Construction and COVID-19:

In today's interconnected world, construction projects may be delayed during COVID-19 by events nearby—such as a subcontractor terminating their contract. But delays also originate thousands of miles away, such as the closure of a production facility overseas.

Consider taking these steps to protect your construction company:

• Determine the impact on project timelines.
• Diversify vendors for materials.
• Find out which relationships are critical. This could be for your project, for your finance team, for working at home, or for another area of the business.
• Contact key suppliers and third parties as soon as possible to get answers. If they need to research the issue, they will be able to begin the process immediately.

Relationships along the supply chain with suppliers and subcontractors are managed via contracts. With COVID-19 delaying timelines or even jeopardizing delivery of materials and services, construction leaders need to answer two questions: how to find an alternate provider and how to manage the legal and financial provisions spelled out by contracts. Contracts are also relevant for construction leaders themselves who need to fulfill contracts to which they have committed.

Consider the following steps to manage your contracts:

• Know the risk if any subcontractors or suppliers suspend or terminate a contract.
• Investigate whether your contracts provide for financial compensation if service levels are not upheld.
• Pay attention to how quickly providers need to notify you of delays. Under the standard contract created by the Canadian Construction Documents Committee, known as CCDC 2, a delay requires the contractor to give notice of a delay within 10 working days of the start of the delay to rely on an extension under the contract.
• Understand key terms in contract law. Common terms include the following: 1) ‘Force majeure,' generally an event beyond the control of the contracting parties that makes work impossible to perform. This common contract term may excuse parties from non-performance. 2) ‘Doctrine of frustration,' a default concept that may be applied to measure impossibility of performance when the contract does not contain a force majeure clause. 3) ‘Duty to mitigate,' the obligation to take appropriate actions to mitigate any delays or damage to the project from COVID-19. For example, if your supplier cannot provide concrete—did you consider stockpiling or seeking alternatives?
• Evaluate your obligations to your clients.
• Add provisions to future contracts that cover COVID-19 and other pandemics or epidemics.

Construction margins around the world are some of the tightest of any industry. The sudden impact of this economic downturn added to a cash flow challenge well-known to construction leaders. Now more than ever, companies need to preserve and maximize their cash flow.

Owners and managers can respond in these areas:

• Understand the financial impact of COVID-19 for your business, measure it, and then manage it.
• Manage cash flow by forecasting your financials to anticipate when and how your response will impact the business. Also use cash flow projections to determine alternative future outcomes.
• Apply as soon as possible for government programs that provide financial relief.
• Keep track of changes to tax deadlines, such as deferrals.
• Monitor new programs announced by governments and any changes.
• Check your insurance policies for losses and expenses you can claim.

Some construction projects have continued despite the current health and economic crisis, while others have been suspended. In either case, construction companies are adjusting their projects to today's operational realities.

As you adapt to the COVID-19 pandemic, consider these steps to improve your project management:

• Re-organize project workflows and schedules to mitigate delays. For example, allow for early ordering and delivery of materials if the supply chain is at risk—this could require more off-site storage.
• If all or part of a project must be suspended, make sure completed work and work in progress are secured.
• Check that all payment processes remain in place to support the payment cycle. For example, will payment certifiers still attend on-site to certify work, or do you need to accommodate them?
• Determine whether signing authorities are available or working off-site if cheques need to be issued. Perhaps you can you replace cheques with electronic transfers. Finally, if your project is in Ontario, do the strict payment timelines of the new prompt payment rules come into play?
• Document throughout. Segregate changes and delays related to COVID-19. Track the impact of the pandemic on specific work for your project, documenting dates and other details. Establish the paper trail early and maintain it consistently across your operations.