A Quarter of Contractors Report Summer Project Cancelations

Nearly a quarter of contractors have reported that a project scheduled to start in June or later has been canceled due to effects of the COVID-19 pandemic. That’s according to a new survey from the Associated General Contractors (AGC) of America, conducted June 9-17.

Of the contractors surveyed, nearly half reported that an owner halted a project that was underway in May or earlier, 15% reported an owner has canceled a project scheduled to start in June, 20% reported an owner has canceled a project scheduled to start in July and 19% reported an owner has canceled a project scheduled to start in August or later.

When asked why the owner halted construction, contractors responded.

• 33% said the owner was concerned about COVID-19 danger surrounding the project.
• 28% said the owner expected reduced demand for the project.
• 24% said it was to comply with state/local order to halt “non-essential” activity.
• 21% said there was a loss of private funding.
• 14% said it was a loss of current or expected tax/fee/toll revenue.

When it comes to the cause of current project delays or disruptions:

• 25% of contractors cited a shortage of construction materials, equipment or parts.
• 24% cited a shortage of the craftworkers required.
• 15% cited information that an infected individual has potentially infected a jobsite.
• 14% cited a lack of needed government action or workers.
• 10% cited a shortage of personal protective equipment.
• 8% cited difficulties securing financing or covering cash flow needs.

While some projects are still being canceled, fewer suppliers are notifying contractors and subcontractors that their deliveries will be late or canceled. At the beginning of May, 48% of contractors reported being told by suppliers that deliveries would be late or canceled compared to 38% in the most recent survey.

The percentage of contractors surveyed that expect their firm’s business volume to return to normal after more than six months (30%) was not far off from the percentage of contractors that report their business volume already matches or exceeds normal activity (26%).

“Our association’s latest survey shows many firms have been recalling or adding employees in recent weeks, thanks in part to rapid receipt of Paycheck Protection Program loans,” says Ken Simonson, AGC’s chief economist. “But only about one-fifth of firms report winning new or expanded projects, while almost one-third of firms say an upcoming project has been canceled.”

Simonson added with most states and localities starting a new fiscal year on July 1, even more public construction is likely to be canceled unless the federal government makes up for some of their lost revenue and unbudgeted expenses.

Association officials cautioned that even as the immediate impacts of the coronavirus appear to be easing, the industry is just beginning to appreciate the longer-term impacts of the pandemic. They warned that without new federal recovery measures, the industry was likely to experience a second wave of job losses. They urged the federal government to enact liability reform, pass new infrastructure funding measures and find a way to incentivize laid-off employees to return to work.

“The economic boost that comes with lifting economic lockdowns will not be enough to sustain long-term growth for the industry,” says Stephen E. Sandherr, the association’s chief executive officer. “Boosting infrastructure spending, protecting firms that are operating safely and encouraging people to return to work will help convert short-term gains into longer-term growth.”