The State of Construction During COVID-19
The coronavirus has shaken up the world and left many businesses closing their doors and others in an area of uncertainty, including the construction industry. Recently, Construction Best Practices spoke to construction attorney and advisor Barry LePatner about the state of the sector, as well as the various challenges, including finding enough people to staff projects.
Construction Best Practices: What are some of the effects that you are seeing COVID-19 having on project schedules? Are many projects being delayed while others are being allowed to go forward?
Barry LePatner: Various states have addressed the issue of construction stoppages in different ways. Some still permit construction to proceed while others have placed total or nearly total suspensions of work. In New York state, “All non-essential construction must shut down except emergency construction,” in accordance with directives from the Empire State Development (ESD) Corp. guidelines issued March 27. This directive was issued following a revised Executive Order from Gov. Andrew Cuomo.
New York has now narrowed the definition of “essential” construction, closing most projects in the state following concerns about worker safety as numbers rise related to COVID-19 cases and related deaths. It does not specify a deadline to stabilize sites or state how long non-essential work will remain closed down.
ESD said that “essential construction may continue and includes roads, bridges, transit facilities, utilities, hospitals or health care facilities, affordable housing and homeless shelters.” Although effective immediately, the guidance “allows time for non-essential, non-emergency projects to continue to a point where they can be safely stabilized to protect the health and safety of occupants.”
CBP: What about staffing? Has COVID-19 made it even harder for contractors to find talented labor than previously?
BL: The construction industry is facing the suspensions with furloughs and layoffs depending on the extent of continuation of construction in any locale. Primary consideration is being given to creating safe zones for workers on projects that have been allowed to continue. The skilled labor in short supply the past few years will by definition become a greater problem over the next two years.
CBP: What are some of the supply chain disruptions that the industry is seeing? Are certain types of materials/supplies easier to obtain than others?
BP: The U.S. construction industry over the past 10 years has repeatedly sourced products from China. These include steel, wood, plaster, aluminum, glazed partition systems, cement and cementitious products, paints, HVAC equipment, electrical equipment, light fixtures — and many others. As the COVID-19 virus spread initially through China, it has left many of these sources closed with the expectation that most production may still not be back to normal until April if not later, assuming they are able to control the virus.
As a result, many ongoing projects are scrambling to replace these overseas sources for critical products with domestic substitutes to allay owner concerns about delays which, in turn, will create a new set of delays, as the U.S. will not be able to develop new domestic manufacturing replacements for the better part of two years.
CBP: Has technology been able to help with the challenges that builders are encountering?
BL: Of all major business sectors, the U.S. construction industry has been the slowest adopter of technology to address major performance inefficiencies. Hopefully, as we come out of the difficult times that will be encountered by the real estate and construction industry as a result of COVID-19, we will see a new era where firms turn to technology to increase productivity and enjoy greater profitability than ever before.
CBP: Do you think that many builders will be able to apply a force majeure clause to the situations they are encountering?
BL: Owners are looking at various ways to address the impact of the coronavirus. Force majeure clauses are but one approach being explored. In the end, government recognition of the need to provide support to owners, as well as design and construction organizations, will determine how quickly a turnaround can occur.