These days, contractors in the infrastructure space might consider themselves lucky as the coronavirus crisis ravages other industries. Roads, bridges, tunnels and similar projects that end up serving a public need often push forward despite economic or social turmoil and are a steady source of employment for skilled workers, managers, engineers and other construction personnel.
“Civil construction doesn’t change a whole lot,” said Paul Pedini, vice president of operations for Skanska USA Civil in New England, based out of Waltham, Massachusetts. “Our work is blessedly less susceptible to the ups and downs of the economy and that which has been created by COVID-19 just because of the nature of the work. It’s one of those things we’re extremely thankful for right now.”
Not only has the infrastructure sector been more resilient in New England, he said, there could even be an uptick in business if a federal stimulus plan includes these projects. But while infrastructure projects might be somewhat immune to external forces, there are major aspects contractors should take into account before pursuing them. Here are four of the most critical issues to consider:
First off, it’s important to determine a project's ultimate sources of funding and ensure that these sources have both committed to bankroll the project and have the ability to pay for work completed, said Nick Grandy, senior analyst at RSM U.S. LLP, a tax, audit and consulting firm. The good news is that the money for infrastructure projects is often set aside in advance.
“Hopefully, the funding sources for these large infrastructure projects are already shored up to a certain percentage, so the contractor really isn't on the hook for that much money if something is to happen,” he said.
However, fee-based owners like port authorities in the New England region, Pedini said, are a different story. In the wake of the novel coronavirus pandemic, almost overnight some have seen as much as a 90% reduction in revenue.
Pedini said projects with such funding schemes have been delayed and even shelved. “How do you foresee that? You really can’t,” he said.
2. Special conditions
At any time, pandemic or not, Grandy said, it’s important to assess areas such as supply chains and the labor market. This is critical not only for making sure the proposed schedule is achievable, but that the quality of the project is maintained.
For example, he said, if a manufacturer relies on products shipped from overseas and that pipeline has been cut off due to tariffs, the pandemic or other factors, then that must be a consideration when including those numbers in a bid.
“Having another source that you can go to that’s local, that will be able to provide you substantially similar-quality material, is key,” Grandy said. “Make sure you have a diversified supplier base for your materials.”
Confidence in the ability to tap into a solid bench of workers is important as well, which can be difficult if contractors have had to institute layoffs and furloughs. When bringing workers back online, Grandy said, make sure they are the right fit for whatever work lies ahead.
In the age of COVID-19, Pedini said, there are additional measures that must be taken into account when it comes to keeping those workers safe, such as scheduling for social distancing requirements and the added expense of personal protective equipment, even though a few infrastructure workers are “safely ensconced” within heavy equipment during much of the day.
“COVID-19 has definitely changed the landscape on how this work is done,” he said.
And sometimes what promises to be a boon for scheduling, such as the lack of traffic on the road because so many commuters are locked down in their homes, doesn’t provide the anticipated, added traction.
Pedini said crews were able to make some progress during the early days of the lockdowns in New England, but it wasn’t long before traffic steadily increased, bringing working conditions back to near-normal status.
Contractors should expect to see more pandemic-related requirements, as well as responsibilities, in their future contracts, he said.
3. Strong partnerships
Part of making sure that contractors have the best resources at hand is developing positive, proactive relationships with partners like inspectors and correctly estimating their cost.
Inspectors are part of the checks and balances that ensure a quality project, but, according to Nagesh Goel, president and co-founder of Atlas Engineering & Inspection Services (AEIS), many contractors don’t use them to their best advantage.
Oftentimes, a qualified inspector, he said, has the technology, data and expertise to avoid problems rather than point them out after the fact.
“Here it is crucial to hire a team that can come up with solutions, who are part of the process,” Goel said. “A lot of time inspection is thought of as a necessary evil. But if you are able to hire a team, which can also be part of the decision process … that's a big value to the project. That's where cost savings happen.”
Even though inspections and quality control are vital to a project, he said, they are often not accounted for adequately in project budgets, which can leave contractors paying out of pocket for those services down the road.
“On any public project,” Goel said, "the budget should be somewhere around 3% and never less than 2% for all quality control, quality assurance and site inspection.”
4. Delivery methods
Increasingly, Pedini said, contractors in Skanska's New England region are stepping into more of a partner role on infrastructure projects as owners are becoming more comfortable with collaborative methods like design-build and are also looking to get the most out of their stretched budgets.
According to McKinsey & Co., collaborative contracts are on the rise in the construction industry, although there is still overall hesitation on the part of many owners to take advantage of these delivery methods despite their successes.
In the days when the vast majority of infrastructure projects were awarded as part of low-bid, design-bid-build packages, he said, decisions were made irrespective of what might be the best value. More project owners today, however, are open to exploring alternatives such as those found in integrated project delivery (IPD) or project alliancing.
Under such models, according to McKinsey, key delivery partners work together during a defined preplanning period to develop the project scope, schedule and budget. These partners form a single contract including a no-fault clause and operate under a joint management structure that governs the project execution.
Even owners of design-bid-build projects, Pedini said, are open to changes that could bring the owner time and budget savings, as well as ease of operations, above and beyond the traditional low bid.
However, he said, contractors need to bring the technology, as well as the design savvy and sophistication, to the table in order to be able to offer owners that best value. Those owners are allowing the door to be open to innovation and leveraging contractor expertise to ensure that jobs are constructible and will give them the results they want.
“When allowed to ideate and create improvements, there’s no limit to what the construction industry and contractors can do,” Pedini said.