Most of us are only too eager to see 2020 come to an end, even if it has been a pretty good economic year for the construction industry. Here are some 2021 New Year’s Resolutions to help you start the year off right.
1. Talk to your bonding agent about removing any personal liability from your General Indemnity Agreement (“GIA”).
Many contractors who have been the beneficiary of PPP funds and a solid year of profits are showing their best financial statements in a while. If you have not already removed yourself personally from the GIA with your bonding company, this may be an ideal time to make the pitch to your surety to do so. Liability on performance bonds can go on for almost a decade and this is a good risk to avoid personally.
2. Talk to your insurance agent about coverage for construction defects.
For many years contractors and subcontractors have assumed that construction defects would be covered by their traditional Commercial General Liability (“CGL”) policy. But, recent decisions in Ohio have jeopardized any real coverage for construction defects under a normal CGL policy. Therefore, it makes good sense to review this risk with your insurance consultant, and see what special endorsements or other insurance products are available to address this risk.
3. Review your lien law procedures and forms.
A bumpy economy presents greater collection risks. This is a great time for subs and suppliers to make sure they are instituting proper procedures for serving a notice of furnishing on all meaningful projects before commencing work. Similarly, owners and contractors should ensure that they are instituting proper procedures for ensuring that lien waivers are being received as part of the payment process. And both sides should look at their lien waiver forms to make sure they are broad enough – but not overly broad – to release lien and bond rights through the payment received.
4. Reach out to service providers and customers to say “thanks.”
As COVID-19 has isolated us socially and much interaction has shifted online, it is easy to become removed from valued customers and trusted service providers. Yet business success remains tied to these relationships.
Find a creative way to stay in touch and show appreciation. Your efforts to reach out in a time of isolation will be noted, and likely rewarded.
5. Explore possible exit strategies.
Unlike some other businesses, construction companies are not always easy to sell. But there are viable vehicles for doing so, including ESOPs, transfers to family members or key employees, buy-sell agreements, liquidations or sales to a competitor.
Even if a retirement or exit from the business is not imminent, it is not too early to begin planning for future transitions. And trusted advisors are the key to success.
6. Review your contracts and consider arbitration, instead of litigation.
COVID-19 related delays have made the wheels of justice grind slower than ever. Getting a civil trial at many courthouses will occur no time soon. So you may want to insert mandatory arbitration in your contracts or purchase orders – as arbitration will result in a hearing date much sooner.