The changing nature of COVID impacts on the construction sector

Construction Industry Shutdowns

Assessing and claiming the impact of construction industry shutdowns was relatively simple. The period of the shutdown was defined. So the assessment followed the usual pattern:

• basis for claiming time;
• assess impact in accordance with the contract (including knock on impacts); and
• assess resulting costs assuming costs were payable in connection with the delay.

Infrastructure NSW led the market by establishing commercial guidelines for government agencies to follow in dealing with claims resulting from shutdowns. Those guidelines were not focused on strict contractual rights, but looked to establish behaviours (from all parties) that would produce the best outcomes for the industry and the people of NSW more generally.

Importantly, those guidelines focused on negotiated outcomes, speedy assessments, 'reasonable and necessary costs' and ensuring relief flowed through the supply chain (maintaining cash flow). The guidelines are available here.

COVID productivity impacts

Infrastructure NSW support for negotiated outcomes in the guidelines in part recognised the productivity impact of COVID mandates:

This provides an opportunity for an improved outcome including ... higher productivity than would otherwise be the case in a highly disrupted environment.

At present, the impacts being felt across the sector are not binary (stop/start) impacts, but productivity impacts. That impact may be 10% of the workforce on a particular site isolating or it might be a delay in critical materials resulting from 10% of a supplier's workforce isolating.

Given productivity rates are generally a contractor risk, there is not a strong baseline for measuring these impacts (or distinguishing them from other productivity impacts). The impacts also vary in terms of remoteness - on site, at a supplier's factory, through the local transport sector, difficulty in securing shipping and so on.

Expanded guidelines

At least for government projects, an expansion of the Infrastructure NSW commercial guidelines would be welcome on the same basis as the original (and amended) guidelines:

?demonstrable longer-term benefits of project outcomes and are in the public interest.

As I mentioned at the start of the pandemic (see here), without an element of cooperation, there is also concern about the sustainability of the industry (given the imbalance in the risk/reward equation for contractors and their inability to absorb events such as this one).