With North Bay coronavirus restrictions relaxing on construction, some work resumes. Here's the outlook for future projects

Construction restrictions for nonessential projects during the coronavirus pandemic came off in Sonoma, Marin and Napa counties May 4, giving the tri-county region a glimpse of modified business as usual, with enhanced social-distancing protocols and reconfigured work environments.

However, there are differences in the revised county orders, each with two pages of rules on how to operate safely as the COVID-19 pandemic continues and with varying procedures third-party inspection policies and other details. County stay-at-home orders issued in mid-March included categories of work that were “essential” and could continue - for construction, largely new construction of homes and jobs needed for health and safety - while “nonessential” work wasn't allowed.

The Business Journal spoke with 10 construction industry leaders on the future of their businesses as they conform to new realities and required practices.

Ghilotti Construction Company

We are still trying to analyze how to work within the new virus protection rules.

“We try to maintain a 50-50 balance between public and private projects as we get back to working on non-essential construction,” said Dick Ghilotti, president and owner of Ghilotti Construction Company. “Educating our workforce is the first priority. We are still trying to analyze how to work within the new virus protection rules.”

The company designated three people to serve on a protocol team developing a plan to instruct its crews each morning during 30-minute tailgate sessions so everyone can learn how to comply with mandates that did not exist while just doing essential projects. This involves taking everyone's temperature, completing a daily survey, tracking their contacts and familiarization with many other new methods of operating safely.

“Some of our people are scared to come to work, even our most macho guys,” Ghilotti said. “But one thing is certain … there is strong demand for housing, condos and apartments and the site prep work that goes with them along with long-anticipated road repairs and related construction activities.”

He said having dedicated personnel doing safety check-ins each morning could increase costs. Meanwhile, subcontractors now want more money, and the price of materials is rising quickly.

That aside, the pipeline of projects for Ghilotti Construction is filling up - and still growing. New jobs include widening Highway 101 north and south from Lakeville Highway to the Penngrove interchange, paving the road and parking lot in Pt. Reyes National Seashore, road work in Ukiah and Lake County, a residential development for the Lytton Pomo Rancheria in Windsor, a subdivision in Rohnert Park and an apartment complex in Petaluma on North Novato Boulevard. The company recently completed paving on Highway 101 from Kastenia Road to the Petaluma River bridge.

“We adapted quickly,” Ghilotti said. “There were no office staff layoffs, and people are spaced 6 feet apart. For our projects in San Francisco and Silicon Valley, car-pooling workers is no longer allowed. Everyone has to be flexible these days. Sixty percent of our workers are in the field.”

Ghilotti also serves on a committee with Cynthia Murray, Sheba Whitney, Roger Nelson and others reviewing the new Sonoma County social-distancing protocols and will provide feedback to Sonoma County supervisors and other departments.

Ghilotti Bros.

97% of our workforce remained committed to working every day.

“I believe we will see a sling-shot of pent-up demand and a new resurgence in our economy so long as the SIP ordinances do not remain in full effect much longer,” said Michael Ghilotti, president of Ghilotti Bros. Inc. “For construction, opportunities will be substantial, as taxpayers see the value of investing in infrastructure and the positive, multiplier effect this has on our economy.”

He said that for the residential sector, stakes are higher, and the forecast is even brighter, as the lack of available housing is not only artificially driving up the cost of homes but also exasperating an already challenging homelessness issue.

Ghilotti Bros. was able to keep about 60% of its projects running before policies were relaxed to provide work for field crews so they could bring home a paycheck and support their families.

Mike Ghilotti noted that some essential projects enjoyed increased productivity because of the reduced highway traffic load with more people sheltering-in-place, including the repaving of 19th Avenue in San Francisco (involving 68 employees) and Shoreline Highway in Mill Valley (37 employees) and soon-to-be-made improvements on Sir Francis Drake Boulevard from 101 in Greenbrae to College of Marin.

“Thankfully, we did not experience challenges with our material or supplier chains, but we did have a couple of subcontractors opt out of performing work because of concerns about keeping employees safe and having fewer people available to work,” Ghilotti said. “We did a confidential survey at the outset of COVID-19 and amazingly 97% of our workforce remained committed to working every day.”

Nordby Construction

Some subcontractors elected to shut down, even though their project was deemed essential, and similar decisions were by the owner or employees who did not feel comfortable going to work - creating delays in project schedules.

“Prior to the last official order, Nordby Companies were still able to continue operations at a reduced capacity since fire rebuild projects were considered to be essential construction,” said Craig Nordby, CEO. “Nordby Signature Homes was operating at 40% capacity, with business activities reduced by approximately 20%. Now we will be operating at 100% again.”

