How Construction Contractors And Owners Can Manage Potential Coronavirus Impacts

Wednesday March 18, 2020, Posted By

This article is to help New Zealand businesses to be aware of few actions they can take during the potential onset of an epidemic like coronavirus. There have been epidemics and recessions before too and businesses that do not panic mostly fare well and grow. It is important to communicate and work with the team, suppliers and clients to develop a business continuity plan.

Coronaviruses are a large family of viruses. The illness they cause range from common cold to more severe diseases. The current coronavirus pandemic termed COVID-19 (coronavirus disease 2019) has not been previously identified in humans.

Coronovirus Symptoms & Transmission

Coronavirus is primarily spread through droplets transmitted into the air from coughing or sneezing. It can affect people nearby when they take in these droplets through their nose, mouth or eyes.

Typically the start of the symptoms is a sore throat in the back of the throat and a dry cough. Most people who are affected suffer from cough, fever and breathing difficulties. This is a viral pneumonia where recovery relates to the strength of the individual’s immune system.

Precautions At The Construction Site

Besides managing any anxiety that this pandemic can create, the advice for any jobsite is to follow good hygiene. This includes frequent hand washing with scrubbing for at least 20 seconds, covering coughs/ sneezes (both mouth and nose) and avoiding touching your face. 

We recommend that owners and contractors support the workforce by providing hand washing stations and face masks. While face masks may not block smaller aerosol particles, it is handy to have these when on the job and both hands maybe occupied. It is ideal to make all attempts for individuals to be at least 6 feet apart. It is recommended that physical contact be minimised and sharing items such as water, food and cigarettes be avoided.

This is also a time to consider cross-training opportunities as cover for potential increase in workforce absence.

Insurance Cover

Even if you have a business interruption cover as part of your insurance policy, it is unlikely that you may be able to claim insurance for interruption because of coronavirus. This is because there is typically a standard policy exclusion which excludes cover for infectious or contagious diseases. You may like to review with your insurance agent or company the cover available to you

Contractual Obligations & Force Majeure

Contractors should start preparing for the probability of COVID-19 resulting in project delays owing to material delays, absences among staff and contractors, site closures, etc. A start point can be to review the construction contract; in particular the force majeure clause. It is ideal if there is a specific reference to an epidemic or pandemic. Even if it is not specified, it should be defined as any circumstance not within a party’s control. If the situation requires, the force majeure clause can be the basis to represent cause for excusable project delays and breach of contractual obligation. It is highly likely that COVID-19 will fall into the definition of force majeure.

If the contract has missed to include unavoidable delay protections, relief could still be granted, however it can be a longer process and representation could be costly. A common sense approach is to have a conversation with all parties at an early stage to reach an understanding.

Talk To Your Bank

Many businesses were impacted in the 2009 recession with cashflow issues and reduced overdraft facilities from banks. While the coronavirus impact could be short-term, it is prudent to be proactive and review your options with your bank to avoid default.

Construction Materials

Trade has already been impacted with a slowdown in the manufacture and supply of raw material and construction products in countries such as China, Italy, etc. This can particularly impact large construction companies even here in New Zealand. For the small and medium sized businesses/ contractors, it is a good time to communicate with everyone involved; i.e., subcontractors, team members and suppliers to determine materials that could be impacted and determine alternatives.

It is recommended that a record be maintained of all the steps undertaken to mitigate any delay in material procurement.

Workforce Related Points To Consider

While many businesses are able to offer their employees the option to work from home, construction companies may not find this feasible for most of its workforce that are required to be on-site. In an industry with contractors and sub-contractors involved, it can be hard on the workforce without paid sick days available. In saying that, when symptoms develop, it is best to ask the worker to self-isolate and seek medical help. It is recommended to maintain a record of staff and contractor absences with detailed notes and reasons such as self-isolation, infected, etc.

When an employee is required to self-isolate, paid sick leave should be considered. This may not be the case with contractors, and the employer and contractor can agree on the best arrangement. The nature of such an arrangement can also be the basis for a long-term relationship.

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