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How Has COVID19 Drastically Altered The Construction Industry?

Posted by: Piyush Singh
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The COVID-19 pandemic has drastically affected the commercial and production activities of several economies of the world. The United States of America is not an exception.

The outbreak has exhibited a spectrum of challenges to the engineering and construction industry, challenges that could intensify, depending upon the severity and length of the crisis, in the country as well as on the global front. The ambiguity surrounding the extent of this pandemic makes it difficult to forecast how the operations of this industry could recover and progress after the period of lockdown gets over.
So, what is the status of construction projects at the moment in the United States of America?

As a result of the repercussions of COVID-19, numerous companies and government authorities, who commissioned a handful of construction outlines, suspended a few projects and revoked several contracts.

Not solely that, the projects that are currently backed by funds are hanging at the risk of plausible supply chain bottlenecks (of equipment and materials including structural steel and glass from Asia) that could cause project delays or reduced spending on future ones.

Subcontractors are particularly vulnerable to bankruptcy, even after the site shutdown of barely a few weeks
Now, in response to the global pandemic crisis, 30 states within the United States, as of April 2020, defined construction activities as crucial. These constructions are designated to be worked upon, as these projects can help protect the health and safety of occupants or can be unsafe if they remained unfinished.

A total of 45 states declared orders to limit construction work activities.
So, all in all, what factors are getting hindered in the process?

(1) Disturbance In The Supply Chain Of Construction Material
With the termination of activities (so as to control the epidemic), foreign manufacturers, and logistic firms, several of which are headquartered in China, have compelled U.S. contractors to encounter difficulties with their supply chain of materials.

The U.S. construction industry depends heavily on foreign imports, including steel, copper, aluminum, cement, and fixtures, much of which originates from China.

If the condition persists, a stark decline in the imports can undoubtedly be anticipated.
In spite of this, it can be expected that the decreased supply of products would anyways contribute to volatile buying habits and still hold the potential to escalate the national prices of high-demand goods.

In addition to potential price spikes, the failure to obtain supplies would eventually delay the overall rate of progress of innumerable construction ventures.

(2) Contractor and Labor Impacts
Following the increase in the number of U.S. COVID-19 cases, efforts to restrict the spread have contributed to the introduction of emergency protocols, and in many instances, city-wide and state-wide suspension of all non-essential jobs.

These initiatives have impacted the broader community and precipitated major problems for the workforce of the construction industry.
Also, several construction companies, site owners, and contractors have enforced travel bans for employees or travel restrictions on those workers who originate from high-risk states. It is determined that the progression of some projects will be hindered by the curtailment of skilled labor.

(3) Global Economic Uncertainty
In expectation of the impacts of the COVID-19 epidemic on the global economy, fear amongst investors has increased.

Not solely that, it has further been reflected that the coronavirus outbreak can cause a global recession by the end of 2020.

Ordinarily, under recession circumstances, business operations, and market activities tend to decline with projects getting annulled or subjected to long-term postponements.
In such situations, demand for resources reduces, and the percentage of labor availability, conversely, witnesses a rise.
If the number of opportunities becomes limited, new ventures arising during mentioned times may see aggressive contractor bidding as well.

(4) Contractual Implications
Despite the unexpected occurrence of the COVID-19 crisis, contractors could still be contractually liable for cumbers or cost overruns of/ on their existing ventures.

Therefore, contractors, as well as the shareholders of the properties, are required to meticulously peruse contracts and determine whether contractual rights and obligations could subsist under such circumstances (the outbreak caused by a novel virus).

It is proposed that owners inquire and examine their contracts and take precise notice of any force majeure clauses that could provide for the suspension or termination of work when such extenuating situations ensue.

Opportunistic arguments can be made in certain situations, but the effect of COVID-19, notably in respect to supply chain disturbances, is considerable enough to reckon multiple statements as legitimate.

Author: Piyush Singh

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