He said in the early weeks, just after the first shelter order was released, there was difficulty in acquiring supplies like hand sanitizer, cleaning agents, gloves and masks. Nordby's in-house COVID-19 task force coordinated a supplier and subcontractor outreach effort to predict potential supply chain gaps and preorder what was needed to mitigate the risk of project delays.

“Back then we experienced local labor shortages,” Nordby said. “Some subcontractors elected to shut down, even though their project was deemed essential, and similar decisions were by the owner or employees who did not feel comfortable going to work - creating delays in project schedules. We chose to implement a modified furlough approach with staff assigned to nonessential projects, and payroll was reduced as we continued to develop strategies for coming out after these orders expired by also reducing hours.”

Midstate Construction Company

Some inspections have been done using Facetime and Zoom.

The new rules means active projects will now require a safety compliance officer and a third-party safety supervisor oversight, said Roger Nelson, president and CEO of Midstate Construction Company.

“With safety first, we have been fortunate in that about 50% of our projects are affordable housing or schools and were essential services,” Nelson said. “As safe construction is now allowed on nonessential projects, we will open other projects. Obtaining construction materials and required governmental inspections has been more challenging and has slowed those projects underway. Some inspections have been done using Facetime and Zoom.”

Nelson added that Midstate was committed at the beginning of the shelter-in-place order to leverage its essential jobs, seek the Small Business Administration's Paycheck Protection Program funds and pull some money out of its corporate pockets to keep the Midstate team together without furloughs or layoffs.

Hugh Futrell Corporation

Deliveries of materials will continue to be interrupted, resulting in unknown but adverse effects on schedules and, potentially, on costs.

“Our Art House project at the corner of Seventh and Riley streets in Santa Rosa and our Courthouse Square hotel project were shut down as nonessential, but all construction is allowed now, subject to field safety requirements,” according to Hugh Futrell, CEO of Hugh Futrell Corporation.

With a four-story glass, steel and wood design, Art House includes a ground-floor art gallery, wine lobby, private garage, 21 residential units and an additional 15 hospitality suites available for extended stay and short-term occupancies. This project is in association with the Altus Equity Group.

Prior to the shutdown, he said construction labor force availability had become iffy - with workers reluctant to come to work even if they could legally, and that affected schedules and productivity.

Deliveries of domestic and imported materials have been delayed, Futrell said. He believes they will continue to be interrupted, resulting in unknown but adverse effects on schedules and, potentially, on costs.

The importance of on-site health protocols will continue to be emphasized at company jobs even when the protective orders are modified or lifted, Futrell said.

Jim Murphy & Associates

(T)hose of us in the construction industry are pretty well equipped, compared to other industries.

“We are continuing to operate on three out of five projects in Sonoma County and both of our projects in Napa are under current exemptions,” said Jesse Malone, superintendent of Jim Murphy & Associates. “Our Sonoma County projects are either in the fire rebuild category or are winery related. A number of projects have been put on hold, mostly commercial work, that can now resume. At the same time, design and permitting activities seem to be moving forward at a reduced pace, and physical construction is definitely slower.”

He said the company's current backlog seems fairly stable, but few new projects are coming in.

“I suspect we are still feeling the effects of the Kincaid Fire and some extent due to the Tubbs Fire as well,” Malone said.

He pointed out that the more exotic the material needed the more difficult it is to procure. Standard commodities like framing material, drywall and concrete have experienced an uptick in cost but are fairly available.

“We have kept all of our salaried employees on staff during the shutdown and most of our field employees were able to take advantage of the expanded unemployment coverage and are now returning to work,” Malone said. “Since October 2017, and after the Kincaid and Tubbs fires, finding qualified labor has been a real struggle, however the effects of COVID-19 are also drastically limiting production.”

Jim Murphy & Associates is adapting to the new normal.

“I think those of us in the construction industry are pretty well equipped, compared to other industries,” Malone said. “Our main goal is to protect our employees and subcontractors. We will continue to operate our sites as long as we can provide a safe work environment and great service to our clients - whether or not we remain profitable remains to be seen.”

GMH Builders

Once the shelter orders were issued by Marin and five other Bay Area counties on March 16, GMH Builders enacted a pandemic protocol with policies and procedures on all project sites.

“Construction continued on essential projects, mostly for health care, education and select residential activities,” said Seth Maze, co-founder and CEO. “In some cases, it was more dangerous to abandon the project, and we needed to proceed and protect it. GMH had an open dialogue with local building departments who authorized the continuance of work, and they have been great.”

As a result of the COVID-19 shutdown, there has been a reduction in billings, and GMH had to reduce staff. In addition, project starts have been pushed back creating a significant impact. However, Maze said GMH was able to pick up new projects to support the influx of COVID patients, which offset these other events.

