Many things can go wrong on a project, including an accident, injury, or property damage. Hazards on the job could result in worker or third-party injuries. Property damage from man-made disasters, such as a fire or explosion, or a natural disaster, such as a flood, hurricane, tornado, wildfire, or earthquake, can destroy a construction site or render it inaccessible.
Planning for the unexpected ahead of time can help prevent and mitigate risks. An emergency plan, while not foolproof, will go a long way to help guide you and your workers through a crisis and minimize the fallout that typically occurs without a plan in place.
Creating an Emergency Plan
Prior to developing a plan, perform a risk assessment to understand and evaluate the risks your company faces, the processes you already have in place, whether they appropriately address these risks, and where gaps in protocols may exist. In identifying the risks, you can develop new policies and update or revise existing practices to better align with changing or evolving situations and emerging trends.
Once you identify your risks, create an emergency plan that includes:
- Team members responsible for various tasks that may arise during an emergency, along with established reporting lines so all workers know whom to contact depending on the incident or event
- Communicating and training all workers on the emergency plan
- Emergency resources that can be called upon if necessary and estimated response times, based upon distances from fire stations, hospitals, and so on
- Contingencies in the event of a jobsite loss to secure the site, including getting workers to safety, stowing away equipment and materials, and maintaining alternative communication systems should inclement weather impact normal channels
- Designated person (crisis manager, for example) responsible for speaking with any regulatory bodies and the press
- Legal and insurance contact information
In addition to communicating your emergency plan to all workers, share it with all stakeholders, including subcontractors to ensure their activities and exposures have been contemplated, suppliers to address risk to their materials, and the project owner or client to account for any site-specific hazards. The plan should be reevaluated and updated on a regular basis to ensure that it continues to address your risks.
Data from the U.S. Bureau of Labor Statistics shows that the price of used cars and trucks jumped up by 40.5% from January 2021 to January 2022. Used pickup truck prices have risen at a faster clip than new trucks, with the average used full-size pickup truck eclipsing $40,000 in 2021.
Why the Hike in Pricing for Used Trucks?
The reason for the spike in used-truck prices is the result of too few vehicles available for sale during the pandemic and too many buyers. Factory closures followed by supply-chain disruptions caused new vehicle inventories to become tight, which resulted in fewer trade-ins and fewer used vehicles available. Vehicle output shrank by 3.3 million due to plant closures during the pandemic, according to an article in the Chicago Tribune.
Rental car companies and other fleet buyers have added to the vehicle shortage. They are typically a major source of used cars and trucks for dealers and have been selling fewer vehicles. Fleet buyers are simply not buying as many new vehicles (due to their high cost and delayed availability) so they aren’t offloading their used trucks.
The Cost of Fuel Adding to Construction Spend
Add to this the high cost of diesel which is needed to power trucks and machines that are widely used in construction projects and materials, and you have a confluence of factors impacting the spend on a project. Rising gas prices affect energy-intensive heavy construction products such as bricks, cement, copper, and aluminum where energy accounts for about one-third of costs.
The cost of construction had already begun to rise in 2021. It is, in fact, the highest it’s been in 50 years with contractors and home builders feeling the effects. According to recent Census Bureau data, construction costs increased by 17.5% over the year from 2020 to 2021. This reflects the largest spike from one year to the next since 1970. Furthermore, the costs in 2021 were more than 23% higher than in pre-pandemic 2019.
Even if contractors are able to find used trucks to replace their old vehicles, they are paying a higher price for the vehicles along with the fuel needed to go to and from a job. These and other surges in prices should be factored into the cost of a job moving forward.
Sources: Chicago Times, Financial Times
You work hard on the job, only to risk not being compensated. Your job as a contractor is already fraught with risk from various avenues – the last thing you deserve is to be at risk of not being paid in full and on time. Payment delays, however, are common in the industry, causing cashflow issues and the inability to pay others, such as subcontractors, in addition to your own bills.
Here are several strategies you can use to reduce the risk of late or no payments, as well as ways to deal with them when they do occur.
- Discuss cost estimates and budgets with your client during the initial phase of the project and make sure you are transparent. Be very clear that you are providing estimates for labor and materials and pricing may change as the project unfolds, based on supply availability and delays and any unexpected occurrences that could impact the cost of the work performed. Keep your client continually updated.
