As the impacts of the coronavirus pandemic continue to ripple through the economy, it is possible that COVID-19 would further impact construction programs and infrastructure projects in the United States and worldwide. Construction companies must act now to preserve the integrity of their operations and protect their people. The pandemic has turned into a global crisis, evolving at unprecedented speed and scale. No industry is immune, and industrial equipment is no exception.
The government’s increased measures to slow the spread or “flatten the curve” of COVID-19, including closing schools, advising working from home, and restricting personal freedoms, have created enormous uncertainty for projects and construction programs in terms of how these restrictions apply to site operations that even construction companies are adjusting to new ways of life. Industrial equipment companies are grappling with the immediate impact of COVID-19 as both their manufacturing and supply chain operations are being disrupted, and their customers’ operations face similar challenges.
There have been project delays, loss of efficiencies, and cost impacts because of the pandemic. That is why it is crucial for companies to understand the potential future impacts of COVID-19 on capital project and construction programs. Many contractors, subcontractors, suppliers, and sources of labor were deemed essential by governments and were not required to shut down. Although, at some point, work may have stopped because of health and safety concerns, overall, projects will likely take more time to finish and have higher costs because of COVID-19’s impact.
It is critical to mobilize a swift and effective crisis response while also addressing workforce, operations, and supply chain, financial reporting, tax, and trade challenges, as well as strategy and brands. We have gathered several important tips that owners, contractors, subcontractors, and suppliers can take to improve the management of their construction programs and be better positioned to continue working throughout the pandemic.
Here’s what you need to know and do:
- Be proactive in developing a mitigation plan for potential slowdowns, shutdowns, and project restarts. Brainstorm new scenarios with your team about how to work around potential delays of critical path items.
- Assess what services or assemblies can be performed off-site to minimize schedule delays.
- Focus on shoring up contracts to limit risks associated with uncertain schedules and cost burdens.
- Develop efficient mobilization strategies to comply with COVID-19 restrictions.
- Take the opportunity to compile lessons learned so they can be applied to projects moving forward.
- Double down on documentation so the reason for any schedule delays or cost overruns can be verified.
For projects that have already shut down or are at risk of shutting down, it is critical to perform a scheduled assessment or time-impact analysis, including examining the status of the material procurement on your projects, to identify and document the delays in the schedule.
- Analyze the cause and attribute delay as appropriate.
- Determine what portion of the delays is attributed to forced shutdowns versus the delays that existed before the shutdown.
- Revisit resource plans with project owners, project managers, architects, engineers, contractors, and subcontractors to identify the current and projected availability of key resources.
- Gather updated project organizational charts and track work resources on a day-to-day basis.
- Get to know resourcing trends on a real-time basis to be able to forecast changes to productivity compared with the original plan.
- Retain records of the resource plan updates for the duration of the project.
- Prepare for impacts that may occur if project owners or managers have to bring in a new set of personnel because of quarantines.
Disputes may arise surrounding existing contractual provisions and new statutory requirements, so a proactive risk management approach is necessary. Taking time to document how project teams execute and administer contracts will be crucial in the development of claims and defenses to potential claims.
Revisit your contracts to understand whether pandemics are defined as force majeure events. Assess whether the current conditions meet those definitions.
Understand what are the contract terms around liquidated damages, delays, unexpected events and unforeseen conditions, time extensions, and excusable conditions, including the notification requirements in each case.
Review your insurance policies to determine whether your construction programs and construction projects are covered from the impacts of COVID-19. Take note of important events and possible impacts to support your claims. Consult with your insurance broker or specialist.
GETTING READY FOR THE NEW NORMAL
COVID-19’s impact will profoundly change the trajectory of future capital projects and construction programs. To position themselves for the best possible outcomes on current and future projects, contractors and suppliers need to fully embrace technologies that support the “now” normal.
Astute planning, risk management, documentation, instant communication, and remote access to shared information are now absolutely essential for project success. Contractors that can demonstrate they have the tools and agility to perform work on schedule and within budget will earn the trust and future projects of owners.
When it comes to disaster preparedness, many companies are experienced. But COVID-19 is unprecedented in its impact, so you may need to adapt and deepen existing plans. Below, we address some of their most pressing issues related to COVID-19 and offer steps you should consider taking now.
Crisis Management
Some of your employees could face serious health risks. Others may have to be furloughed for a period of time that is impossible to define. Companies will need to protect active employees and make sure that furloughed ones can be reactivated quickly when needed.
Cybersecurity may also be a concern as a growing number of employees work and handle sensitive data remotely. Here are some points to consider to properly handle any capital project issues that may arise.
- Evaluate which of your employees need to work on-site now. Put risk mitigation programs in place for employees who need to work at a common worksite.
- Look to increase automation and use emerging technology to minimize person-to-person contact while still getting the work done.
- Coordinate closely with the workforce and community representatives to ensure full stakeholder support for your workforce plans.
- Maintain productivity by providing supporting tools for virtual communication, collaboration, and documentation for remote workers.
- Confirm the safety of employees who may need to continue working on-site by continually updating and communicating risk-mitigation guidelines.
- Explore compensation options for employees who are unable to work because of illness or closures. Review HR policies to confirm they are appropriate in the current environment.
Workforce Issues
If they haven’t done so already, E&C companies should put in place immediately and contingent safety measures for their employees and decide which functions can be carried out remotely should an outbreak occur within their ranks.
The industry should also plan for a prolonged reduction in capacity and cost structure, which may translate into potential staff reductions and related measures.
In the event of widening outbreaks of COVID-19 that may affect workers, companies should consider the need to outsource some corporate functions (e.g., moving IT to the cloud or shifting internal noncore operating functions to contractors). Such changes can help lower operating costs and eliminate maintenance capital expenses.
- Confirm that your employees are safe and know how to protect themselves.
- Consider instituting sanitation rules in the workplace and assess mobility policies to encourage remote working when necessary and possible. Ask employees who are sick to stay at home until they are better. Stagger shifts, increase the distance between workers and ban visitors to construction sites.
- Eliminate nonessential travel.
- Consider forward-paying subcontractors whose construction sites have been shut down because of COVID-19 containment efforts.
- Establish risk-mitigation programs for employees who still need to work on-site. Invest in education campaigns for frontline employees who have to be on-site so they know what to do to minimize the spread of the virus and what to do if they experience symptoms.
- Consider potential workforce scenarios to help reduce immediate labor costs.
- Gather necessary data on employees (geography, visas, etc.) and track movements during the crisis.
Construction companies are being hit on numerous fronts. Yet how your company will be impacted depends on what segments you serve and where you sit in the industry’s value chain. Players also need to look beyond their own economic viability. They may need to coordinate closely with the public sector to help forge plans central to public safety and the solvency of their workforce while keeping the lights on in their operations. This should be especially relevant for firms designing and building projects connected to critical infrastructures, such as energy and power, transport, communications, food and agriculture, and others.
Keep in mind that austerity measures should be tempered to preserve long-term objectives. Although moving quickly can certainly create an advantage, knowing where you are headed will help you ensure the changes you make are more impactful. Given that you are aware and well-informed of the steps you need to take, you and your construction company will be capable to adjust and adapt to this new normal.