Coronavirus and construction activity

1. Introductory part

Coronaviruses (CoV) are a large family of viruses that cause illness ranging from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). A novel coronavirus (nCoV) is a new strain that has not been previously identified in humans.  The outbreak of the coronavirus was first reported on 31 December 2019 from Wuhan, China. The World Health Organization has reported over 43,000 confirmed cases globally, 42,000 of those in China, with 1,000 fatalities.

Common signs of infection include respiratory symptoms, fever, cough, shortness of breath and breathing difficulties. In more severe cases, infection can cause pneumonia, severe acute respiratory syndrome, kidney failure and even death.

Being that there is no current vaccine for COVID-19, no one can say how long it will take for the virus to be contained and the economy to normalize.

Chinese production has been devastating global supply chains. The outbreak has already affected US-based companies in tech, automotive, and airline industries, and is posing a threat to the construction industry.

Standard recommendations to prevent infection spread include regular hand washing, covering mouth and nose when coughing and sneezing, cooking meat and eggs. Need to avoid close contact with anyone showing symptoms of respiratory illness such as coughing and sneezing.

However, The Coronavirus can severely influence to the construction business.

Disease rarely affects construction in a macroeconomic way – until now. China’s global presence in the construction space is unparalleled. According to the Nikkei Asian Review, Chinese contractors took nearly a quarter of international construction revenue in 2018, so disease that paralyses China will inevitably have repercussions.

China has issued more than 1,600 force majeure slips (covering a total contract value of $15.7bn) to COVID-19 hit companies to shield them from damage liabilities. These certificates, which are recognised in more than 200 countries, exonerate companies from not performing contractual duties by certifying they are suffering from circumstances beyond their control. The virus has led to a slowdown of supply to the market that is expected to cause price increases across many of these commodities.

However, with little sign of an immediate cure to the coronavirus, there remains a significant risk of further delays and cost overruns.

With this brief research, we would like to find out what is the future of the construction business in the light of the global onset of coronavirus.

II Managerial roles

The role of construction managers is significant. The management of the construction company must necessarily develop an action plan in period of the spread of coronavirus in the world. The management of the construction company and the customer must understand that they will have to go for additional overhead costs. However, additional expenses for precautionary measures will protect the business from large losses and delays in the timing of opening facilities. 

The main goal of the complex of measures is full control over what is happening at the facility. On the large construction, sites can simultaneously work more than 200 people. All these people work in a limited space and are constantly in contact with each other. In addition to the general contractor at the site of present others contractors and companies suppliers of materials and products. To achieve a common goal, all participants in the construction process communicate. Very often, technical issues has taken directly on the construction site.  Therefore, communication takes place both outdoors and indoors. 

The main strategy at the construction site should be to reduce the contacts of workers engineers among themselves.

III Action plan

 (To reduce the risk of coronary virus infection and stop work at the facility):

