The Economy Under COVID-19: Notes from the Trenches - April 6, 2020

There are currently two crises underway simultaneously. The advance of the novel coronavirus is taking a terrible toll in terms of physical and emotional well-being. At the same time, job losses resulting from ‘social distancing’ are sending the economy into a tailspin. To fight on both fronts, governments are advancing rescue packages of never-seen-before dimensions. Every day, the tremendous number of factors in play reconfigure in a new way. These ‘from the trenches’ notes attempt to shed some light along a murky pathway.

A Contractor’s Troubled Sleep

The building of projects has always been a precarious business. It’s not for the super-anxious. A small error in estimating prior to bidding can ultimately sink a general or sub-trade contractor.  

But surely the list of worries, brought on by the coronavirus medical crisis, has never been lengthier. Furthermore, it’s impossible to prioritize all the concerns.

• While construction activity is still judged ‘essential’ by governments in most jurisdictions, there are some states and provinces where only the most crucial work will be allowed to continue or proceed.

• There’s the constant threat of individual projects being delayed, postponed, shelved or outright cancelled by cash-strapped owners, or by owners now concerned about the future demand for their product or service, even after shovels have broken ground.

• The shortages of qualified construction workers that were apparent before the crisis have become, in certain instances, even more acute, i.e., there are specialty trades people that can’t easily be replaced when they need downtime for illness. Local governments requiring the use of local labor can add a further dimension to the problem.

• In surveys asking how current work is proceeding, instances of material supply interruptions are being mentioned with increasing frequency. Factory closures at home and abroad have become both widespread and unpredictable.

• There’s considerable discussion of ‘force majeure’ clauses in contracts being invoked to justify breaches of ‘milestone’ dates (e.g., ‘substantial completion’) by material suppliers, sub-trades and GCs.

• Reduced government staffing, ‒ due to quarantining and ‘sheltering-in-place, ‒ in such areas as permitting, inspecting and commissioning are pushing out completion times.  

• Following health-directed guidelines at job sites with respect to ‘distancing’ (e.g. workers staying six feet apart) is slowing work flow schedules. Installing extra safety and sanitizing equipment, plus more portable toilet facilities, is adding to construction costs. These final two items, though, placed in the context of the present difficult circumstances facing the construction workforce, are not subject matter for contention.  

Read the previous article here: The Economy Under COVID-19: Notes from the Trenches – April 3, 2020.

Alex Carrick is Chief Economist for ConstructConnect. He has delivered presentations throughout North America on the U.S., Canadian and world construction outlooks. Mr. Carrick has been with the company since 1985. Links to his numerous articles are featured on Twitter @ConstructConnx, which has 50,000 followers.