The COVID-19 pandemic’s duration is approaching the two-year mark, leading to significant “COVID Fatigue” for everyone. However, the recent spike in confirmed cases makes ignoring the potential impact globally on business owners’ critical. According to the World Health Organization, confirmed cases rose by nearly 10 million in recent weeks; far higher than at any other time during 2021, with most of those confirmed cases being, in order of magnitude, the Americas, Europe, and South-East Asia.
Shifts in Global Market
We have seen extensive shifts in the global market, including for construction materials. Those shifts continued even when confirmed cases remained relatively stable. The recent spikes suggest the market is likely to continue being impacted, with no short-term end to those market instabilities.
Nevertheless, projects are being bid and proposed now, so what are owners, contractors, subcontractors, or suppliers doing? What should they do? There is no certain answer to those questions. Instead, these “industry players” should each carefully evaluate their individual situations and make the best business decisions they can from their careful evaluation.
If those evaluations suggest prices will rise, industry players at the higher tiers will likely want to lock in pricing as early as possible, at firm-fixed prices, while those on the lower tiers will likely want to do the opposite. The industry players at lower tiers will also likely want to incorporate escalation provisions in contracts, entitling them to price and time increases in the event of market changes limiting material production, increasing material costs, or both.
The only certainty is that there will be uncertainty. Prior to the recent transition, Virginia’s former Governor issued Executive Order No. 84, declaring a secondary limited state of emergency in the Commonwealth of Virginia because of COVID-19. Federal and state governments have enacted various COVID-19 related mandates. Regardless of personal views of those mandates, COVID-19 continues to disrupt businesses and appears likely to continue challenging the construction industry, including material and labor shortages and disruptions.
So, as frustrating as this continuing pandemic is, shake off the COVID-19 fatigue, carefully evaluate your project-related options and strategies, and incorporate provisions in your project documents to help minimize those challenges, now and moving forward.
For more information regarding this or any other construction industry-related matters, please contact the author or another member of Vandeventer Black’s Construction and Government Contracts Practice Group.