1. Organize procurement of materials and products of the same type from different suppliers. In the event that one of a supplier will stop producing (because of the epidemic coronavirus), general contractor can transfer order to another provider without some delays.
2. To achieve the maximum possible assembly of products off-site — in factories. This will make it possible to reduce the number of contacts among construction workers at the construction site.
3. Acceptance of materials and products in a designated place or outside the construction site. Only people responsible for acceptance in a minimum amount carry out acceptance of materials and products. This will reduce the number of contacts of construction site workers with the outside world.
4. In sanitary inspection zone, trucks and cars needs to be washes and blown.
5. Each specialist must have an understudy. In case of illness of a specialist, his understudy will replace him immediately.
6. Number of sanitary household premises is necessary to increase. Quantity of workers in one locker room need to be minimize. Each worker should have a separate locker for work and casual wear. Each worker must have two sets of clothing specials. In a separate wagon should be organized washing and steam drying clothes special.  Before and at the end of the work — a must shower for everyone.
7. Workers have to work in disposable gloves. They should be banned handshake at a construction site.
8. It is necessary to introduce two-shift work in order to reduce the simultaneous stay of workers at the facility.
9. Drawings need to send to each other only in electronic form by e-mail or through a server. Each master should have a lap top right on the construction site with a large screen. Prohibit paper drawings at the facility.
10. Meetings at the facility held only on Skype, being in different rooms.
11. Negotiations with designers and customers via the Internet only.
12. Food need to arrange only in disposable sealed containers. Exit from the construction site at lunchtime need to prohibit.
13. Sewerage at the construction site need to connect to the municipal network. In the toilets, everything should be disposable. Be sure to install the dryer Dyson type hand with high air pressureб heated and with bactericidal air filters.
14. Each worker should have his own hand tool.
15. Guards must check at the entrance and exit the body temperature of each worker at the construction site. Establish a temporary detention facility at the construction site for a few beds. In case of detection of elevated temperature in anyone, immediately send to the isolation ward and call a doctor.
16. Organize the work so that the brigades work on different floors and sections.
17. In closed rooms, install exhaust fans.
18. For everyone have limit of vacation for the construction period. (After vacation — 14 days quarantine).
19. All premises at the construction site at the end of the day undergo antiseptic treatment and airing.

IV Risk insurance

During the epidemic Сcoronavirus increases the risk of delay of commissioning. General contractor    can pay big penalty. Not all insurance companies are prepared to bear insurance risks during this period. Large insurance companies can sign insurance contracts with construction companies, but only if their conditions are met. In the event of an insured event, the insurance company will carefully check the fulfillment of all conditions by the contractor on a checklist. If one of the items on the checklist is not execute, the insurance company will have the right not to pay compensation to the general contractor. Almost all items on the checklist listing in the action plan. Fulfill all the points of the action plan is not simple. It requires daily supervision and discipline at a construction site. In addition, the implementation of the action plan increases the cost of construction. The customer must also agree an increase in the cost of construction. Therefore, participants in the construction process should consider and calculate how much it is profitable for them to conduct construction without observing sanitary safety standards and discipline in the infectious period. 

A strategy for limiting delays from the outbreak may be to try and substitute materials or equipment manufactured in China with products made in the United States. Demand for these substituted materials already has already driven up costs. Standard form construction contracts permit substitutions under certain circumstances where there is also a cost savings to the owner. As such, any increased costs for a substituted product are usually the sole responsibility of the contractor.

Whether you are negotiating a contract for a new project or in the middle of construction, it would be wise to consider who will bear the risks and costs associated with the still evolving Coronavirus.

For commercial builders that rely on Chinese-made goods or materials, this could mean higher material costs and potentially slower project completions. Not only will supplies be disrupted, , but stakeholders should also prepare themselves for other ramifications such as higher costs, the collapse of strategic partnerships, logistics breakdowns and possible legal squabbles as parties debate.

For the conclusion, a risk table is compiling and the costs of the additional budget is comparing with the costs of concluding a contract with the insurance company.   Ultimately, the investor will decide on the need to conduct construction during the spread of the virus on the base of received database from table of risks.   

Conclusion: Risk engineering may be the opposite of value engineering, but that money may be very well spent.

References:

https://www.building.co.uk/communities/coronavirus-vs-construction/5104612.article

https://www.natlawreview.com/article/who-will-bear-risk-and-cost-coronavirus-construction-delays-contractual-analysis

https://constructioncitizen.com/blog/how-coronavirus-could-impact-us-construction-industry/2002271

https://www.constructiondive.com/news/coronavirus-impacts-could-have-ripple-effect-on-us-construction-industry/572586/

Pereferio LLC is ready to calculate all the risk caused by the COVID-19 effects for the particular construction object and for specific general contractor and customer. Our company also provide variable budget of the activities implementation to reduce the impact of COVID-19 for the construction business.

For any inquires please contact us: asalov@pereferio.com