Construction Environment Roundtable

Adapting to the New Reality While Looking to the Future

An untold number of construction projects have put on hold as a result of the COVID-19 pandemic, but that doesn’t mean all work has to stop. In fact, owners should focus on preparing those projects to resume the moment it is safe to return to the job site. “The best thing for an owner to do is get these projects shovel-ready so they will be in the driver’s seat,” says James Vermeulen, managing principal of Vermeulens. “Whether the project can start construction or is delayed, it is important to be in the driver’s seat. If there’s a schedule slip, you can have an even better set of 100 percent construction-ready documents.”

To keep apprised of the dynamics in the current construction environment, Vermeulens, a professional services firm focused on construction cost estimation and pre-construction cost control, has scheduled twice-weekly virtual roundtable discussions with industry leaders in Central and East Coast regions to identify ongoing trends, influencing factors, construction administration issues, and the market outlook in the construction industry. A recurring theme is the measures companies can take to prepare for when the pandemic has passed.

If possible, owners should be taking advantage of the current market, while competition for work could be driving costs lower in the short term. For example, a $10 million project in the Austin area went out to bid in early March and was reissued at the end of the month. The bids came in on April 14 showing a 4-6 percent cost reduction overall.

But costs could escalate when the construction sector ramps back up after the pandemic, if there are shortages of workers and materials, so it’s best to have projects ready to go. “Then the owner is in a much better position,” says Vermeulen.

Highlights from recent roundtable discussion include:

An engineering firm in the Northeast reports that they have stopped running two shifts to avoid workers having to share equipment.

  • Employees in the field are wearing paintball masks because that’s what is available on Amazon.
  • Fifty percent of their employees have requested to be laid off, and the majority of those are the higher-skilled people, so they are having trouble getting product off the floor.
  • On the bidding side, they are still seeing a lot of opportunities coming in the door and are saying “yes” to more than they typically would, in order to keep their teams employed.
  • They have not seen increases in prices from vendors, but are planning on delays.

An electrical contractor has 45 or 50 projects underway, and all but one have shut down.

  • They laid off 93 percent of their field staff, but the office is still fully staffed, and business opportunities haven’t slowed down.
  • They are cautious about the work they accept, because they still have to complete all of those projects that were halted. They are focusing on projects starting four to six months from now and beyond.

A vendor of specialized equipment and systems for life science and healthcare has adapted their procedures for factory acceptance testing (FATs), because customers are reluctant to travel to the factory. The vendor executes the testing internally and shares the results electronically via computer and camera. This is not a new practice but is more prevalent now. Other customers are opting to postpone the testing, which creates a challenge to the vendor, who must now store very large equipment. The vendor is considering negotiating a storage fee, and is working on a warrantee extension so the warrantee period doesn’t go into effect until the product is accepted.

A general contractor reports that the price per ton of structural steel is very inflated, and manufacturers are requiring payment in advance because of projects being shelved. “We haven’t seen this anywhere else,” responds Vermeulen. “Procurement across all trades, including steel, has been tracking the same as before COVID, but it might be something we’ll see coming. Or it could be a one-off for that project.”

The cancelation of elective surgeries, coupled with the downturn in the stock market and the oil and gas markets, is having a huge impact on the healthcare sector, says a representative from an architectural firm that works extensively in healthcare. “It’s an uphill discussion with clients. It’s going to be tough out there.”

The same is true of higher education institutions. Many unfunded/not-approved projects are on hold, while some approved projects are moving ahead two months early because they had been waiting for commencements that have since been cancelled.

Developers find themselves in a different position. They had money set aside, so the downturn in the market hasn't affected them, and they are anxious to take advantage of this market. Bigger projects seem to be holding steady, while smaller projects are slowing.

By Lisa Wesel

Project Data
Completion Date: 
April, 2020
Published 4-22-2020