As the coronavirus continues to spread all over the world, some construction companies are already seeing the impact of the virus on supply chains for building materials and shipping delays. Contractors are worrying about how long countries will be on lockdown and how their crews might be affected by all of this. The news they receive is changing by the hour.
- World wide, As of March 16, 2020 a total of 174,995 confirmed cases caused by the novel Coronavirus COVID-19 and 6,706 deaths were reported. Just over the weekend, the number of confirmed cases in Canada climbed from 197 to 341.
- Globally, warehouses, depots and ports are being affecting by this outbreak.
- There has been extraordinary turmoil in financial markets.
These facts show how quickly such a risk can develop and can begin substantially impacting economic results.
Both Canada and the United States import a significant portion of their supplies from all over the world and things are rapidly changing. Here are some ways the Coronavirus could impact the Canadian construction industry:
1. Expect material delays
With all the problems with dealing with the Coronavirus globally, many factories have been shut down and production has fallen considerably. Commercial builders that depend on goods or materials from other countries could soon realize slower project completions and paying more for materials needed. Builders look globally for everything from steel and stone to millwork and plumbing fixtures.
2. Legal Issues will need to be considered
Even though the coronavirus pandemic was unpredicted, contractors may still be contractually responsible for delays or cost overruns on current projects. Force majeure is a clause found in most contracts that allow one party to the contract to excuse themselves from performance issues. The criteria required to excuse themselves are if:
- specified event is beyond control of claiming party
- event prevents or delays contract performance
- event makes performance more difficult or more expensive
- event was not due to fault or negligence of the claiming party
- claiming party has exercised reasonable diligence to overcome the specified force majeure event
3. Workers' Health and Safety could be in jeopardy
Employees should be informed to use good hygiene including frequent hand-washing, covering coughs and avoiding touching their face. Employee anxiety over the coronavirus should also be taken into consideration.
Construction workers, supervisors and managers could all end up quarantined in a city and not be available to work. Without a reliable work force, projects could become stalled.
While many businesses offer employees leave of absence or working from home, construction companies require healthy workers working on site. If or when public transportation comes to a halt, many workers may find it difficult to show up for work on time or not at all.
Construction site closures are going to occur in certain areas. If regions are locked down and residents become quarantined, all construction in the area would have to stop.
4. Pullback in construction financing is possible
One of the consequences of the virus could be that it makes clients and lenders very nervous. Financing for new jobs may dry up or owners may want to postpone a project until the uncertainty passes.
Lenders are also worried about material delays that might slow existing projects. Insurance policies can help with the effects of shutdowns and delays. Policies need to be reviewed to see what types of situations are covered.
5. Quarantines could greatly affect your business
Most construction companies at this point still seem to be operating as normal but are monitoring the situation because an outbreak would prompt a 14 day quarantine shutdown. Newly enforced travel bans are also hurting the construction business and some companies will need to turn to telework and other technologies to keep business running smoothly while employees are at home.
Posted by Judy Lamelza