The impact of COVID-19 on Construction Costs

Andy Bell
With the Scottish Government confirming that the Construction Sector in Scotland can proceed with Phase 0 and Phase 1 of the Construction Re-Start Model our construction partners are reviewing what impact this and future Phases will have on current and future projects.

As part of ongoing reviews, prelim costs of setting up sites to meet the COVID-19 restrictions are being considered.  Some items will be required in order to meet the working safely guidance, such as increased welfare and toilet provisions along with staggering break times etc.  The cost of providing PPE has already increased as demand has rocketed, and provision of welfare units could witness the same supply and demand pressures.  

Our construction partners are also reviewing what mechanisms and technology they can utilise to maintain safe working practices, such as proximity warning systems being provided to all on-site workers that will alert them to anyone entering the 2-meter social distancing zone. Other items being considered include electronic and biometric sign in systems with COVID-19 hygiene regimes in place to maintain the safe use of these systems.

Another item that needs to be considered is the need for a COVID-19 Compliance Officer.  It is yet to be seen whether updated Construction Phase Health and Safety plans will allow for this role to be undertaken by existing site staff or whether this will be undertaken by an additional staff member or members depending on the size of the site.

All measures that are required over and above the previous “norm” of site set up will come at a cost.  Some initial estimates have seen a weekly cost increase of up to £2.5k over the current duration of the project if all COVID-19 “systems” are required over the full duration of the project (this also takes into account the increased cost of the project duration itself is increased by approximately 30%).

Further complexity of arriving at a cost for meeting the COVID-19 restrictions comes when further Phases are introduced and how these are taken into account.  This will require open and transparent discussions from all parties in order to arrive at an agreeable solution.

With a perceived increase in prelim costs it will be interesting to see what happens within the overall construction market.  The current economic recession has been dramatic and has occurred at speed. The most optimistic view is that the economy will rebound to pre-COVID-19 levels by the end of next year after a 14% drop in GDP.  This will undoubtably impact on new construction orders as Clients review their current strategies and the impact on their own sector.  The impact of the previous financial crash on the construction market saw tender prices decrease year on year by 12.6%.  It is tough to compare the current economic impact with the financial crisis and we continue to closely monitor the situation as the weeks and months progress to ensure that we can advise our Clients accordingly.

We remain in communication with our Clients and Construction Partners as we navigate this unprecedented situation. Using our technical knowledge and understanding of the guidance issued we can inform all parties of the anticipated impact from the current guidelines and through our ongoing market research we can shape future decisions and projects.

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