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Nearly all industries have experienced the impact of Covid-19, an incomparable global health emergency that has shaken the globe. Like almost every other industry, the construction industry will be prone to any economic affects brought about by this virus. Some of which some of you may be feeling already. Some of the areas that are most likely to be affected by Covid-19 include:
- Project remobilizations
- Project cancellations
- Mothballed projects
- Development of separate cost codes
- Price escalations
- Contract suspensions and terminations
- New regulations and licencing requirements
Including the new dynamics in the construction estimating process is going to be one of the biggest challenges. Like all pandemic-related concerns, no one knows how things will end up or the kind of ‘new normal’ within which the industry will have to operate in the near future.
As a key process in the overall construction and project implementation process, construction estimating is likely to experience some of the most fundamental shifts. Here are a few ways the pandemic is likely to affect the process:
1. A Shift in the Labour Demographics
Labour is one of the most fundamental cost lines in the construction industry. As more older and vulnerable workers are advised to stay at home, many of them might take a hint and consider early retirement. There could be a potential demand (and dependency) for younger workers who may cost a little less or more in terms of wages.
On the other hand, retaining the older, more experienced workers may require extra costs such as bonuses, perks, incentives and a change of working environment. All these would add to the overall labour costs.
Most construction work can’t be done remotely. A lot of it has to happen on-site and construction companies may need to figure out how to enact Covid-19 regulations such as social distancing. They might be forced to work with smaller crews and have longer shifts. This might call for a complete reorganization and calculation of total man hours during the estimating process.
2. More Tax and Compliance Expenses
Construction companies are already required to provide safe, clean, and healthy project environments for all their workers. However, as both new and stalled construction projects resume, there’s likely to be an extra layer of compliance and special Covid-19 guidelines before licences are issued.
Many other industries currently in the process of resuming their operations already have to grapple with new licensing and compliance regulations. Of course, the construction industry will also face these new requirements.
However, other than the extra compliance costs, this added layer of requirements might add more red tape as well as additional time to get the necessary approvals. And in the construction industry, time is absolutely critical.
Further, potential changes to the workforce, mobility, and supply chains may have tax implications on the overall project. Construction companies may have to factor in previously unprecedented tax implications into their estimates. This might be especially challenging for companies with more global supply chains and may affect their operations differently based on the location of their projects.
3. Cost of Materials
As the global economy nearly ground to a halt, critical industries such as transport, energy, food and agriculture, communication, and others were severely affected as every country shut off it its borders. Getting materials from overseas suppliers was almost impossible. Imposed curfews also limited the movement of goods within some countries.
This, of course, is gradually changing as more countries slowly open their borders and continue to ease the restrictions on movement within their borders. However, changes in transportation norms and the overall movement of goods will significantly affect the cost of transportation, which will in turn reflect on the cost of materials. Construction estimating will have to rely on new data and therefore, more risk in creating accurate estimates.
Many of us have already experienced huge delays in the transport of goods since the beginning of the pandemic. As we come into winter and with continued restrictions these delays are very likely to get more common.
4. Weakening Supply Chains
As the pandemic weakens smaller players such as sub-contractors and supporting industries within the construction supply chain, many of them may face financial struggles and eventually cease operations.
While larger players in the industry may have the financial resources to keep the lights on until the pandemic eases off, many of them may find themselves operating within weaker supply chains. In fact, the ones with more global supply chains may have to face greater pandemic-related disruptions With supply issues likely to come up for both new and existing projects, they will have to adjust their estimating processes to reflect the changes.
Conclusion:
As the construction industry reawakens and attempts to return to near normalcy, there will be a likely shift in the way professionals conduct their estimates. As with many other recovering industries, the construction industry is likely to rely more on technology to minimize human interactions and provide safe working environments for its workforce. Construction companies that have a more or less automated estimation process may find it easier to make the adjustments while minimizing risk of inaccuracies.
You may want to consider switching to or acquiring more dynamic estimating software like Cubit Estimating that combines natural take-off capabilities with the powerful BIM technology.
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