17 April, 2020 - COVID-19 is expected to cause only minor delays to the delivery of Australia’s current transport infrastructure projects – but the question of who pays for those delays is still very much up in the air.
A second survey of infrastructure leaders conducted this week by Roads Australia (RA) reveals that one third are worried about the business impacts of clients rigidly enforcing contracts and terms without making allowances for COVID-19.
The industry has had to adopt strict physical distancing rules to keep construction sites open, resulting in slower-than-usual progress on many projects.
The problem has been exacerbated by a range of COVID-related challenges for management teams, including travel restrictions, unavailability of clients for approvals and sign-offs, and the inadequacy of bandwidth and other technologies associated with working from home.
Roads Australia President Michael Bushby says the latest survey results underline the importance of clients and contractors having ‘honest discussions’ about the impacts of COVID and being flexible in working through the issues.
“Governments and industry have been recognising the importance of collaboration to get through this crisis,” he says.
;Only last week, Victorian Transport Infrastructure Minister Jacinta Allan, and the Director-General of the Major Transport Infrastructure Authority Corey Hannett, wrote to industry to acknowledge the pressures it was facing and to emphasise the need for all parties to work together. The NSW Government has come out in similar terms, with Infrastructure NSW providing a single point of advice for the construction sector.
“We’ve seen the positive results of this collaborative approach in the way clients and contractors have worked together to keep construction sites open. But we also need to see it in how we manage the time and cost impacts.
“Contracts typically include clauses to cover delays caused by force majeure events, but from what we’re hearing the COVID pandemic may be sitting in a grey area.
“Nationally, contractors and consultants are getting very mixed responses from their clients - both public and private - on the question of who pays for any delays.
“Half our survey respondents say their clients have ‘opened the door’ to the possibility of varying terms, while the other half have received no such indication.
“Contractors and consultants are naturally concerned about the financial implications of having to bear all the costs. In the longer term, it may discourage them from bidding on projects.”
Seventeen per cent of respondents to the latest RA survey expect COVID-related project delays to be significant, 70 per cent to be minor and 13 per cent to have no impact.
“While it’s good news that the overwhelming majority believe the damage, in terms of cost and time overruns, will be minor or non-existent, it’s still a concern,” Mr Bushby said.
“Many are describing this current heated infrastructure market as a profitless boom. Margins are extremely tight and even relatively minor cost overruns can have big impacts on bottom lines.”
Mr Bushby says this week’s survey also reveals productivity across the infrastructure sector as a whole has dropped by 18 per cent since the impacts of COVID kicked in.
“Nearly 55 per cent of our respondents say the crisis is impacting on their abilities to deliver their current workloads, compared to 33 per cent who were asked the same survey question three weeks ago,” he said.
“It’s also worrying that overall productivity has fallen slightly from 86 per cent three weeks ago to 82 per cent this week. We hope that as flexible working arrangements and physical distancing changes bed down, we will start to see this trend turn around.”