Problems with Finding Construction Projects During the Pandemic

Problems with Finding Construction Projects During the Pandemic

The coronavirus pandemic, first declared by the World Health Organization in March, shows no signs of slowing down. In fact, the number of new cases per day keeps rising. The effects of the second wave now overshadow the impact of the first one in Europe. The US is hitting record numbers in its third wave of the pandemic and this has had unprecedented effects on the economy. Like all other industries, engineering and construction have suffered this year, so it's no wonder that you may be having trouble finding construction projects during the pandemic.

The state of construction projects during the pandemic

Coronavirus and the measures to stop its spread have affected virtually every industry. However, some have suffered more than others. Sectors that do not have the option of becoming virtual and allowing work from home are among the hardest hit. Unfortunately, construction is one of those industries (along with tourism, service, performing arts, sports, and transportation).

The significant impacts of the coronavirus pandemic on the construction industry are:

 

 - Suspension of projects
 - Loss of jobs
 - Time overrun
 - Cost overrun
 - General financial losses

 

Why is finding construction projects during the pandemic so hard?

According to a recent DataBid Blog entitled: How to Successfully Bid on a Commercial Construction Project in Chicago, If your projects are stalled, and you're facing financial losses, then the best way to recover would be to find new projects to work on. However, winning a construction bid during a global health crisis is not easy. The cause for this is twofold:

 - There are fewer projects to bid on: businesses and private persons are less likely to invest in construction during a crisis


 - There is more competition for the existing projects: with all construction firms struggling to find work, bidding wars are much more cut-throat

The reason for more competition is pretty straightforward. The lack of projects, on the other hand, has multiple underlying causes.

 

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Businesses in crisis are less likely to invest in new premises

A study published in PNAS found that as many as 43% of small businesses in America closed either permanently or temporarily due to the pandemic. Companies in such a precarious position are most likely to invest everything they can in staying afloat. Any expansion or growth plans (and the construction projects dependent on them) will probably be put on the back burner.

The impact on small business owners isn't limited to other industries, either. Many construction subcontractors are small business owners themselves, putting them at a higher risk of failure and closure, especially if they have a lot of debt and low cash reserves.

Resource and workforce shortages negatively impact productivity

Pro Movers states that the successful completion of construction projects depends on the large and diverse group of people working on them. Every construction project needs architects and engineers to imagine it, managers to organize it and keep it running, suppliers to provide raw materials and equipment, someone reliable to transfer the equipment to and from construction sites, and physical workers to put the project together. Unfortunately, COVID-19 has destabilized both supply chains and the labor force.

Per PWC Insight, we can expect issues with importing equipment and materials (especially from Asia). This will make it harder to get the necessary tools for construction on time and further delay projects. But that's not the only resource construction firms are running low on. A new AGC survey reported in Engineering News-Record estimates that as many as 40% of firms have laid off workers during this pandemic. This means that even well-supplied projects might not be well-staffed. The combination of these factors erodes confidence in the timely and successful completion of construction projects and thus lowers the likelihood of investment in the field.

The extent of government investments stimuli is uncertain

One of the most common ways for the government to stimulate the economy in times of crisis is through investing in infrastructure. This would undoubtedly create more jobs and projects in the construction industry. And there is hope for this - Business Insider recently reported on president-elect Joe Biden's meeting with Democratic party leaders to discuss future COVID relief measures. However, the extent of these measures and their effectiveness is still up for debate. The Center on Budget and Policy Priorities has argued that an aggressive fiscal policy, the likes of which we haven't seen before in this country, is necessary to battle the effects of the coronavirus pandemic on the economy.

Government restrictions are imposing severe limitations on construction projects

It is hard to give exact details on the effects of government measures on construction because different states (and countries) have implemented various measures. Consequently, general contractors face different restrictions, depending on where they work. However, one thing is certain: construction projects face significant changes in a post-COVID world.

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An article in Construction Dive predicts that construction projects face significant changes in a post-COVID world including the following:

  • Cleaner and safer sites
  • Social distancing as a norm
  • Longer projects                                                                                            
  • Stronger union influences                                                                            
  • Different types of projects growing in popularity

In the meantime, we are still trying to find ways to work during a global health crisis. This gives current construction projects an uncertain future and reduces the likelihood of investments in new construction at the moment.

The future of construction projects during the pandemic and after it

There are many questions that construction companies are asking themselves:

 - Will finding construction projects during the pandemic become easier with time?

 - Will we have to weather the storm and wait for an end to the crisis? And if so, how many construction businesses will survive?

These are hard questions to answer. CNBC reports that Dr. Michael Osterholm, the coronavirus advisor for the Biden administration, recently suggested another nationwide lockdown lasting 4 to 6 weeks, which could devastate the already struggling construction businesses. But it's not all doom and gloom. There is good news coming from the European Union, which suggests a quick post-COVID recovery is possible. Data compiled by the European Commission Eurostat shows an increase in construction production in the EU between April and August 2020, during a downward trend in coronavirus cases. This increase has brought industry production up to about 97% of its pre-crisis state, so construction businesses still have something to hope for.

Experts at Bankrate created a guide that provides strategies for business owners to stay afloat in 2021 with loans, government resources, and shifts in their marketing plans. They also explain what consumers can do locally to support small businesses. 

 

Editor's note: This is, indeed, a confusing time for the construction industry. DataBid is working tirelessly to report and distill the news that can help you and your company make the right decisions and keep you up to date on the constant changes as they are made. We hope our coverage brings some clarity amid all the confusion.

 

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Posted by Judy Lamelza

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