Covid19 is a global pandemic that changed the global economic perspective. The ongoing pandemic is indeed the major cause of project delays. A severe impact is being taken place in all industries.
Since the World Health Organization (WHO) announced the coronavirus 2019 (COVID19) outbreak as a pandemic, many countries have declared a complete national lockdown after a remarkable spike in COVID19 cases. These decisions had restricted the movement of people and resulted in a complete shutdown of many businesses across many sectors. The construction industry, as a significant growth driver of the economy with no exception, has also been shut down. All the development and projects were postponed until further notice.
0ne of the main concerns facing the construction industry is the delay that will caused to projects. Delays on site are likely to occur from varying different reasons stemming from the corona virus. This is an issue as many projects are time sensitive, with the majority of contractors having various projects lined up over the course of the year. This could force future projects to be lost and in addition, contractors could face penalties set out in the contract for delays in completing the works.
The main causes of delays are likely to occur as a result of:
- >Temporary suspension of work: this is likely to occur because of reduction in the numbers of workers due to them becoming unwell or having to self- isolate. This could force work to have to be suspended until further notice.
- >Risk to the workforce: if construction sites remain open, workers may be working in close proximity which increases the chances of the virus spreading.
- >Restricted wage support: the government has extended the wage support scheme to the registered self- employed so that construction worked out do not miss out, but at present time support is only 3 months initially, and it does not cover those self- employed directors of small limited companies.
- >Supply chains: the virus is having a massive impact on supply chains. Due to the recent lockdown, there have been delays with delivering supplies and many containers have ended up in the wrong places.
There are some practical tips we can use to minimize the impact in the business:
- >Check the construction contract for a force majeure clause and take advice where necessary.
- >Check your contract for other clauses dealing with the use of alternative suppliers or materials; relevant events enabling claims for extensions of time and additional money; delay and liquidated damages and any rights to terminate the contract.
- >Seek legal advice on the doctrine of frustration, in the absence a of force majeure clause.
- >Issue any warning notices to other parties if you feel delays that works are inevitable.
- >Check the terms of any insurance policy to see if it provides any protection for business interruption. If so, you may be able to recoup your losses and should discuss with your insurers. If you are able to claim under your insurance policy you will have to prove the losses incurred and will receive money from the insurer after the event. You should therefore record any delays, shortage, shortage or change meticulously in order for any loss to be ascertained.
- >You should notify other parties to the contract on the likelihood of any delay to progress works and be proactive in liaising for an extension of time. Having an open discussion at this time seems to be the best approach in order to agree and negotiate a way forward that will work for everyone.
- >Take measures going forward to review contracts, terms and conditions and health and safety requirements to be better equipped in the future to deal with similar situations.
- >Whilst some construction sites still remain open, be vigilant with health and safety requirements to prevent the spread of the virus as much as possible.
- >Companies should review, in detail projections for the next number of months and identify what mitigating actions can be taken to preserve cash in the short or medium term.
- >Forecast may indicate a potential breach of financial covenants .By proactively engaging with funders, businesses can look to negotiate covenant waivers or covenant resets, helping to prevent any breach.
It is proven that most of the impacting factors are the suspension of projects and job loss. The projects developers work hard to mitigate the impact by reducing the number of workers on-site and encouraging them to work offsite to avoid and slow the spread of the contagious virus.
Written by: Kefilwe Matlhomane