The coronavirus pandemic has partially changed every company’s operations, but it has also disrupted greater supply chains and halted operations in a few key fields. In particular, many contractors and home builders don’t have access to the materials they need to get work done, pushing back projects and leaving employees with nothing to do.
Let’s further explore the cause of these supply chain disruptions and how some companies are overcoming them.
International Lockdowns Limit Imported Materials
One of the biggest challenges to the supply chain comes from country lockdowns. Each national government has the power to limit travel to and from its country, shut down “non-essential” businesses, and restrict production to keep citizens safe. This occurred in China when the outbreak was at its peak, shutting down hundreds of factories for several weeks.
These international shutdowns impact domestic construction. In late February, Dodge Data & Analytics estimated that nearly 30 percent of products used in U.S. building construction come from China. Without production or export channels, builders can’t get the majority of the products they need to start or complete construction projects.
The supply chain could further be hindered by import limits and travel bans from affected countries – should the United States decide to enact them.
Supplies will be limited at different times as the virus spreads from country to country. One contractor rushed to get the stone he wanted out of Italy before the country went into lockdown. Otherwise, he could have been waiting months for businesses to open back up and ship it out.
Contractors Are Looking for Domestic Alternatives
One of the main options for contractors who are worried about supply chain disruption is to look for domestic alternatives. You may be able to locate a regional supplier who can offer a competitive price for the same or similar materials.
That being said, if hundreds of contractors across the country are suddenly interested in a limited domestic supply – one that is also likely to be disrupted by the pandemic – it may cost more to buy the materials and become harder to find them.
Many Contractors Can’t Delay Projects
There are multiple reasons why contractors are scrambling to find the materials they need before the supply chain dries up. Primarily, completing one project means they can move on to the next one and continue the positive cash flow into their companies.
However, there are also legal provisions driving contractors to work quickly. Many building contracts come with timeline agreements, including financial penalties for projects that aren’t completed on time. If you need to push back the completion of a project, either due to labor shortages from sick workers or supply chain disruptions, you may end up eating a significant amount of your profits.
To protect your business, you may want to ask a lawyer to look at your existing contracts and see if there are exceptions to these timeline agreements.
Michael Keester, a partner at the law firm Hall Estill, cites a provision that creates an exception for any “unusual delay in deliveries, unavoidable casualties or other causes beyond the contractor’s control or other causes that the architect determines may justify delay.” A clause like this may give contractors more leeway if they can’t get the supplies they need. A global pandemic that disrupts the supply chain is certainly out of the contractor’s control.
While many contractors have yet to see significant disruptions in their supply chains, there may be problems in the near future. By planning ahead in sourcing materials and looking for domestic options, you can make sure your projects have the materials they need. You can also protect yourself by including timeline clauses and exceptions in your legal agreements.