Effects of COVID-19 (Corona Virus) on the construction industry

COVID- 19 (Corona Virus)

Contractors are used to risks; from labor shortages to escalating tariffs. The industry entered 2020 facing many unknowns, and experts say the fallout from the COVID-19 (Corona Virus) virus is one more factor poised to affect construction firms. Despite the uncertainty, experts predict that the pandemic will have ramifications for several aspects construction. These include:

  1. Construction materials

Contractors across Africa look to China for construction materials. But the Chinese government’s containment efforts and quarantines have slowed or shut down factories in dozens of the country’s cities and provinces, leading to forecasts of a sharp falloff in production of everything from including construction materials.

For contractors that rely on Chinese-made goods or materials, this could mean higher material costs and potentially slower project completions.

  1. Labor

To help prevent the spread of the virus, many schools, colleges and businesses have shut down. Construction companies across the world are also considering how they will react to the outbreak with regards to maintaining their workforce.

These shutdowns and bans mean that companies will need to turn to teleworking and other technologies to keep business running smoothly while employees are at home. However, these might not apply when it comes to construction sites because they need a physical presence; so construction of buildings or infrastructural projects might face delays.

  1. Construction contracts

While the Corona virus pandemic was unforeseeable, contractors may still be contractually responsible for delays or cost overruns on current projects, experts say. There are many terms that will be relevant to those discussions, including the various contractual terms relating to the contractor’s schedules, substantial completion, delays, liquidated damages and other contractual provisions

It is recommended to know exactly what is in each contract, and taking special note of any force majeure provisions that allow work to be suspended or terminated when certain extenuating circumstances arise.

There may be some opportunistic claims, but the impacts of the Corona virus, particularly on the supply chain, are so broad that there has to be many valid claims.

  1. Project financing

Lenders might be uneasy to finance construction projects because of the uncertainty surrounding the completion of projects. The lack of construction materials and labor might slow down the construction of ongoing projects.

 

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