COVID-19 Will Continue to Impact Projects and Supply Chains in 2021
There has been a lot of talk about how builders have felt the impacts of COVID-19 and how they have changed work practices to stay safe. But there’s been less attention given to the disruption caused by the pandemic to the global supply chain that delivers the products and materials they need to complete their projects. Barry LePatner, who is an advisor on business and legal issues to many real estate, design and construction companies, thinks the impacts will have a dramatic effect that will carry into 2021 and beyond.
“Tens of thousands of subcontractors, suppliers, vendors and manufacturers of materials and products — all of them small ‘mom and pop’ operations — will go out of business,” he predicts. “Identifying replacements for these needed team members — especially those located outside the United States — may take as long as 18 to 24 months to create new relationships with new sources and do the necessary due diligence to assure their reliability for future projects.”
LePatner is also the founder of the New York City-based law firm LePatner & Associates LLP. He recently spoke with Construction Best Practices about how to work around these challenges, as well as the steps that firms should take to prevent future delays.
Construction Best Practices: How can contractors and project managers work around supply chain difficulties and material shortages created by the pandemic?
Barry LePatner: The key will be (1) to quickly identify existing sources who have been unable to sustain their businesses as a result of the moratorium; and (2) to develop new relationships with established vendors and suppliers who can demonstrate their financial viability and ability to be reliable partners on future projects. This will not be easy as the requisite due diligence needed to identify quality providers will entail receiving satisfactory proof of current reliability, financial security, insurability and can provide a roster of satisfied clients.
CBP: What sort of contingency would you recommend construction estimators build into their estimates when working on projects in the near future?
BL: Everyone in the industry must come to recognize that the impacts of the pandemic will be felt through most of 2021. Projects will go forward under constraints of extended schedules due to health protections at project sites and social distancing that will reduce efficiency for each trade. In turn, owners will need to recognize that general conditions costs will be much higher and schedules will need to be extended. Finding skilled trades for certain work — a persistent problem in the industry — will be increasingly difficult and will slow some projects. Finding domestic product and materials manufacturers in the United States will become more imperative as sourcing overseas will be constrained.
CBP: How should project managers prepare to deal with the potential crises of a reduction in supplies and labor?
BL: There will a greater need for risk management to identify the many increased risks of designing and construction of all projects. Over 1 million construction workers have lost their jobs, according to the AGC, and many of these may not return to their jobs in the near future. Finding replacements will not be easy. There will, in the short term, be fewer projects being competed for by many more contractors. Identifying and pricing these risks will create a major challenge for all in the business.
CBP: Are there specific steps that project managers (PMs) should be taking now to prevent delays in future projects?
BL: First and foremost will be the need for PMs to carefully assess their own ability to produce a project with the new health and safety constraints being imposed by state regulations. This will entail recognition that worker distancing will result in slower completion of each scope of work on a project. Not recognizing this will lead to schedules that are unrealistic and should be avoided at all costs. Everyone in the industry must move forward to honestly assess these issues and remain strong for the upturn in construction that will move forward in 2022.