- Make sure your contract agreement with the client clearly outlines the cost of the project and payment due dates, methods, and terms and conditions. Include:
- Agreed-upon cost estimates and a detailed breakdown of each
- Payment schedule – detail when each payment should be made, based on agreed-upon dates and/or project milestones
- Materials and equipment list – specify the materials and equipment needed to complete the job, their respective costs, and which party will be responsible for each expense
- Add-ons and exclusions – itemize possible add-ons the client may request and their cost estimates
- Any fees for late payments and the course of action you will undertake if payments are not received on time
- Consider increasing your upfront down payment, particularly for new clients, as part of your terms.
- Send detailed invoices to the client to avoid any confusion or red flags. Should a dispute arise, a detailed invoice will help support your expenses.
- Send the client gentle reminders via post or email, stating that the bill is past due and that the late payment fees outlined in the contract will apply.
- Send the client a preliminary payment demand notice (prior to filing a mechanic’s lien). If you haven’t received payment after several communications or you’ve been advised by your client that he or she will not pay for the work you performed, send a payment demand letter. The letter should specify the monies owed and payment method. Have your attorney review the letter.
- File a mechanic’s lien on the construction property. Mechanic's liens, which are recorded in public records, can cause problems for property owners. A lien makes it extremely difficult for a client to sell his or her property until the debt is paid in full. Banks and lenders are also unwilling to refinance homes or lend against lien-encumbered properties.
A solid contract will help ensure that projects go smoothly and you and your subcontractors are paid fair and square for your hard work.
Sources: CCIS Bonds, Nolo, AIA
Unlike large corporations, most small construction firms and contractors don’t have a dedicated marketing department (or marketing employee, for that matter) with a big budget to bring in new business. This shouldn’t stop you, however. There are cost-effective, proven marketing strategies you can implement and execute that will help you target the right type of customer for your business to generate additional revenue in 2022 and beyond. With a well-though-out plan in place, you won’t be wasting dedicated dollars on leads that go nowhere and will get the ROI you need to help expand and grow your business.
First Things First
Define who your customer is. Are you targeting residential and/or commercial clients for construction work? Is the work revenue-specific, for example, construction for high-end homes? If you are a roofing contractor, do you service both homes and offices? Is all your work local and within certain ZIP codes, or are you traveling throughout the region for jobs?
Having a clear definition of your customers will help shape your messaging so you can speak directly to their needs, including their pain points and concerns and how your services address them. This will also help you determine the type of lists to buy so you accurately zero in on the right target audience and don’t spend money trying to reach people whose service needs are not in your wheelhouse.
Start with Your Digital Presence
Other than asking for referrals from friends and family, everyone searches online to find a contractor. You need a plumbing contractor, you Google plumbers in your area. You need to replace a roof, you search online. Even potential clients who have a list of GCs to contact for a job, go online to research firms for a more detailed idea of each company’s experience, expertise, licensing, bonding, certification, insurance, Better Business Bureau (BBB) rating, etc. Here are some suggestions to get your firm’s digital presence up to par:
Review your website.
- Is the branding on your website prominently displayed? Does it convey the message and story behind your business?
- Does the “About Us” section speak to your local reach (or beyond if you service many areas) and include your experience and company’s core values?
- Is the look and feel of your website modern and up to date and legally compliant? If you haven’t done a website refresh in years, it’s time to do so. Also, be sure your website is mobile-device friendly, as increasingly more prospects look up information from their smart phones and tablets.
- Is your website easy to navigate with clearly defined menus? Are your services listed front and center? Is your contact information easy to find? Is there a call to action? Consider including a chatbot to answer simple customer inquiries immediately.
- Does your website include photos of your work? Consider including a video.
- Are there referrals and testimonials from clients included on your website? It’s easy to ask clients to provide you with written recommendations. Client testimonials go a long way in conveying the confidence and trust customers have in your work.
- How often do you update your website with new information? Include a blog so that you can keep content fresh and current. If you don’t have the budget to hire a writer, simply post photos of your latest work with a paragraph or two of the services you provided on each job.
You most likely don’t have the time or bandwidth to update and improve your website. You can hire a freelancer or firm to perform a website analysis and then make the necessary changes and updates. There are individuals and businesses that offer website design and development services in price ranges that will fit your budget.
