Impact of 3rd Wave of COVID-19 in Construction Industry and steps to mitigate associated risks
The third wave of COVID-19 crisis has had a significant impact on various sectors and the construction industry was no exception. Since the construction industry contributes a substantial amount to the country’s economy and many other allied industries rely on its demand, any setback in the industry might be detrimental to the country’s progress. As one of the leading project risk management companies, we share useful flights on how the construction industry was affected after the third wave of COVID-19 and what steps can be taken to mitigate associated risks:
- 1. Price burden on all stakeholders: One of the biggest drawbacks of the COVID-19 pandemic and its aftermath is the exceptional material price hike that has happened in the last two years as a result of many factors including an imbalanced supply and demand ratio. The unprecedented price rise of the commodities involved in the construction sector such as steel, copper, cement, and aluminium place huge financial burdens on all stakeholders, including end-users of ongoing construction projects.
- 2. Drop in productivity: Preventive measures such as lockdowns, as night curfews, working with 50% manpower strength, reduction in public transport, and operation of various govt offices with 50% strength, were implemented . Above restrictions had a cascading effect on the cost of the project and prolongation of the contract.
To sail through the difficult times brought by the pandemic, contractors must take some essential preventative measures. Here we share with you some essential preventive measures that can be taken to evaluate the losses and get adequately compensated for such uncontrollable occurrences:
- 1. Keep track of work progress on a regular basis with respect to the planned construction schedule.
- 2. Client deliverables and their reciprocal promises are to be tracked in accordance with the signed contract.
- 3. If a delay has occurred or is anticipated in the future, intimate the clients as quickly as possible by written correspondence.
- 4. Initiate preventative steps (if any) can be practised and advised.
- 5. Prepare a written record of all verbal communications.
- 6. Keep the client informed about the unfavourable conditions and the serious consequences for timely completion.
- 7. Maintain a well-maintained document on labour, machinery deployment, and its safety and security in accordance with government regulations.
- 8. Keep contemporary records of additional expenses being incurred and periodically submit the same to the client.
- 9. If additional work is included in the scope, rate confirmation must be acquired prior to the start of the activity. If no similar item is available in the contract, detailed rate analysis for such work or source of such rates (scheduled rates of PWD/ CPWD) to be expeditiously submitted.
- 10. Consistently follow up with the client for the settlement of previously submitted claims.
- 11. Keep track of all deliverables, impediments, and other minor information with the client’s approval in writing via the “Hindrance Register,” which should be signed by the client.
- 12. All efforts should be resorted for settlement of the disputes and payment against losses by means of conciliation and amicable settlement. Remember, dispute avoidance is always better than dispute resolution.
- 13. If the client becomes non-supportive, keep all the related documents readily available for invoking arbitration or dispute resolution clauses based on the signed contract.
What does the law say on the Force Majeure Clause?
According to the COVID-19 Guidance Memorandum to Users, published by FIDIC in April 2020, the contractor is entitled to EOT (extension of time) under the Force Majeure Clause, but must rely on other sections of the contract or the law for financial compensation.
According to the law, government orders, notifications, and guidelines are to be regarded as modifications in legislation and change in the law. As such a contractor may bring out his claims for the cost and losses incurred due to the outbreak of COVID-19 as the cost incurred due to change in legislation and law, which can be a more prominent and sustainable approach towards such claims.
How can a contract and risk management company help contractors and construction firms?
To receive any financial benefit, contractors must keep all relevant data with justifiable financial implications in compliance with the contract. To monitor the impact of restrictions, contractors have to keep a close view on day-to-day activity and record the change events by close monitoring. It is here a contract management and risk management company like Contract Square Pvt Ltd can help.
- Our well-experienced engineers continuously monitor the project to ensure execution within the project scope.
- We identify and document any changes in scope of the project that may need extension of time.
- We help identify and document any delay or loss due to force majeure events and document all evidence and vet all claims-related correspondence.
In a nutshell, we take care of all the paperwork, fill the gap between delays and claims, so that you can concentrate fully on the execution of the project. To know how we can help your construction company, call us at 9051739355 to explore more about our expert services.
