The COVID-19 pandemic has undoubtedly had a major impact on varying industries in the U.S. and around the globe. One of the most notable affected industries is the construction industry, which thrives when projects can be completed efficiently. Unfortunately, however, the pandemic has upended this industry in many ways. Now, following the release of the Empirical Productivity Impacts of the Novel Coronavirus, a whitepaper by JS Held University on the study of how the pandemic has affected construction project productivity, it is apparent that the industry has suffered major blows. Understanding the impact of these stalls in productivity can help contractors and others be better prepared as the pandemic continues.
How COVID-19 Impacted Construction Industry Productivity
Productivity is essential to the construction industry for various reasons. According to JS Held University, construction productivity in its most basic form is defined as the number of “inputs” required to produce an “output.” In most instances, the inputs of a contractor are the labor, equipment, and materials needed to complete a project. The results of these inputs are the outputs, or the installation of building foundations, the erection of a building, or the paving of a roadway.
Productivity is essential to construction performance because bids are typically formulated based on the estimated rate of productivity per unit installed. Additionally, construction projects rely on deadlines and contractors can only be paid for completed work. Meaning, that in order for a construction project to turn a profit, productivity must be achieved.
According to the Association for the Advancement of Cost Engineering International (AACE), lost productivity in the construction industry can have serious impacts. This is because contractors are unable to accomplish their anticipated rates of production, leading to producing less than planned output per work hour of input. Because of this, contractors then expend more effort per unit than initially planned, leading to lost profits. These losses have been inevitable for many construction companies and contractors due to the economic impacts the coronavirus pandemic.
COVID-19 Productivity Losses
Over the summer months of 2020, two reports were released addressing the results of productivity data collected on construction sites – one for the United States and one for the United Kingdom. Released in July, the U.S. findings detailed that the construction industry experienced a 15-18% decline in productivity as the pandemic spread.
This revelation comes following a joint report from two U.S.-based construction organizations – the Sheet Metal and Air Conditioning Contractor’s National Association (SMACNA) and the National Electrical Contractors Association (NECA) – based on an analysis of 113,000 labor hours on jobsites in 21 states operating under pandemic protocols. The results showed that construction teams experienced an 8.8% loss in labor productivity due to jobsite mitigation measures to prevent COVID-19 exposure.
Additionally, these teams experienced a 9.2% decrease in labor productivity during operations due to worker fatigue, extra demobilization, social distancing, additional inspections, and altered material delivery and receiving procedures. Together these findings amount to 17.9% or 86 minutes lost out of an eight-hour workday for each affected worker. This time lost from each working day amounted to seven hours each week and 29 hours each month per worker.
What Contractors Should Consider
Because of the pandemic’s interruption of business operations within the construction industry, contractors should consider many different things for future projects, including:
The impact to project costs and scheduling on construction teams, and how to best adjust for potential lost productivity and scheduling delays due to the pandemic.
The pricing structure of any upcoming projects that will be performed under COVID-19 protocols and where costs should be adjusted to make up for a potential decrease in profits.
The financial projections for potential stresses on cash flow due to decreases in productivity and increases in overhead costs.
Texas Business Interruption Insurance Recovery and Construction Defect Attorneys
The COVID-19 pandemic has impacted business owners in many different ways. The revenue losses suffered by those who had to temporarily close their doors or put a stop to ongoing projects has led to lost wages, with aftereffects still being felt in various industries. Because of this, many businesses have filed insurance claims to recover compensation for business interruption losses. While these claims normally arise after a natural disaster causes physical damage to a commercial property, there may be potential coverage available in your commercial insurance policy. At Raizner Law, we can determine what coverage options are available to your business. Contact us today to learn more about your coverage and how you could potentially obtain financial compensation for your losses.