THE IMPACT OF COVID-19 ON THE CONSTRUCTION SECTOR

The novel COVID-19 pandemic has increased the risk in construction operations. New systems are, thus, required on construction sites to mitigate the risk and challenges associated with the pandemic.

CHAMAN LAW FIRM

6/3/2022 0 min read

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THE IMPACT OF COVID-19 ON THE CONSTRUCTION SECTOR

Back in December 2019 world experienced the first case of COVID-19 from Wuhan city, China, rapidly spread across the globe, becoming a global pandemic in March 2020 (World Health Organization, 2020). After the public health emergency issued by the WHO, to slow down the increasing number of cases day by day, many countries have chosen to impose nationwide lock down as a rapid action.

The novel COVID-19 pandemic has increased the risk in construction operations. New systems are, thus, required on construction sites to mitigate the risk and challenges associated with the pandemic.

The construction industry is one of the most important industries for national development in the world. It is an unorganized sector and most of the time human-driven; a large number of people are working in this sector. In the pandemic of COVID-19 most of the construction sites are being halted due to fear about the infection of Coronavirus. The projects are already delayed in relation to completion and handover. The developers are not facing the cost escalation risk only, also afraid of the spreading of COVID-19 in projects. The model of Work Health and Safety (WHS) laws says that it is the duty of the employers to take care of the health and safety of their workers in the workplace. In the building and construction industry where workers work closely together, there is a high risk of exposure to COVID-19. During this epidemic situation, all the employers and constructors should implement the control measures to minimize the spread of COVID-19 and provide a safe work environment to the workers. In this study, we are highlighting the impact of novel Coronavirus in the construction industry associated with risk assessment and how to implement the safety measures for the workers during and post pandemic.

As a result of COVID-19, the construction industry has been forced to adapt to significant challenges and formulate project-by-project solutions to mitigate the delays and other impacts caused by COVID-19 whilst protecting commercial interests.

Some impacts of COVID-19 on the Construction Sector are:

WORKPLACE SAFETY GUIDELINES

Minimizing the spread of COVID-19 become a top priority for all responsible participants in construction projects. Thus, key participants (including the owner/developer, general contractor, and key subcontractors) needed to jointly develop a plan that identified COVID-19 related health and safety precautions to be deployed at the jobsite, as well as the party responsible for implementing these precautions.

The government issued guidance specific to construction jobsites to ensure safe and healthful working conditions during those unprecedented times.

  • Owners were recommended to take steps (or at least make sure that their contractors were taking steps) that represent local best practice, including:

  • use of cleaning chemicals pre- approved by local agencies for cleaning frequently touched surfaces such as tools, handles, and machines, screening of all visitors and employees for signs and symptoms of COVID-19

  • Performing temperature checks and pre-access jobsite questionnaires · ­ Establishing protocols to manage employees displaying symptoms of illness in the workplaces. · Keeping premises well ventilated

WORK SCHEDULE

Very often, COVID-19 guidelines and additional work requirements had an impact on work schedules and the productivity of contractors. Where a construction site was shut down due to a governmental order, owners had to meet with their contractors to determine the status of their projects at the time of the shutdown and the work remaining.

Moving forward, owners also requested their contractors to submit detailed reports of impacts and real time itemization.

Parties to construction contracts had to regularly collect data regarding the circumstances affecting the work and their mitigating efforts. This data collection allowed the parties to accurately track impacts and anticipate delays and extra expenditures.

GLOBAL SUPPLY CHAIN DISRUPTION

The extent of the COVID-19 shock was global rather than local which disrupted most supply chains around the world and reduced or halted most international commercial activities related to the supply of construction materials, causing major delays in the projects. The International Labor Organization indicated that the Covid-19 crisis has caused disruption to most of the materials supply transactions, and equipment rental companies have complained of major problems due to the remaining defective equipment at the sites. There was a severe shortage of imported construction materials in most local markets. This was also recorded in the markets of the Maldives after imports from China or India have ceased. In Ethiopia, there has been a great disruption in steel, aluminum and cement supplies, as countries that export these materials, such as China, the United States or the United Kingdom implemented a policy of closure. It should be noted that the construction industry in Australia in the past ten years has relied heavily on importing construction materials such as aluminum, plumbing fixtures, glass, etc., especially from China. Therefore, it was observed that there was a significant effect at the beginning of the pandemic on construction projects in Australia, especially on large projects. Whereas the effect was lower on small projects, since they rely more on local raw materials.

LEGAL ISSUES

Legal disputes and claims have significantly affected the local construction industry around the world. Researches and reports related to the construction industry indicated that there is a controversy over the legal interpretation of the impact of the Coronavirus pandemic on Construction projects. Some specialists believe that it is possible to interpret COVID-19 as being of the category Force Majeure (unforeseeable circumstances in which contractors are unable to fulfill a contract) while others tend to the principle of changing laws to resolve disputes. Interpretation of the pandemic as a Force Majeure, as it is found in most contracts including FIDIC, allow the contractors to claim compensation for the time resulting from the delay, but it does not give them the right to claim financial compensation except in case of agreement between the parties.

In contrast to Force Majeure, the scenario of changing laws will allow the contractor extending the time and claim financial compensation due to legal changes. Most International contracts such as NEC and JCT use protocols related to the issue of Force Majeure, but there is no unified definition for it, and most of the local laws and Contracts for construction projects in the world have included references to explain Force Majeure. Force Majeure is an unexpected external event, where both parties to the contract are not responsible for it, such as if it is a security event specific to the state or a natural disaster.

The legal effects of COVID-19 were not limited to construction contracts only, but extended to include relations between the participants in the projects, so there were disputes between stakeholders and contractors due to delay or lack of completion, other disputes between contractors and subcontractors, as subcontractors may demand a new mechanism of pricing for the project activities. Also disputes arose in the relationship between the contractor and the insurance companies as to whether the insurance policies cover the pandemic issue or not. There is no doubt that construction companies and contractors faced many other legal complications, such as the percentage of profits, increased costs, new safety conditions and the issue of taxes, etc. This requires difficult negotiations, given that the contractual terms are not commensurate with price fluctuations or the stoppage of project activities as a result of epidemics. Thus, these legal disruptions have motivated many contractors to activate contractual formulas that allows them to work in more flexible legal conditions.

In Conclusion, it is evident from the information available that the construction industry is a vital artery in providing jobs in several countries and therefore millions of the workforce have suffered from financial crises or psychological problems as a result of this sector being affected by COVID-19, which has caused huge disturbances affecting the various construction industry resources and its legal legislations.

NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com

WRITTEN BY CHAMAN LAW FIRM TEAM

EMAIL: chamanlawfirm@gmail.com

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