Coronavirus lead to Great Delays in the Construction World
A picture adjacent to the catastrophe of economy of the country imparting to perform a major role needs to be studied. Construction delays are considered as time lag in completion of activities from its specified time as per contract which mostly supervene due to overcosts, overtime, disputes, negotiations etc. These causes got dominated by deadly virus COVID-19 creating a pandemic situation in whole world. Get to know the status of constructions, their reasons and ill-effects and safeguard steps to face the post pandemic situation throughout this article.
The nationwide shutdown has caused project delays due to supply chain disruptions, unavailability of manpower (reverse migration) and issues in obtaining project financings including liquidated crisis. These industries relies heavily on foreign suppliers and manufacturers of goods for construction materials, including steel, millwork, electrical and lighting equipments, etc. which now are currently halted. Cumulatively, the above circumstances would cause hindrance in meeting the obligations under the construction and engineering contracts and would lead to multiple legal wrangles for the industry post lifting of the current restrictions.
What are the effects on supply and demand?
Only economic downturn??? No, the crisis is also expected to hit long-term supply and demand, resulting in lasting shifts in investment patterns. Lack of demand for new commercial or industrial facilities and ambiguity will bring in several white elephants!
The value of residential buildings and infrastructure closely tracks GDP, the need for new construction activity is highly sensitive to GDP growth, even in longer-term models.
Worrying to buy new house after the pandemic? Then wait, the housing sale are going to affect tremendously in long run of home finance. Several cash-starved developers with unsold inventory may be forced to sell at discounted prices. Well, it won’t be a positive response. The prices of homes at various places will be restructured with respect to the demand and under-construction projects.
Also, lack of consumer confidence will negatively affect demand for housing construction or refurbishment.
What is Force Majeure?
There are a number of claims for relief that might become relevant due to the impact of the coronavirus. A key issue in this regard is the concept of Force Majeure.
A force majeure clause in a contract may excuse the contractor for delays caused by extraordinary events that a contractor cannot control such as fires, earthquakes, and even a pandemic! In construction contracts, it may justify an time extension to perform under the contract and financial cost compensation like overhead or remobilization associated with delays.
Not only compelling clause but also should be ensured that all necessary steps are taken in terms of monitoring and evaluating are likely to occur in the project as soon as they become foreseeable mitigate the consequences.
In construction, always additional costs are calculated for avoiding sudden hike in construction expense. Ultimately, now these costs will have to be borne by one of the contracting parties (either the employer or the contractor) or one of the sub-contractors or suppliers, depending on the allocation of risk in the relevant contracts.
Infact, documenting an impact regarding coronavirus would help too. Reviewing the contract with the counsel and find out measures to solve the issues and make allied arrangements before signing contract.
Role of an Engineer
Currently, most of the under-construction sites are permitted to resume the incomplete projects specifically in India. Though at many red zone places construction activity is still crawling. The government continues to follow social distancing among the limited labourers which still remains a concern, whereas contractors are trying to limit the contact of labourers outside camps. Coordinating among them and building an optimistic environment is very essential for an engineer.
For future concern of workable projects, one must consider how the impact of the coronavirus is dealt with in the contract. The force majeure might not lead a continued impact depending on the crisis of coronavirus changing drastically. As a remedy, new provision should be included in the contract which specifies the coronavirus as an event for the delays of project.
This is the situation we are going to face in post pandemic. Do you think the construction sector would be back on the track of economy? What are your views on this? (Mention your views in comment box)