Get a social media presence.
If you don’t already have a social media presence, at the very least set up Facebook and LinkedIn platforms. LinkedIn is great for B2B, and each quarter sees significant increases in monthly active users and platform engagement. The platform is also constantly introducing new features that improve the performance of businesses and pages.
If there is someone inhouse who can post for you, set up an Instagram account to feature photos of recent jobs. You want people to see your work. Plus, the wider your digital reach, the more likely people will find you when they search for the services you provide. It doesn’t cost anything to have a social media presence (unless you hire someone to write your posts).
Be sure the branding on all your social media platforms is cohesive and consistent. Post regularly on your platforms.
Conduct a Lead/Nurture Email Campaign
Complement your online presence with an email campaign to the target audience that represents your customer demographics. This involves purchasing the right list and personalizing emails with copy and images that speak to your potential clients’ needs. A lead/nurture campaign will help bring leads into the sales pipeline, establish company recognition, and foster trust with potential customers.
Here are some best practices to follow when conducting a campaign:
- Provide expert insights for valuable content
- Concentrate on one relevant topic per email, including a pain point that will resonate with customers
- Keep emails short and ensure they flow naturally
- Track key metrics and test your emails, including which subject lines work better than others
- Maintain brand consistency
- Include a call to action (call for more information, an estimate, etc.)
- Follow up
Email marketing firms are available to help you set up and execute an email campaign as well as track results. It’s important to remember that email campaigns garner results over a period of time. It’s all about nurturing and establishing a business relationship, which is a long-term investment that will ultimately pay off.
There are additional marketing strategies you can consider such as paid advertising, direct mail, telemarketing, print advertising, SEO marketing, and others. Begin with the basics and as your business grows you can look to spend more marketing dollars.
March was Ladder Safety Month with the American Ladder Institute raising awareness on the importance of safety to prevent ladder-related accidents and fatalities at home and on the job. Let’s review some of the ladder and scaffolding safety basics for construction workers.
An estimated 65% of the construction industry works on scaffolding or ladders on a daily basis. Falls from this equipment account for about 15% of all construction accident fatalities each year, as well as at least 20,000 injuries in the industry as a whole. According to the Centers for Disease Control and Prevention (CDC), more than 80% of fall injuries by construction workers that result in a visit to the emergency room involved a ladder.
Accidents involving ladders and scaffolding frequently result in severe or permanent injuries such as broken bones and fractures, back and neck injuries, traumatic brain injuries, and paralysis. Some of the most common reasons for ladder- and scaffolding-related injuries, according to the Occupational Health and Safety Administration (OSHA), are as follows:
- Defects in the ladder or scaffold
- Excess equipment weight load
- Failure to secure the ladder or scaffold
- Faulty design or defective materials
- Lack of adequate safety equipment such as guardrails or harnesses
- Lack of qualified supervision
Ladder and Scaffolding Safety Practices
Following are safety tips to reinforce with your crew:
Ladders
- Properly train employees on ladder safety.
- Ensure all workers wear clean, slip-resistant shoes.
Inspect all ladders and make sure they are in good working order prior to using them. - Do not use ladders with missing or loose parts. Ladders that sway or lean to one side must be repaired or replaced.
- Choose a ladder appropriate for the size of the job:
- The ladder's Duty Rating (the maximum safe load capacity of the ladder) must be greater than the total weight of the climber, tools, supplies, and other objects placed on the ladder.
- The ladder must be long enough so that the worker does not have to stand on the top rung or step.
- Select a ladder made of nonconductive materials such as fiberglass if exposure to electrical hazards is a possibility.
- Place an in-use ladder on firm, level ground with no slippery conditions at the base or top support points.
- Keep three points of contact (either two hands and a foot or two feet and a hand) at all times when climbing a ladder. Once a worker has stopped climbing, tools and materials should be carried on a tool belt or hauled up by rope.
- Before using a non-self-supporting ladder, make sure it is situated at the proper angle. The base of the ladder should be 1 foot away from the support for every 4 feet of working length, according to a 4:1 ratio. Stand erect with your toes against the bottom of the ladder's side rails and your hands straight out.
- Unless the ladder is specifically designed for more than one climber (such as a trestle ladder), only one person is permitted on it at a time.
