CONSTRUCTION ESTIMATING & OUTSOURCING
Early spring is the time of year when the construction industry normally begins to ramp up. The winter thaw begins, your mind set changes with the smell of the fresh spring air, warm breezes, the ease of moving around and the days stay lighter longer; but not this year.
This year is like no other we’ve experienced in modern history.
To some extent COVID-19 has not only affected and disrupted every person, family and business in the nation but much of the world.
It will effectively change our way of life and the manner in which we conduct business forever.
With the mandatory closure of non-essential businesses during the quarantine period most companies are forced to lay-off or furlough their employees. Some employees have even offered to use their use their POT or take leaves of absence in an attempt to help their employer weather the storm. Unfortunately even those efforts may be in vein. The longer it takes for the country’s engine to restart the more damage will be done in its wake and many business may not be able to recover or survive at all.
The Construction industry is one example. As America was enjoying a booming economy, employment at incredible high levels, unemployment at an all-time low, the unthinkable happened. In just a few weeks construction industries have come to a screeching halt and they find themselves laying-off and furloughing employees rather than building up their forces which would be the norm about this time of the year. This pertains to both field tradesmen, supervision as well and office personnel and management. No one is safe.
Instead of the normal spring boom, construction sites have been asked to shut down and have been secured in place. Some projects may be delayed and other may be outright canceled altogether.
Everyone’s health is at risk. It’s frightening how quickly a virus can overtake someone’s life. All preventive measures must to be taken for the preservation of health. We must all learn new ways of living smarter, including more efficient ways of running our businesses.
So what happens when the engine get restarted and the stalled construction sites reopen, projects that were put on hold will be back in the works and new jobs will be out for bid.
There will be an overall increase in the cost of construction.
There will, no doubt, be material shortages and backorder delays. Material made and bought from China will be delayed due to their slowed production. For contractors to substitute material with “Made in America” goods is more expensive. So either the contractor will take the hit to his bottom-line or if he can pass it along to the owner for recovery, either way, there will be cost increases for someone. There will also be a huge supply and demand market which will overwhelm suppliers and congest delivery schedules.
The good news is there will be a huge demand for labor in all trades and the ancillary supporting businesses and vendors.
Although there will be a demand for labor, to be compliant with today’s six foot personal space standards, the manner in which tradesmen work may need to be reassessed or retrained for new means and methods, at least for a given time. How will this affect crew sizes or work space? How will it affect schedules? Will new OSHA regulations need to be adopted? When the effects of all the personal space compliance criteria is ascertained, I believe it will find the costs of constructions will have increased.
Subcontractors will be a high commodity and their availability will be limited due to the revival of construction projects resuming simultaneously. High demand will increase costs.
Building Inspections and Special Inspections will feel the crunch as the need for site inspections and lab testing will be overloaded. This will slow down job progress waiting for inspections and approvals which ultimately move the project to the right.
The main office overhead is an indirect expense for contractors that is best kept to a minimum. It’s a cost of doing business that can be a major drain to the company’s bottom-line. In market turn-downs and lean times the main office overhead is still a monthly constant.
COVID-19 and the fallout has been a tough pill for America to swallow. One of the major lessons learned is to restructure the interoffice staff to have the ability to work apart or virtually. Depending on the company size, it may be a good fit to help cut costs with the main office overhead if set up properly.
Another avenue to pursue could be to outsource some tasks. Many contractors are using Outsource Estimating and Estimating Companies to assist them with their office staff and team. It relieves them from the payroll burdens and Workmen’s Comp. Insurance, vacation pay, sick pay and more. Depending upon the experience level that could well equal a cost of 70K-100K or more per person annually. Outsourcing should certainly realize a company saving. Every year the construction industry goes through cycles which has Ebbs and Tides. Rarely does an estimator have 52 weeks of fulltime estimating work. During those weeks when an estimator is not needed, the contractor should not be spending money needlessly. The same can be said for Project Scheduling, Submittals, Owners or Site Rep Services, Project Managers. This is when outsource estimating services can be extremely beneficial to construction companies of all types, including residential construction, and commercial construction.
We must all adapt to the new ways. Be Safe!