Eighth Crisis-era Message to Contractors from: Dr Tom Schleifer
New Worksite Protocols—The Impact
Construction is either continuing or about to restart depending on your location, which is the good news. The other news is that the new Covid-19 safety requirements now apply. They vary by location, are continuing to evolve and are not necessarily fully understood by those who will enforce them. Other than a concern about the need for some clarifications, you will get no argument here about the need. Our industry is obviously in uncharted territory and is in no position to judge whether the requirement will be effective, and it goes without saying that we will comply. There is no need to get into the details here as the requirement vary considerably and contractors are already scrutinizing those that apply to their projects as they are issued. My guess is that how strictly they will be applied will vary, and that the consequences for not strictly adhering to them will also vary. This is how each new OSHA safety regulation was received and reacted to over the years so it will work itself out eventually.
Many of the guidelines issued require “strict” compliance, which may mean different things to different people and other guidelines caution that more stringent requirements may be added later. Most say that if there is any conflict between applicable regulations, the stricter will apply and, in some jurisdictions, noncompliance is grounds for shutting the job down and/or revoking the building permit. Others have fines attached and at least one encourages the public to report construction noncompliance and suggests there may even be a reward. Another exposure we face is the reporting of real or imagined noncompliance by disgruntled employees. What is yet to be determined is the part that the unions might play in all this. So far a few local unions have lobbied for shutting down construction in their work area and some contractors report as much as 20% absenteeism on active projects.
Planning and executing the new requirements may be a little complicated, but it is something that construction professionals are capable of doing and absorbing. The much bigger issues are: what will it cost, who is going to pay for it and who is liable if the measures are ineffective? Contractors may claim that they did not cause this, and project owners will be able to say that they did not either. Contractors may claim that this is a changed condition while owners may assert that the contract says the contractor will comply with all codes and regulations. There is little I can add other than to say it will be fertile ground for disputes and lawyers. The caution here is to manage and minimize costs as if it were your own money, because it may be. And keep meticulous cost records whether or not you expect to go to claim.
What is of concern are the liability issues that may arise. A review of multiple federal, state and municipal guidelines indicates a liberal use of open ended and all-inclusive words such as: any, all and every. Some guidelines place responsibility on contractors for not just their own compliance but, in some cases, for the compliance of others. There are clauses that suggest the contractor is responsible for the compliance of subcontractors, sub-subcontractors, suppliers, other trades and visitors; including the behavior of employees off site and off the clock – like “prohibiting” car-pooling. The problem we face is that responsibility is closely related to legal liabllity.
Of further concern is the question of who is responsible if an employee becomes infected on or off the job? Who is responsible if the employee infection forces everyone on the project to be quarantined? Would the employer be liable for the lost wages of the infected person? Would the employer be responsible for the lost wages of all who are quarantined, and would that include people employed by others? Is anyone liable for lost wages of people who are not sick, but cannot work because someone else is infected? Obviously, there are more questions than answers, but the solutions for these questions, if they arise, could generate considerable legal costs, administrative time and perhaps settlement costs.
Now that we can or are about to restart construction, we need to carefully pre-plan exactly how we will manage the costs and the impact on productivity of the new work protocols. Clearly these restrictions on our job sites will affect profits. Prudence demands that we estimate the cost as accurately as possible and adjust the anticipated profit on our accounting records. When revenues are interrupted, business activity is disrupted, but when profits are impeded your business is exposed. Measure the impact now while there is time to react to it. Don’t wait until it occurs and don’t let the surrounding market drama distract you from taking a dispassionate look at your capital and borrowing power and determine how much of it you might be going to need if the market decline lasts very long.
Next week I will address defensive actions indicated by a long-term decline in the construction market.
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