Scaffolding
- Make sure all workers are properly trained on scaffolding safety by a qualified person who will review potential hazards such as electrocution, falls, and falling object hazards and the procedures for dealing with those hazards. Training must also cover the proper use of the scaffold, how to handle materials, and the scaffold's load capacities.
- Inspect the scaffolding prior to the work shift to ensure it’s safe to use and in proper working order before a worker climbs aboard it.
- Have only trained personnel under supervision erect, dismantle, alter, or move scaffolds.
- Always wear a hard hat when working on, under, or around a scaffold. Also, wear sturdy, non-slip work boots and consider using tool lanyards.
- Keep an eye out for coworkers working above and below you, as well as those working on the scaffold. If you witness improper use of anything on or near a scaffold, stop what you're doing and notify a supervisor.
Safety on the job is always paramount and it’s important to keep construction workers safe when using ladders and scaffolding.
In recent years, construction project management has changed in favor of a streamlined process that minimizes friction, centralizes responsibility, and increases focus on quality and completion. The shift may benefit everyone involved.
Traditionally, construction projects have involved project owners’ hiring the architect/designer and contractor separately. Under this approach, the project owner requests a bid for the design of the project from an architectural firm. Once a firm is decided upon, the project owner draws up a contract up with the design firm. The project owner and design team then solicit bids from construction contractors for the build, with a separate contract drawn up with the construction firm that won the project.
Essentially, under the traditional approach, there are two different contracts (or more if there are multiple designers involved, such as landscape architects, interior designers, etc.) drawn up between the designer and contractor for the project. Too often this approach tends to establish an adversarial relationship between the two parties regarding responsibility for issues such as scheduling delays, change orders and cost overruns. When this occurs, the project owner is caught in the crossfire between the designer and the contractor.
A Simplified Project Delivery Approach: A Single Contract for Design and Construction
Over the years, increasingly more project owners and contractors have begun using a design-build approach to help streamline deliverables and address potential issues that arise when everyone is not on the same page and working together as a team. With the design-build project delivery, the project owner contracts the job with one entity that is responsible for managing the project in its entirety. This is led by the construction contractor, typically the general contractor or design-builder, who collaborates with the design and construction teams.
Because the design-builder assumes total project responsibility – from design to costs to scheduling – this approach saves the owner time and reduces designer/contractor conflicts, as they are one, cohesive team. Furthermore, the design-build approach fosters collaboration and offers greater cost certainty, a shorter project timeline, custom
Construction contracts are one of the most critical aspects of a project. They define the parties involved, the work to be performed, how the work will be done and when it will be done, what materials will be used, and how much the project will cost, among many other things.
Following is a list of what is included in a typical construction contract along with some tips to ensure there are no surprises that could negatively impact your business.
- Client information, including legal name, phone number, email, and address, and where the construction work will be taking place.
- Contractor’s information, including legal name, phone number, email, and address, relevant license numbers and insurance information (General Liability, Professional Liability, Workers’ Compensation).
- Title and description of the project, including a clear outline of the scope of the project.
- Will you be providing materials only? Materials and labor? Or just labor?
- Will you be providing specification plans and is this part of the costs involved?
- Projected timeline and completion date, including the date the contract takes effect, the project start date and estimated completion date.
- Clear verbiage regarding any project delays.
- Cost estimates and payment schedule and terms.
- Change order agreement. Things may change throughout the course of your project so be sure the agreement explains the change order process. Document and require sign-off on every change order and specify this as part of the process in the contract. This applies to changes in the project scope, project timeline, or in price or payment terms.
- Stop-work clause and stop-payment clause. A stop-work clause gives you the legal right to stop the project if you have not been paid. A stop-payment clause gives the client the right to withhold payment if the work is not completed as outlined.
- Act of God clause. Occasionally, circumstances beyond your control may prevent you from completing a project on time. It is critical to include provisions for these circumstances in the construction contract. An Act of God clause specifies how you and the client will proceed if one of these unforeseeable events occurs, such as a hurricane, earthquake, or widespread material shortage due to supply-chain disruption. Make sure the contract accounts for any and all potential issues.
- List of all exclusions so each party understands what is and isn’t being provided as part of the project scope.
- Define the dispute resolution procedure. You may want to require in the contract that in the event of a disagreement, each party must meet within a week or two to attempt resolution. If that doesn't work, consider going to mediation.
