By Lisa Roberts, special to Ontario Construction News
Saying that the coronavirus pandemic has negatively impacted the economy would be a huge understatement. In this regard, unfortunately, the infrastructure and construction industry in Ontario is no different. With this in mind, we will examine the current state of affairs in the world of construction, as well as the outlook for the near future.
Huge COVID-19 effects
Pretty much every construction project has suffered as a result of the coronavirus spreading throughout the world — and thus, Canada. Construction companies across Toronto and the rest of Ontario have already felt the disastrous effects of this novel virus.
While different parts of the country and the world have borne the brunt of the blow at different times, we should note that this happened in Ontario in mid-March. More specifically, the provincial government enacted a state of emergency on March 17. This was necessary in order to contain the spread of the virus and lower the number of infections as much as possible.
Because of this, a huge majority of construction projects in the province of Ontario shut down temporarily during the state of emergency. The only exceptions were the ones that were deemed essential — such as linear transit and hospital constructions. These continued working. However, their pace also slowed down. This was due to heightened safety and health requirements.
The guidelines for public health required better compliance from the few construction sites that remained open. Most notably, this included screening all labourers who arrive at their workplace to determine whether they’re potentially infected with the virus.
Apart from that, worksites were disinfected and cleaned at a brisker pace than usual. Most construction sites installed hand washing stations to allow all labourers to wash their hands and disinfect on a regular basis. Where this was not absolutely necessary, the workers also received instructions to remain at a distance of two meters from one another.
Of course, in practice, this isn’t easy to achieve on a construction site. Inevitably, such changes are likely to reduce everyone’s productivity. The disinfecting, cleaning, hand washing, distancing, and testing all takes time. Even more importantly, it takes a lot of energy. La borers cannot maintain the same level of performance with all of these new hindrances in place.
Supply chain and contractual law issues
Apart from the closure of many sites which the construction industry in Ontario operates, and the problems arising on the sites that have remained open — supply chain issues have been a major problem for this sector as well.
The companies in the logistics and transport sector have also experienced worksite issues as well as a huge market downturn. According to companies like Discount Moving & Storage Ottawa, the demand for residential and commercial moving services has fallen significantly in the previous few months.
Naturally, companies that work as suppliers and logistics providers in the construction industry in Ontario have felt similar disruptions. Also, a major point of contention within the industry itself was a debate on the legal nature of the pandemic. More specifically, whether or not contractual law would consider the pandemic force majeure.
However, in the end, most contracts for construction work were not cancelled if the performance had already begun. Ontario regulates many construction projects with contracts that contain a clause stating that a worksite that shuts down for a hundred and eighty days or more is grounds for contract termination.
Luckily, it wasn’t possible to terminate contracts because the provincial government rescinded the declaration of emergency after two months.
It should be noted that, unfortunately, predictions for the imminent future of the construction industry in Ontario are just as dire as in other sectors. Most construction sites have reopened. However, the guidelines for hand washing, disinfecting, physical distancing, and daily screening are all still in place. They are likely to stay in effect until communities reach some sort of herd immunity. Alternatively, they might go away with the production of a vaccine.
There are no official trade estimates on the losses that the industry has incurred due to the fall in productivity and the disruptions in the supply chain. However, some early estimates indicate that the losses are between ten and twelve percent. This percentage is just about equal to the overhead and profit that contractors expect to make on an average project. The coronavirus pandemic has pretty much eliminated any earnings in the previous period.
Luckily, the construction industry in Ontario has an incredibly vibrant safety and health culture in the workplace. The finest contractors have maintained a focus on the safety and health of their labourers even before the pandemic. However, the added health requirements during this crisis have inevitably led, and will lead, to a fall in profits. Having to provide additional protection to workers will cost companies a lot of money. This, combined with handling the disruptions in the supply chain, means a huge increase in expenses.
The biggest issue that the construction industry in Ontario — and beyond — is facing is contractor solvency. Some estimate that the industry will feel the first negative effects in this regard by the fall of 2020.
Most of the local contractors are not huge conglomerates, but small businesses. Their main source of income are renovations and residential homebuilding. The economic changes felt at the consumer level and a significant drop in demand for residential renovation and construction will present a problem for these companies. It is likely that there will be some closures, as well as reduced profits for those who remain.
Editor’s note: DataBid.com originally published this article in its weekly eletter, observing that this is, indeed, a confusing time for the construction industry. “DataBid is working tirelessly to report and distill the news that can help you and your company make the right decisions and keep you up to date on the constant changes as they are made. We hope our coverage brings some clarity amid all the confusion,” DataBid said in a statement.