“With so much uncertainty, it is difficult to forecast the true impact of this pandemic,” Maze said. “So far we are seeing a 20% reduction in operations. Obtaining materials from vendors has not been a problem, but it is difficult to obtain cleaning and PPE supplies to protect employees and visitors on job sites.”

Maze said GMH also reduced staff and field labor through layoffs and furloughs, and temporarily shuffled responsibilities and some work-sharing activities to maintain project progress, while office staff members were able to perform their jobs from home.

The new-project backlog has not stopped during this crisis, but it has slowed. There has been an increase in GMH's permitting backlog for nonessential projects, and Maze said county building departments will be overloaded soon.

There may be a need to add resources for plan checking, similar to those during fire rebuilding efforts, prioritizing certain projects over others and adding third-party reviews.

“This bottleneck will run concurrently with some businesses' cash-flow demands or wait-and-see positions in the short term, leading to the boost the industry will need later this year,” Maze said.

Precision General Commercial Contractors

“We have 18 projects underway, and two of these are very large,” said Tom Dawson, CEO of Precision General Commercial Contractors, a certified B Corporation. “The list includes residential construction of Dutton Flats and 38 Degrees North in Santa Rosa and also a 120-unit project on Kawana Springs Road set to start soon, but our field staff numbers are down 30% overall as we continue to abide by strict COVID protocols. None of our projects have had to shut down.”

Protocols include a ban on sharing tools, a requirement to wear gloves and masks indoors, and a policy of not entering occupied apartments until after tenants have vacated.

He said while it is easier to confirm to a 6-foot separation policy when working outside, for interior work it can be a challenge. Housing the company builds ranges from 10%, 80% to 100% percent affordable and has what he called a “fair amount of work” under contract and planned.

In Dawson's view, those in the Permit Sonoma and Santa Rosa permitting department have gone out of their way over the past two years helping to expedite the company's projects. In some East Bay communities, there has been a problem getting inspections.

McDevitt Construction Partners

“Our billings were down 90% to 95% during the nonessential-construction ban, forcing us to furlough everyone, shut down three projects in Marin County, with only one small essential project still active in Cotati,” said Peter Rosell, president of McDevitt Construction Partners. “We immediately applied for the Payroll Protection Program relief, received the funds and now are 100% back in operation.”

All of the Marin projects were restarted as of May 4. Rosell expected to get building permits on a project in Santa Rosa the same week and by June 1 have permits for projects in Marin and Corte Madera.

“To expedite work, we asked our subs to obtain all of the materials they need as soon as possible and bring it onsite,” Rosell said. “This works for most basic materials, but if you want special light fixtures from China, stone from Italy, France or Spain, you may have to order far in advance.”

Recent and near-term projects include building a new Balletto Winery tasting room, two Splash carwash locations on College and Cleveland avenues, converting an old theater is Sausalito to office space on the second floor, refurbishing a church in Tiburon, a Marin Subaru dealership in San Rafael, work for Homeward Bound and another office building.

It has been a bumpy ride for the local construction industry over the past few years, even before the coronavirus.

Rosell said looking one to three years into the future, additional auto dealership construction is still in the game, but if his firm has to shut down again, all bets are off.

It has been a bumpy ride over the past few years with the wildfires before the coronavirus, but McDevitt is resilient and has always bounced back, he said.

“Before the fires, we were operating at 110% and nearly went to zero,” Rosell said. “A similar scenario is occurring now, but we are hopeful that after everyone is vaccinated, things can return to near normal or better.”

He said there is a lesson to be learned. Coronavirus spread rapidly through the population, especially in dense urban areas.

“Should we continue to push for more urban infill and higher-density development if that can lead to crippling the economy, given the frequency of viral outbreaks the U.S. has experienced over the past decade alone?” Rosell asked.

Wolff Contracting

The prospect that some housing projects may be operating at a loss has banks hesitant to lend.

“A lot of what we could do before returning to nonessential projects was for developers of speculative (home) builds,” said Michael Wolff, owner of Wolff Contracting. “Many projects that had already begun, or were close to breaking ground, had stopped with no restart date in sight.”

He said this was due to the possibility that the developer would not be able to sell for a profit after completion of the project. The prospect that some projects may be operating at a loss has banks hesitant to lend.

“Homeowners who had not started to build yet, but were getting close, have also pulled back and are reevaluating whether or not they want to continue,” Wolff said. “However, essential projects continued to move forward for homeowners who are far enough into the build that it only makes sense to finish.”

Editor's Note: This story has been updated, Michael Wolff is the owner of Wolff Contracting.

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