- Indemnification agreements and hold harmless agreements. It’s important for an attorney to review these agreements to ensure you are clear as to your liability as well as that of the other party’s.
All contracts should be reviewed by an attorney and an insurance professional to ensure the appropriate insurance program is in place and, when possible, transfers your liability to a third party. It’s important to make sure you are well protected if there are claims made against you. Review both your own policies and those on which you be named as an “additional insured,” including your subcontractors’ policies.
Despite grappling with the ongoing effects of the coronavirus pandemic, 2021 was a strong year for the construction industry. Total construction spending reached a record high in July of 2021 and, since Q3 of 2020, the industry has added over $20 billion to the economy each quarter. While the road ahead is by no means smooth, 2022 is expected to be another successful year for construction. As the year comes to a close, here are trends and themes to look for in the coming year.
Surging Demand Shows No Sign of Slowing
Median home prices reached $363,000 in June of 2021, a 23.4% year-over-year increase. The rising prices speak not only to an increasing demand, but also a shrinking supply. Record low mortgage rates have Americans buying homes at a rate last seen in the 1970s, and the housing supply is unable to keep up.
The National Association of Realtors reports that over the past twenty years, the U.S. has built at least 5.5 million too few homes to keep up with housing needs. And, in response to this low inventory, residential construction is seeing an increase in inventory demand. U.S. home building surged to an eight-month high in November, and housing starts are likely to stay strong in the year to come. Further, for those who have managed to purchase a home and existing homeowners, demand for remodels is expected to remain high in 2022.
Biden’s Infrastructure Plan and Nonresidential Construction
Associated General Contractors of America CEO Stephen Sandherr described the recently passed Infrastructure Investment and Jobs Act (IIJA) as a monumental piece of legislation that will “provide a needed boost to the construction industry,” in a statement. With $110 billion devoted to roads and bridges; $66 billion to passenger and freight rail; $55 billion to water infrastructure; $73 billion to electrical grid improvements; and billions more, the bill bodes well for the nonresidential construction sector.
Associated Builders and Contractors President and CEO Michael Bellaman echoed a similar sentiment: “Passage of the bipartisan infrastructure bill creates an opportunity to effectively modernize our nation’s most critical infrastructure, and ABC and our members stand ready to do the important work to bring America’s infrastructure into the 21st century”
Labor Shortage
According to an August survey from the Associated General Contractors of America (AGCA), six in ten firms report project delays due to workforce shortages. The Home Builders Institute estimates that the industry needs over 61,000 new hires each month to keep up with demand.
On the severity of the labor shortage, Home Builders Institute CEO Ed Brady says, “the construction worker shortage has reached crisis level. The situation will only become challenged in the coming year with other industries rebound and offer competitive wages and benefits to prospective employees.” In other words, the labor shortage is something firms will be dealing with for years to come.
Supply Chain Disruptions
The coronavirus pandemic upended global supply chains and now, nearly two years later, pandemic-induced supply problems persist. Shortages of crucial materials, such as lumber, paint, and steel, persist, leading to increased material costs and project delays. Construction businesses need to get creative and be proactive in sourcing materials to help projects run smoothly and keep costs down.
While the supply chain will remain volatile, we might see small improvements in the domestic supply chain in 2022. Nucor and US Steel both announced plans to build new multi-billion-dollar plants next year.
Though it is not all rosy skies ahead, the construction industry is well poised for growth in 2022. Over the past year and a half, firms have held strong and adapted to meet the challenging market conditions. Firms who stay resilient and find creative solutions to industry wide problems will come out on top in the coming year.
Purchasing insurance can be a headache, and, with clients to please and employees to manage, the last thing you have time for is sifting through policy paperwork. Operating without insurance is costly, but so is operating while underinsured. It’s about finding the sweet spot, having enough coverage but not so much that you are paying more than you should. For some insurance, project specific insurance is the optimal coverage.
Essentially pay-as-you-go insurance, project specific plans provide coverage specific to your individual project. Unlike an annual policy, you pay for insurance only at the time you are working, either on a per contract or per day basis. If you are just starting out with contracting, or you operate on a small scale, with projects coming in inconsistently, this type of policy ensures you are not overpaying for insurance.
