Businesses in the construction industry are concerned about how the outbreak of Coronavirus (COVID-19) will impact planned and future construction projects. Since no one can predict the full impact from the effects, the advice for contractors is to continue like normal.

Chinese government containment efforts and quarantines have slowed or shut down factories in dozens of the country’s cities and provinces which will lead to a sharp falloff in production of everything. This could mean higher material costs and potentially slower project competitions for commercial builders that rely on Chinese-made goods or materials. Supply shortages have already impacted one of the country’s largest home builders, Toll Brothers.

An additional concern is that the virus has been spooking clients and lenders, including firms that work in highly impacted segments like hospitality. There may be a pullback in construction financing and a greater focus on risk mitigation and conservative underwriting. It is unclear what type of aid will be available for business interruption coverage.

Contractors may still be contractually responsible for delays and cost overruns. Contractors and owners will be reviewing contracts to see what contractual rights and duties exist in light of the conditions caused by the virus’ spread. Force majeure provisions, for example, may help to protect contractors in this position.

Time will tell how great the impact this virus will have on the construction industry.

• Next
• Previous