Effects of COVID-19 on the Construction Industry
When is it going to return to “normal”? We all have been asking that question. Well, for the construction industry, it may never return to “normal.” COVID-19 may have permanently changed the landscape of the construction industry in many ways. Depending on your perspective, many changes could be for the better. We may have to alter how we do business to address some new issues and business concerns. Here are just a few issues that the pandemic has brought to the forefront of our industry.
Virtual Dispute Resolution
Video conferences eliminate travel time and permit people to participate who would normally not be able to meet in person, due to distance or other commitments. Everyone needs to understand from the very beginning of a project, is the need to document everything — absolutely everything. Due to the difficulty of meeting in person, we have seen many more disputes initially handled on paper submissions. It is easier to be successful in your claim if it is well-documented. This was true before COVID-19, but now is even more critical.
Early on in the pandemic, during the initial shutdowns and stay at home orders, private work projects came to a halt, while many public work projects were deemed essential. Not only did these projects proceed, but some public agencies took advantage of the lack of commuters and quiet streets to add work to existing contracts. Now we are seeing a distinct turn. While stay at home orders are being lifted and private construction is returning to pre-pandemic levels, the pandemic has devastated municipal capital budgets. We have seen contracts terminated or suspended, work deleted and future tenders put on hold. For public contractors, as the current backlog of work is burned off, the scarcity of future work can significantly strain cash flow and possibly the viability of the company. It is imperative to remain disciplined in bidding, watch your margins, stay within the geographical footprint and industry sectors. This is not necessarily the best time to expand. Sometimes the best project is the one you did not win.
Skilled craft persons working side-by-side on a project has always been the cornerstone of construction. Social distancing is not always possible, and people are worried about contracting COVID-19. This has heightened the health and safety protocols on projects. From additional PPE, social distancing and limiting the workforce on site, these protocols have possible negative effects on productivity and costs. Reduced efficiency and productivity directly translates into increased costs. These additional costs and productivity impacts have to be built into future bids.
The pandemic has slowed and shut down factories throughout the world. This has caused a scarcity of raw materials and equipment, causing increasingly long lead times and higher costs. It is unclear when the supply chain will recover. These factors need to be accounted for when developing schedules and budgets.
Legal Notices/Contractual Issues
The pandemic exposes contractors to new and different claims and disputes related to COVID-19 You must thoroughly review your contract to assure you provide timely notices of all time and cost impacts, and comply with all claim documentation requirements.
Health Insurance and Paid/Unpaid Medical or Family Leave
Local, state and federal responses to the pandemic have impacted the health care and leave benefits provided to workers. Having an understanding of all insurance policies, coverages, union agreements and your obligations as an employer is vital.
This is just a partial list of the impacts on our industry. Keep communications open with the professionals that make up your construction team: attorneys, accountants, bankers and insurance carriers. And always “stay tuned”.