Further personalizing this coverage is the fact that you only pay for the coverage needed for that specific project. It’s not only a matter of time, but also the unique risks of the project at hand. Underwriters consider the specifics of the jobs including services being provided, location, cost, business history. Using statistics, underwriters tailor premiums to the specific project. Projects in densely populated areas have greater potential risk of injury; history speaks to your business experience; cost of project explains what’s at stake; a new addition to a home is inherently riskier than a bathroom modification — brokers gather this information and underwriters use it to help calculate premiums. Project specific insurance premiums account for the specific risks of the project.
The key takeaway here is that project specific insurance is customized to the specific project, as the name elegantly implies. It can offer contractors adequate protection at a more affordable rate depending on the nature of their business and volume of transactions.
Project Specific Insurance Is Not Always Stand Alone
Even those with large annual policies can still benefit from project specific insurance in addition to their current coverage. You might be working on a project that has certain risks your basic plan does not account for; you might be working on a risky project that could potentially exhaust the limits of your regular plan; or you may be required by clients to have higher limits than your current policy allows. Typically, project specific insurance becomes the primary insurance on the covered project and annual practice policies include exclusions for work performed on projects covered by project-specific insurance. There are instances, however, where practice policies can sit in excess of a project-specific policy and act as an umbrella kind of coverage.
Ultimately, insurance is complicated and, in the risky business of contracting, there is no use in taking unnecessary chances — insurance is paramount. Speak to an agent to find your Goldilocks policy, coverage that is “just right” for you and your business’s needs.
With constant technological advancements and ever-changing tastes, the construction industry is always evolving. Staying on top of trends helps you interact more meaningfully with clients — it shows them your passion for and knowledge of your industry. As we usher in the new year, take a look at some of the top trends in building and design.
Colorful Kitchens: While the sleek and modern black and white kitchens are not going anywhere just yet, a new, eclectic and colorful style is entertaining the design stage. Watch out for rich jewel toned cabinets, funky wallpapers, mixed metals, and alternative countertop material this year.
Sustainability: Homeowners are not only looking for homes able to withstand extreme weather, but also homes that are eco-friendly and efficient. Smart technology, alternative energy, recycled materials, and deliberate climate friendly landscaping are all expected to rise in popularity.
Prefab Construction: Prefab construction has been used in the industry for many years and, in light of the labor and supply shortage, they may be making a comeback through modular construction. Modular construction is an increasingly popular construction technique where things are brought to site in nearly finished building blocks which are then quickly assembled. Experts predict modular construction will increase 6% globally in the year 2022.
Indoor-Outdoor Living: All the time spent at home during quarantine has many homeowners yearning to turn their home into their own natural oasis. Outdoor fire pits, outdoor televisions and speakers, and direct access to outdoor spaces via porches and patios are popular among buyers.
Patterned Hardwood: From herringbone to chevron, two-toned to concentric rectangles, patterned hardwood floors are growing in popularity as homeowners move away from carpet. Hardwood and wood-appearing flooring, like laminate or vinyl, are a trend that is only increasing.
Larger, More Luxurious Bathrooms: The average bathroom is often boring and outdated. Now, after too much time spent at home, many are looking to revamp their washrooms. Bathrooms were the second most popular home improvement project of 2021 after yard/landscaping projects. Realtors are seeing an increase in bathroom size and noting that clients choose showers over tubs.
Flexible Rooms: Single use spaces are a thing of the past. Offices that double as guest rooms, dining rooms that double as offices, flexible spaces and multifunctional furniture are of great interest to homeowners.
Minimalism and Maximalism?: Over the past two years, the minimalists and maximalists have veered further and further away from each other. The maximalists have become even more over the top amid COVID, using their increased expendable income on their homes, and the minimalists have doubled down on their decluttering lifestyle. It varies by client, but the key takeaway is people’s tastes are becoming more extreme versions of what they were.
Kitchen are the Heart of the Home: The kitchen has grown into the center of the home. Not only is it where food is prepared, it is also where people gather and entertain. On the double island design trend, designer Marshall Erb says “there’s a dinner-theater component to double islands.”
Lifestyle and culture ultimately dictate design trends, and technological advancements determine operational trends — both of which are always in flux. Engage with your industry online and in real life by joining LinkedIn groups, social media sites, and trade associations to stay abreast of the latest trends.