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A 2020 report from Levelset and Fieldwire shows that, even in the months before the COVID-19 pandemic hit, construction businesses were struggling with project and payment delays.

The 2020 National Construction Payment Report shines a spotlight on jobsite coordination and its effect on project and payment delays. The report is based on a survey of over 540 contractors and suppliers, conducted in Q1 of 2020.

Key Findings:

While three in four construction businesses (77%) say they are happy with how quickly they finish a job, fewer than one in three contractors (28%) always finish projects on time and under budget.

Even though a majority (53%) say they are satisfied with how quickly they get paid for their work, 80% spend a significant portion of their workweek chasing payments.

70% say poor jobsite coordination almost always causes projects to run over budget or past deadlines.

Only half of construction businesses say they receive payment within 30 days of invoicing, while 15% regularly wait for 60 days or longer to get paid.

Poor planning and coordination delays projects

While no construction project is exactly alike, nearly all jobs share one thing in common: delays. In the survey, 80% of contractors said they expect project delays. That finding is not necessarily surprising. After all, construction projects are often incredibly complex, with each phase dependent on work before it being completed according to precise schedules. Coordinating the moving pieces is critical to getting the job completed on time.

According to one survey respondent, “Site work coordination is the most important factor for completing the job on time and under budget.”

What is surprising is the number of contractors that rate their jobsite efficiency highly (77%), even while they bemoan their own lack of planning, coordination and productivity on projects.

Fewer than 60% of contractors say that a timeline and budget is shared at the beginning of every project. More than one in 10 say they “rarely” or “never” work from a schedule.

As a result, many project delays are entirely preventable. Construction businesses blame delays on unexpected change orders (62%), weather (60%), poor subcontractor coordination (54%) and stalled payments (12%).

In the survey, construction businesses reported losing more than one full day of work every week to inefficiency on projects. Two-thirds (66%) spent more than a quarter of their work hours simply waiting for work to be done.

Slow and partial construction payments limit business growth

When it comes to getting paid for their work, contractors suffer twice over: they don’t get paid in full and they don’t get paid on time. Of course, payment challenges in construction are not new. Perhaps most surprising is how many have grown to accept it as the status quo: 53% say they are actually happy with how quickly they get paid.

Yet, according to the survey, construction businesses report waiting a long time to get paid. Nearly half of contractors and suppliers (49%) report waiting more than 30 days for payment on a typical job. And one in six contractors (16%) say they routinely wait longer than 60 days to get paid.

Getting paid is not only a waiting game. Construction businesses are also struggling to get paid the full amount they are owed. Only 52% of contractors say they are “always” paid in full for their work. Nearly one in 10 say that they are "rarely" or "never" paid in full.

In spite of their payment problems, few contractors actually take action to get paid faster, opting instead to carry their customers’ debt. The majority “rarely or never” charge interest on overdue invoices (70%) or offer discounts for early payment (54%). Many feel afraid to protect their payments as well. More than 35% say they “rarely” or “never” protect their lien rights, and two in three hesitate to file a mechanics lien if they’re not paid in full.

Transforming construction business-as-usual to survive COVID-19

These survey responses were collected in the months immediately prior to the COVID-19 outbreak; construction businesses were struggling with delays even before the current downturn. Coordination challenges are only getting harder as the novel coronavirus disrupts the construction industry, delaying projects or shutting them down entirely.

And cash is getting even harder to come by. According to Levelset’s lien monitoring data, contractors appear to be a lot more comfortable filing mechanics liens in the age of COVID-19. Across in the United States in March 2020, construction businesses filed 40% more mechanics liens compared to January. That number is likely to increase as the lien deadlines for Q1 projects approach.

To survive the current crisis and impending recession, contractors will need to take immediate measures to address the coordination and payment challenges that were commonplace prior to the pandemic. Those that bury their heads in the sand and accept project delays and late payments as the status quo are unlikely to emerge intact.

COVID-19 is transforming the way construction work is planned, completed and paid for. To thrive in the new environment, construction businesses will need to transform their own jobsite processes. Those that plan their work properly, communicate openly, and protect their payments every time will be in the best position to meet the demands of a post-COVID-19 construction economy.

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