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What is the effect of the COVID pandemic on contractors?

Motivations, Clashing Behaviour, and Post-COVID trends.

Anchal Srivastava, Naveen Kumar, Meghna Singh, COVID, COVID19, pandemic, lockdown, labour, labourer, migrant, unskilled, skilled, contractor, subcontractor, OEM, manufacturer, material, logistics, homebuyer, homeowner, Architecture, Engineering, Construction, AEC, Stakeholder, Stakeholders, Analysis, Research, R&D, Primary Survey, Secondary Research, Development, Forecast, Snapshot, KPMG, Deloitte, EY, pwc, McKinsey, Government of India, GDP, Economic Survey of India, Cushman & Wakefield, CW, JL

Everyone has faced varied consequences due to COVID and its trickle-down effects, resulting in multiple lockdowns, financial shortage, economic downturn, and so on. Today we will discuss contractor-specific difficulties. In light of the crisis, there are a number of short-term and long-term implications that must be addressed.

Why do people work? Money, independence, the opportunity to learn new things, improve skills, gain experience, and develop one’s personality. And there could be a number of reasons. Recall the roles and responsibilities of the contractor that we had mentioned in this last article. A contractor is a businessperson. And what inspires a businessperson to work? Profits and urge to attain growth in the business.

There are some things over which one has no control. Because of the previous recession, there are fewer projects, as well as stiff competition. The cost of building materials fluctuations, tariffs, taxes, and shipping expenses all reduce profit margins. To optimize margins, however, one must focus on what one can manage. Right?

Anchal Srivastava, Naveen Kumar, Meghna Singh, COVID, COVID19, pandemic, lockdown, labour, labourer, migrant, unskilled, skilled, contractor, subcontractor, OEM, manufacturer, material, logistics, homebuyer, homeowner, Architecture, Engineering, Construction, AEC, Stakeholder, Stakeholders, Analysis, Research, R&D, Primary Survey, Secondary Research, Development, Forecast, Snapshot, KPMG, Deloitte, EY, pwc, McKinsey, Government of India, GDP, Economic Survey of India, Cushman & Wakefield, CW, JL

How can a contractor increase their profits? By identifying the variables that can be managed. Profit is selling price minus cost price. As a result, either cost must be cut or better bids must be submitted, or both. A contractor must deliver quality at optimum prices in order to bid higher and still get picked. To be able to receive new projects, a contractor must deliver work on schedule. Furthermore, financial stability and development will be established by completing as many projects as feasible in the shortest amount of time possible. This is known as the productivity of the company.

Efficient working is the key to increasing productivity on the job site for two specific reasons. One is to keep costs under control, and the other is to stay on track. Projects that are finished on time and under budget typically result in larger profit margins.

Anchal Srivastava, Naveen Kumar, Meghna Singh, COVID, COVID19, pandemic, lockdown, labour, labourer, migrant, unskilled, skilled, contractor, subcontractor, OEM, manufacturer, material, logistics, homebuyer, homeowner, Architecture, Engineering, Construction, AEC, Stakeholder, Stakeholders, Analysis, Research, R&D, Primary Survey, Secondary Research, Development, Forecast, Snapshot, KPMG, Deloitte, EY, pwc, McKinsey, Government of India, GDP, Economic Survey of India, Cushman & Wakefield, CW, JL

Remember Bunty, the tile contractor? He was hired as the general contractor for a renovation project in Delhi. The contract specified five milestone payments.

1: 20 percent payment upon contract execution

2: 30 percent on material reaching the job site

3: 30 percent before grouting

4: 15 percent on completion

5: 5 percent on handover

Old projects must be handed over in order to get a new project. Bunty and his son are capable of focusing on one project at a time. Such contractors bear the brunt of the consequences of late payments. They work hand in hand, and one day’s work can make a big difference. Bunty was unable to begin work since the owner was delaying the job. Bunty would have had to put money out of his own pocket if the second milestone payment had not been made. Such politics are prevalent among both individual owners and builders.

Anchal Srivastava, Naveen Kumar, Meghna Singh, COVID, COVID19, pandemic, lockdown, labour, labourer, migrant, unskilled, skilled, contractor, subcontractor, OEM, manufacturer, material, logistics, homebuyer, homeowner, Architecture, Engineering, Construction, AEC, Stakeholder, Stakeholders, Analysis, Research, R&D, Primary Survey, Secondary Research, Development, Forecast, Snapshot, KPMG, Deloitte, EY, pwc, McKinsey, Government of India, GDP, Economic Survey of India, Cushman & Wakefield, CW, JL

These unethical practices are frequently carried out in order to avoid payment. As a result, some contractors place their money. And, by delaying deadlines, these builders/owners often dodge making payments by blaming the contractors. These project delays impact Bunty and other contractors in two ways– they cannot take on new projects and must spend money attempting to get paid, either in the form of fuel or transportation costs. In such unethical behaviours, empathy appears to be lost. As a result, numerous contractors take on multiple projects at the same time, stalling one or both by citing fake reasons such as “I need to go to my village since someone died” or “My child is in the hospital,” etc.

Unforeseen circumstances caused by the COVID interrupted material supply networks all around the world. Contractors are now working on expanding inventories and identifying new distribution channels.

