The COVID-19 pandemic has put the construction industry in muddy waters and it could be years before things become clear, says John Mollenhauer, president and CEO of the Toronto Construction Association.
“Buyers of construction, architects, engineers and those of us who are in the business of bricks and mortar, we are in muddy water and it won’t be crystal clear how things should be interpreted for some years to come,” Mollenhauer told the Daily Commercial News recently.
“As we come out of this and we get back to work, we will have a lot to do to get through the mess. We’re trying to share information that will help our members because we should be preparing now for what will inevitably be muddy waters for the next five years. Sadly, there will be casualties in a pandemic of this scale, and I am not just talking in a health context, I’m talking financial health. We’re seeing the beginnings of it now. There just isn’t enough money to keep everybody whole.”
Mollenhauer said he wasn’t surprised by the Ontario government’s April 3 announcement to refine the list of essential services. Until that time, most construction sites were able to continue operating but now some will be shut down in an effort to slow the spread of the virus.
“The list is shrinking of essential services and so it should, it was pretty generic in the first go,” Mollenhauer stated. “It’s interesting the industry practitioners, employers, often have very different opinions and there is a bit of polarizing that is beginning to happen. There are those that advocate for a longer list of construction projects that ought to be on an essential services list provided of course that the safety protocols are followed and rigorously enforced… Then there are those that since the beginning have felt like construction should be treated like everything else…that if we all stay home it will all be over soon.”
Since day one there have been some bad eggs who have been paying little attention to the protocols, recommendations and guidelines outlined by the government, but most are listening, he said.
“What so often happens is the bad eggs give everybody a bad name, but there are those that were following protocols and were very careful to ensure that people that were going to work in the morning were going home safely at night and didn’t put their families in harms’ way because they went to work,” Mollenhauer noted, adding the province has brought in more enforcement officers to ensure safety of essential project sites.
“There are some in our industry that believe they should just be at home period and you’re not going to convince them that they ought to be at work. I think what Premier Ford has attempted to do is to distill the list down and identify what truly is essential and keep the focus on what is essential.”
For the members that are unsure what is and what isn’t considered essential, Mollenhauer advises them to speak to the client.
“Ultimately it’s the clients who have to recognize if their projects falls under essential services and when they don’t, they have to be willing to acknowledge that the project needs to close and they may be reluctant to do that,” Mollenhauer said. “The best advice I give contractors is keep good records.”
Mollenhauer pointed out the whole notion of what will be a legitimate recoverable expense through this period will be very unclear for some time to come.
“There are some contract clauses that don’t make it crystal clear that a pandemic like this is an act of God or force majeure in a contract context,” he said. “There will be different types of delays that all have cost consequences. If we are told by the provincial government that a project has to close then there will be costs around that predictably. There are demobilization and remobilization costs that will be very difficult to measure. There will be productivity impact costs that will be very difficult to measure and if the buyer of construction, the client or the owner, doesn’t have the wherewithal to recoup some of their costs then that will just exacerbate the issue.”
Follow the author on Twitter @DCN_Angela.