By Data Gumbo and PrairieDog
The impact of the COVID-19 pandemic has hit all parties in the construction process, but none more than owners. It was their job to decide to halt or defer projects, decide when or whether to resume projects, deal with the financial consequences and figure out how to handle claims arising from their decisions.
Like the rest of the industry, the pandemic took owners by surprise, and most were uncertain on how to handle the situation. Stephen Mulva, director of the Construction Industry Institute, Austin, Texas, notes one CII
owner-member lamented that his company had a robust plan for shutdowns from hurricanes, but nothing for pandemics.
CII shifted into high gear from the start, says Mulva. “Beginning in March, we held a series of weekly webinars on such issues as how to shut down a project, how to employ pandemic safety measures and how to move workers across state lines where work restrictions may vary,” says Mulva. CII also convened groups of members to discuss shutdowns and best practices. Now that the economy has begun to recover, CII is holding a series of webinars on how to restart projects that had been shut down and how to handle losses and force majeure claims, Mulva says.
Shutting down large-scale projects both quickly and safely has been a challenge. “You don’t just push a button. You have to do it methodically,” says Art Limper, director of global safety and construction at Merck. “Make sure the condition you leave it in is the condition you anticipate coming back to. [Everything] needs to be documented.” He feels strong collaboration between owners, firms and trade unions in creating both shutdown and reopening checklists have been key.
Keeping People Safe
One of the big concerns related to the pandemic has been a long-standing worry among owners: how to keep workers safe. “Losing five members of a work crew for a 14-day quarantine is going to have an impact on quality and productivity,” says Greg Sizemore, executive vice president of the Construction Users Roundtable (CURT), Cincinnati.
Further, Sizemore says that workplace COVID-19 restrictions and worker worries about contracting the virus on site may be taking its toll on workers’ focus. “We are seeing some contractors with great safety programs suddenly experiencing a spike in safety incidents and are now seeing experience modifier rates above 1.0. We haven’t seen that level in years.”
James Boileau, construction segment director, risk engineering at Zurich North America, says a successful strategy to keep workers safe on site during the pandemic still comes down to executing the basics: “Assessing what your risk is, having a plan to deal with it and then communicating that plan.” For COVID-19, knowing how you are testing employees, what you will do if someone tests positive and how you manage that process are essential, he adds.
The pandemic has also accelerated other safety trends. For example, more owners are seeing the value of staggered shifts. “Not only do you have less congestion, but that also improves productivity,” says Boileau. Staggered shifts avoid the burnout caused by months of overtime.
Reducing infection vectors has been a priority for owners dealing with the pandemic. Keeping workers on the same crews helps with contact tracing. “If the same crew works together all the time you can isolate [an outbreak] quickly to that crew instead of to 10 different crews,” says Boileau.
Merck has also seen success with regulating trades. “Maybe you have mechanical and heavy electrical on first shift, but then you’ll have a smaller crew of mechanical and electrical on the second shift. Maybe there’s a conduit that is in [the HVAC contractor’s way]. Well, they can still call a small crew in there.”
Another trend that has been accelerated is the use of new technologies. Virtual jobwalks using GoPro or other technology have become common. In addition to reducing onsite congestion, virtual jobwalks are “cheaper” and “just as efficient,” says Limper.
For those crew members who need to be on site, proximity detectors have helped reduce congestion. These devices buzz or flash when someone is within a worker’s “bubble” says Boileau. “That way they’re not constantly looking over their shoulder to see where everyone is at,” he adds. Aggregating the data from these wearables also allows owners to see potential “hot spots” where workers come into frequent close contact. “When you have data to see where that proximity is being breached and when, you can take mitigation measures to reduce that potential conflict,” Boileau says.
Losing Staff
Staffing has been a perennial problem for owners, and, while the pandemic has eased concerns in the near term, it has only made the problem more acute going forward. Some senior workers are concerned about the health risks of the work site and are reluctant to return to work, says Sizemore. Further, the stock market remains strong, keeping worker 401(k) levels high, making retirement at this point an attractive option, he says.
Owners have been showing increasing interest in the Construction Workforce Development Assessment tool, developed by the National Center for Construction Education and Research, Alachua, Fla. The CWDA demonstrates that contractors have a workforce development plan to ensure they have an adequate supply of trained workers to staff up projects. CURT has been urging owners to require contractors to comply with the CWDA program as a prequalification element in the proposals.
However, the CWDA has been under-utilized. “So we rebuilt the system, we modernized it, we made it a whole lot easier to use,” says Daniel Groves, CURT’s director of special projects. Unfortunately, when COVID-19 hit it changed the labor market dramatically, taking the air out of CURT’s effort. “But now as this recovery is happening, we’re starting to see that interest in the new CWDA has come back again,” he says.
Groves believes that strong market labor demand should return by the first or second quarter of 2021. But he agrees that many craft workers will probably leave the workforce for good, and will have to be replaced by new workers. It will take a lot of time to get these new workers up to speed. “Skilled workers aren’t born. They are created, they’re trained,” he says. So having a strong training program will be critical.
Blockchain Payments
Despite the disruptions caused by the COVID-19 pandemic, owners continue to search for ways to improve efficiency and productivity. One of the most significant moves is Operating System 2.0 (OS2), being studied by CII. The group is studying how to leverage technology to create more efficient project execution.
The first element of OS2 to come online was digital contracts. Currently, it takes an average of 75 days from the date of an invoice for a contractor to get paid. Using a contractual blockchain approach to make payments self-executing upon delivery of labor or materials reduces this time to a matter of hours, Mulva says.
The ability to have a self-executing payment system in contracts is especially critical in the wake of the COVID-19 crisis, as contractor and supplier cash flow is critical to companies’ financial health, says Pete Dumont, CEO of PrairieDog Venture Partners, which is implementing digitized contracts for CURT. He notes that contractors are being forced to draw on their lines of credit to maintain cash flow, which generally have higher interest rates than other forms of financing.
Dumont points out that payment delays and other uncertainties in the procurement process are priced into bids not just by the general contractors, but also by their subcontractors, suppliers and others in the supply chain. “We have a very hierarchical supply chain … and we have very inefficient contracts that bind these companies together with lots of risk shifting and estimate padding at every layer,” he says. This could add as much as 40% to the cost of the project, Dumont adds.
Dumont says self-executing payment systems are the first step in the digitalization of the construction process. He points out that there is a distinction between “digitizing” current processes, reducing paper to a digital format, and “digitalization,” where the whole process is transformed by using technology to eliminate unnecessary steps. “This is the beginning of our efforts to flatten the supply chain,” he says.