Anchal Srivastava, Naveen Kumar, Meghna Singh, COVID, COVID19, pandemic, lockdown, labour, labourer, migrant, unskilled, skilled, contractor, subcontractor, OEM, manufacturer, material, logistics, homebuyer, homeowner, Architecture, Engineering, Construction, AEC, Stakeholder, Stakeholders, Analysis, Research, R&D, Primary Survey, Secondary Research, Development, Forecast, Snapshot, KPMG, Deloitte, EY, pwc, McKinsey, Government of India, GDP, Economic Survey of India, Cushman & Wakefield, CW, JL

Usually, International Federation of Consulting Engineers (commonly known as FIDIC) norms are the ones that form the backbone for inking contractual agreements in the construction industry. In the present circumstances, there is a need for contractors to rework their contractual agreements. In that case, contractors are required to gather evidence in the form of site photographs, minutes of official meetings, communications and recollections of site staff, etc. By doing so, contractors can establish concrete proof by invoking Force Majeure clauses. These clauses can be used by giving advanced notices when plans of either one of the parties are disrupted by extraordinary circumstances which are not in their control. Here, the pandemic can be established as one such instance in order to extend deadlines and to claim compensation for the project delays.

Anchal Srivastava, Naveen Kumar, Meghna Singh, COVID, COVID19, pandemic, lockdown, labour, labourer, migrant, unskilled, skilled, contractor, subcontractor, OEM, manufacturer, material, logistics, homebuyer, homeowner, Architecture, Engineering, Construction, AEC, Stakeholder, Stakeholders, Analysis, Research, R&D, Primary Survey, Secondary Research, Development, Forecast, Snapshot, KPMG, Deloitte, EY, pwc, McKinsey, Government of India, GDP, Economic Survey of India, Cushman & Wakefield, CW, JL

To do so, there are multiple ways which are as follows:

  • By taking aid of FIDIC’s Force Majeure Norms.
  • Orders issued by government authorities.
  • Delays from the employer’s side in terms of material supplies or while seeking design and other kinds of approvals.
  • Incorporating variations due to the orders issued by competent governing bodies.
Anchal Srivastava, Naveen Kumar, Meghna Singh, COVID, COVID19, pandemic, lockdown, labour, labourer, migrant, unskilled, skilled, contractor, subcontractor, OEM, manufacturer, material, logistics, homebuyer, homeowner, Architecture, Engineering, Construction, AEC, Stakeholder, Stakeholders, Analysis, Research, R&D, Primary Survey, Secondary Research, Development, Forecast, Snapshot, KPMG, Deloitte, EY, pwc, McKinsey, Government of India, GDP, Economic Survey of India, Cushman & Wakefield, CW, JL

Multiple lockdowns and limits on cross-border mobility brought several sites to a halt. This also resulted in a whole new set of site protocols that prioritize worker health and safety. Given the current state of affairs, contractors are utilizing digital platforms to monitor staff health and productivity, as well as to control workflow. Apps are also used to track, update, and manage on-site operations.

Another effect of the pandemic was the elimination of intermediaries. The supply chain became increasingly streamlined. It usually entails direct oversight of material procurement and handling, as well as a stronger emphasis on direct labor rather than a low-skilled, temporary workforce. With increased emphasis on vocational training for front-line construction workers and with labor shortages, experienced subcontractors are hired at greater wages.

Anchal Srivastava, Naveen Kumar, Meghna Singh, COVID, COVID19, pandemic, lockdown, labour, labourer, migrant, unskilled, skilled, contractor, subcontractor, OEM, manufacturer, material, logistics, homebuyer, homeowner, Architecture, Engineering, Construction, AEC, Stakeholder, Stakeholders, Analysis, Research, R&D, Primary Survey, Secondary Research, Development, Forecast, Snapshot, KPMG, Deloitte, EY, pwc, McKinsey, Government of India, GDP, Economic Survey of India, Cushman & Wakefield, CW, JL

About the Writer
Anchal Srivastava is an architect, urban planner, writer, researcher, and scholar. She is a certified GIS specialist from IIRS, ISRO, Dehradun. She is a graduate of the School of Planning and Architecture (SPA), Delhi, and Dr. A.P.J. Abdul Kalam Technical University (APJAKTU), Uttar Pradesh. She has experience working at the Town and Country Planning Organisation Delhi, Jabalpur Smart City Limited, Suresh Goel & Associates (SGA), APS Green Architects & Associates, and as the head architect at SSAP and Shantiniketan Buildtech Pvt. Ltd.

About the Editor
Naveen Kumar is a public policy and regulatory governance professional. He is a graduate of the Tata Institute of Social Sciences (TISS), Hyderabad. He has experience working at the Gitika Trust, Tata Institute of Social Science (TISS) Hyderabad, Krishi Vigyan Kendra — MYRADA, AID India Eureka, Larsen & Toubro Infotech Ltd. (LTI), and Eco Foundation for Research and Training (EFFORT).

About the Illustrator
Janhavi Deshpande is an undergraduate architecture student at the Sir JJ College of Architecture. She is an illustrator, designer, and dancer. She is interested in photography and writes stories as a hobby. She is inquisitive about exploring new perspectives in art and architecture.

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