Project manager calculating increased construction costs due to COVID-19

The Impact of COVID-19 on Construction Costs 

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The novel coronavirus (COVID-19) has disrupted businesses in ways no one could have predicted and for a period of time longer than most anticipated. The good news is that the majority of U.S. businesses have been permitted to resume operations and are finding ways to adapt to the “new normal.” However, with that being said, the construction industry has suffered major financial impact as the cost of doing business has risen and the ability to complete projects on time has been impeded as a result of COVID-19. 

 

In this article, we’ll cover some of the major ways the coronavirus pandemic continues to impact construction costs.

 

New Standards for Workplace Safety

new safety measures implemented in the construction industry due to COVID-19

New health and safety regulations have required construction companies to develop plans for returning to work that outline how they plan to keep employees safe and operate in accordance with local laws and ordinances. Developing, documenting, distributing and implementing new safety protocols requires time and resources, all of which comes with a cost to construction companies.

 

New Personal Protective Equipment (PPE) requirements also come at a high cost. Not only is it difficult to calculate how many masks and gloves are needed to complete a project, N95 masks are still difficult to come by, especially in large quantities. As a result, some construction sites have begun to rely more on air scrubbers, HEPA filters and other dust control measures to save the N95 masks for situations where close contact is unavoidable. Sanitizing stations and temperature check programs also come at a significant cost and require rental fees, material costs and man hours for setup and management.  

 

Another factor to consider is how social distancing rules impact the pace of construction schedules. Before the COVID-19 pandemic, job sites would typically be packed with subcontractors which is no longer considered safe. With fewer people allowed to work at any one time, projects are taking longer to complete, which invariably costs more.

 

Project Delays & Cancellations

A workforce survey conducted by the Associated General Contractors of America (ACG) and Autodesk between August 4 and 26, 2020 reports that 60 percent of responding firms say they have had at least one future project postponed or canceled because of the coronavirus, and 33 percent report having projects that were already underway halted because of the pandemic. Additionally, the share of firms reporting canceled projects in August nearly doubled since the survey conducted in June, when 32 percent of respondents reported cancellations.

 

The survey also found the coronavirus has had a negative impact on firms’ confidence in the demand for future projects. Only 42 percent of firms report their volume of business has returned to the same level as last year, or is expected to do so in the next six months, compared to 52 percent who held this view in AGC’s June survey. Another 37 percent expect returning to normal levels of business will take more than six months, while the remainder don’t know.

 

Labor Shortages

The same ACG workforce survey found that while “the coronavirus has harmed the construction industry, prompting project delays and cancellations, layoffs and furloughs, it remains difficult for a majority of firms to find craft workers to hire.” Results from the survey found that 52 percent of firms are struggling to fill some or all hourly craft positions, especially openings for laborers, carpenters and equipment operators. 

 

Ken Simonson, ACG’s chief economist added, “Ironically, even as the pandemic undermines demand for construction services, it is reinforcing conditions that have historically made it hard for many firms to find qualified craft workers to hire.”

 

Global Supply Chain Disruption 

Global supply chain disruption due to COVID-19 affecting the construction industry

The COVID-19 crisis has had a global impact and caused disruption within every element of the supply chain. Suppliers, manufacturers, subcontractors, banks and the like all have been impacted in various ways, creating the need to develop mitigation plans for all aspects of business. 

 

According to Beroe Inc., a procurement intelligence firm, “the global construction industry will face disruptions for next 3-4 months from the pandemic as companies globally are being squeezed by the coronavirus outbreak, through labor market and supply chain disruptions.” Furthermore, “companies with worldwide supply chains may see tier 2 and tier 3 suppliers highly affected by disruptions related to the pandemic. The construction industry may experience constant supply issues surrounding construction equipment and materials from Asia.”

 

Final Thoughts 

Now, more than ever, it’s imperative to keep a constant pulse on your company financials and project costs—and we can help. Premier Construction Software’s all-in-one, cloud-based solution allows you to easily compare the original, current and estimate at project completion and account for anticipated costs. With over 20 customizable fields, and full drill down capability, project managers have access to all the job costs and accounting details they need to make more informed decisions.

 

And while the increased costs and other financial implications caused by the coronavirus pandemic are beyond any one person’s control, there are ways you can reduce other costs in order to mitigate the overall financial impact to your construction business and future projects—for example, by improving efficiencies across your team through automating complex processes to save you time and to reduce human error.

 

To learn more about how our software can help you save time and money, click here to schedule a personalized product tour. 

 

Author Biography:

Kathryn Dressler is a content strategist with more than 10 years of experience across the spectrum of marketing services, including blogging, social media, public relations, copywriting and editorial services.

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