The COVID-19 pandemic has tremendously hit the construction sector. As of the first quarter of 2020, the Australian economy has shrunk 10%, with estimated losses of approximately $5 billion, while the UK economy has decreased 5.8% or £301.5 million daily.

Similarly, the pandemic has resulted in decreased investments in the Indian construction industry by 13% to 30%, thereby diminishing India’s gross domestic product by 23.9% and increasing the unemployment rate to 27.11% as of May 2021.

Evidently, the pandemic’s considerable impact has affected the Malaysian construction sector, which suffered a large decline of RM18.5 billion during the interval period of the Movement Control Order (MCO) between March and April 2020.

The majority of construction activities, except those categorised as critical and essential services, were halted via MCO, eventually resulting in a 30% loss of manpower and their income and decreasing the consumption of construction materials by 42% (equivalent to RM4.6 billion).

During the Conditional MCO in May and June 2020, contractors continued to experience difficulties, such as the incorporation of demanding standard operating procedures on health and safety measures for construction sites. Such a hindrance has prevented contractors from continuing their projects in a conventional manner.

Despite MCO 2.0 and 3.0 announced in October 2020 and May 2021, respectively, daily COVID-19 cases continued to increase to 5,728, 7,748, and 17,786 in January, June, and July 2021, respectively. Thus, the typical impact on the construction sector was caused by financial issues, project delivery issues, difficulty in honouring various contracts, labour constraints, companies facing economic downturn, and supply chain management issues. The following section explains the typical challenges encountered by the construction industry.

Financial constraints

Financial constraints are the immediate impact of COVID-19 on the majority of contractors. Given that companies are not generating any type of net or operating profits owing to work cessation, suppliers issuing the prescribed materials have incurred huge losses. The implementation of MCO meant suspension of work and payments, and contractors assuming the recurring costs of rental expenses, salaries, and fixed costs. In addition, the cessation of selling materials and shutdown of the construction industry have resulted in the government losing adequate tax collection, which has a direct impact on the country’s economy.

Contractual obligations

The Temporary Measures for Reducing the Impact of Coronavirus Diseases 2019 Act 2020 was officially promulgated in October 2020 and will be in effect for two years. In particular, Section 7 acts as a statutory force majeure that provides temporary protection to a defaulting party’s inability to continue any contractual obligations caused by measures, unforeseen events, and difficult period under the Prevention and Control of Infectious Diseases Act 1988.

In Malaysia, three standard documents on contracts for construction works can be referred related to excusable delays triggered by the pandemic: JKR 203A (2007/2010), PAM (2006/2018) standard document contracts for government and public sectors, and FIDIC (1999) standard for building and civil engineering projects. Unfortunately, conditions associated via a force majeure or excusable delays provision may differ.

In particular, contractors should not postulate any contractual clause addressing excusable delays automatically applied to the COVID-19 pandemic. Contracts for minor works, restorations, repairs, and interior activities are examples of those not covered by excusable delays.

Labour constraints

During post-MCO in 2020, the principal drivers of the Malaysian construction sector with a total of 17,000 workers from G5 to G7 companies, representing a substantial number of the total labour workforce of approximately 850,000 employees, experienced the severe impact of the pandemic.

These workers are not allowed to resume work on-site. The possible reason is that some migrant workers asked to return home owing to fear and various uncertainties. However, as work resumed in G1 to G4 companies, the top priority of fulfilling burdensome health and safety demands, distress caused by viral infections, and influence of uncertainty have caused a decline in the number of migrant workers. Thus, the mental well-being and morale of workers substantially affected the workforce and the overall efficiency of operations.

Materials suppliers, sub-contractors, and project supply chains

Among the sectors that have experienced considerable disruptions are the materials, sub-contractors, and supply chain sectors. The ripple effect of the materials supply chain has suspended production, issuance, and distribution. Builders face the impact related to the availability, delays, and increasing costs of imported materials and off-site construction items, such as steel, tiles, and internal fittings.

The reason is that numerous factories ceased operations for an extended period. Disrupted transportation and travel restraints have likewise hampered project delivery, and equipment rental companies may experience equipment being abandoned at sites that became inoperable.

Therefore, work efficiency has undoubtedly decreased as work-from-home measures were enforced. However, COVID-19 has expedited the digitalisation and virtual concept of the sector, specifically by using building information modelling as a key attribute of construction 4.0. Moreover, the trend for controlled factory setting of prefabrication can be optimised.

In this case, managing the occupational and safety perspectives has become effortless. Subsequently, this building material requires minimal labour to assemble on site, which is a key priority in the context of social distancing requirements.

-- BERNAMA

Dr Afizah Ayob is Associate Professor at Faculty of Civil Engineering Technology (FCET) and the Dean of FCET of Universiti Malaysia Perlis.