small businesses and large corporations will gain in market share.”

“A lot of our work is for the oil industry. There is the double hit of COVID-19 and oil prices.”

“That the overreaction to shut down the economy continues.”

The economy. New projects being put on hold as a result of the COVID-19.

“We are concerned about our employee safety when they cross state lines to get to our projects and we are finding some interesting difficulties scheduling hotels, food etc.”

“Media induced hysteria.  Owner concerns that are reactive vs. thought out.  Lawyers pushing legal solutions to COVID related delays.”

Shut down of site construction or unable to secure materials.”

“The biggest concern is having enough subcontractors that are willing to work safely on the Jobsites.”

“Uncertainty about when the peak will get here; how long the effects will last on the economy overall.”

New projects will be delayed due to state of economy.

SUB-CONTRACTORS:

“Impacting the construction industry long term is our biggest concern. Currently we are still working and going at it, thankfully. We are concerned about upcoming projects and people not wanting to have new projects built due to financial risk or scared about their future with the virus.”

 “Long-term construction growth. We are fortunate right now, but if more new projects keep getting delayed, we will struggle in 3rd and 4th quarters.”

“Getting Owners/General Contractors to pay for work being performed during COVID-19 crisis. If there is a delay in pay it trickles done to suppliers and this can trigger a recession and cause small contractors to go out of business.”

That the government leaders in congress are so disconnected from reality and fearful that they continue this insanity!

First and foremost would be the health and safety of all. After that priority comes the potential long-lasting impacts on the economy. Hopefully, we can get people back to work when the time comes and make for a speedy recovery.

Lack of care for the field workers and their health. While many jobsites are doing a great job following the guidelines of social distancing, cleaning of jobsite and employee hygiene recommendations, many General Contractors are threatening owners of subcontracting firms if they don’t work or do not have the appropriate manpower at this time. It seems as though Contractual obligations are more important than having understanding in the situations.

Manufacturers shutting down and supply shortage. Company people possibly getting affected do to being on the front lines.

“Health and welfare of field employees moving on and off job sites.

“Payment delays, clients not releasing or spending capital until their client business ramps back up.  There will be a lot of “re-thinking” expenditures going forward until this is a very distant memory.” 

“The health of Americans and the health of our economy.”

“Safety of my people working here.”

“Owners delaying construction on new projects as many entities are seeing a drop in (their) revenues.”

Projected revenue shortfalls will create more layoffs and furloughs.

 “That the government does not act quick enough to give significant financial relief to individuals and businesses.

That it will drag on longer than we can hold out to finish our projects.”

SUPPLIERS:

“Economy will stay shut down longer than needed. Models have been incorrect from beginning and we are still following them.”

 “I don’t want any of my family or business associates to become infected and or die. I also wish things to quickly return to normal.”

“The ability of the medical community to bring effective treatment and vaccines to market.”

“Losing long time employees.”

“Mostly the fleecing of America and manufactured hysteria relating to the current flu strain spreading around the world. Long term economic outfall from shelter in place and shutdown of thousands of businesses area / nationwide; increase in crime due to number currently out of work and idle youth not attending school; real estate depression; increase in cost of basic goods; lack of available necessities; changes to social norms across the board; political instability due to status of global economy and utter lack of collaboration amongst some branches of government.”

“Shelter in place extending into late 2nd quarter.”

 “Losing long time employees.”

“Construction stopping. Owners cancelling jobs in the design stage. Owners not paying. Contractors not paying.”

“Shelter in place extending into late 2nd quarter.”

“The education of our children. Not only in school but in hearing how their parents are having to react to changes in our daily lives and how much of that is being driven by politics and local politicians in a power grab.”

“Government intervention in the construction industries ability to continue our livelihood.”

SERVICE PROVIDERS:

“If everyone is not able to go back to social interaction by summer, I’m afraid it will cripple the economy.”

“If the shut-down extends into construction. We are a design firm.”

 “My employees’ health and the economy.”

“We are an architecture firm, so our risks are far less than for the braver tradespeople and craftspeople. Our concerns are more focused to limiting field inspections and site visits. Some people are going to virtual tour walkthroughs where a foreman walks their camera phone through pertinent areas and carries a conversation. Our larger concern is wondering what else is coming in terms of limiting construction site work. We worry for the families and people who are working there, and we worry for their livelihood if it is curtailed.”

Thank you to all those that took the time to complete the VBX survey and for the many thoughtful and candid comments which were included.

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By |2020-04-22T17:07:42-05:00April 20th, 2020|Feature Story, Industry News|

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