April 2020
COVID-19 crisis: Impact
on capital projects and
the way forward
Impact of the COVID-19 crisis on capital projects
The interconnectedness, complexity and global nature of the construction industry’s supply chains and workforce affect the cost and schedule of infrastructure projects.
Any slowdown across infrastructure investments due to scenarios such as uncertainty of demand or access to financing could have an impact on project start dates or stall the progress of construction, with potential longer- term economic repercussions.
Actions have to be taken by organisations to plan for risks related to the delivery of infrastructure projects.
To mitigate negative results, organisations can consider the following five actions:
• identifying critical activities
• considering legal and financial implications
• communicating
• conducting scenario analysis
• creating a contingency plan.
Table of contents
1 Possible impact across project dimensions
due to the COVID-19 lockdown 04
2 Key areas of impact 08
3 Possible recovery strategies 09
Areas of importance for capital projects in India Workforce
Organisations must consider the following with regard to workforce management during the ongoing crisis:
• How much of the labour force is skilled or unskilled and how much of it comprises local or migrant labour?
• How much of the labour force and the project staff are unable to mobilise due to the lockdown or the unavailability of public transport?
• Which other options of readily available local workforce are available to replace the unavailable workforce?
• How much extra labour force is required to compensate for the delay?
• How are special works, which require foreign expatriates to be deployed, being planned?
• Are the future manpower requirements being evaluated to plan projects in a phase-wise manner?
• Has the process of revisiting, revising and
reimplementing construction methodology and activity sequence to mitigate the losses from delays being initiated?
• Which options for use of enhanced mechanisation have been evaluated, as an alternative to labour force unavailability?
• What kind of motivational and healthcare workshops can be arranged to enhance positive sentiments and motivate the workers post the COVID-19 crisis?
• What additional protective equipment is required for the labour force to restart the work on site?
• What measures are planned to maintain social
distancing between workers and controlling visitors to construction sites?
• Is necessary data on employees (geography, visas, etc.) available and are their movements during the crisis being tracked?
Protect employees and workforce planning
Possible impact across project dimensions due
to the COVID-19 lockdown
Procurement and supply chain
Supply chain continuity under the impact of COVID-19 is another area which organisations need to assess thoroughly by addressing the following concerns:
• How are they relooking at the import of project material and equipment from COVID-19 affected countries?
• Are they taking stock of the supply of critical
equipment and materials affected due to interruption in manufacturing, production, cash flow and
transportation?
• Are they looking at alternate supply options or logistics methods?
• What are the most needed critical construction materials that can face vulnerability in the market due to initial high demand after the lockdown is lifted?
• Are there any possibilities of price escalation of vulnerable resources after the lockdown?
• Who are the possible local suppliers available who can act as substitutes to replace the material supplier in case of last-minute emergencies?
• Have they identified and connected with all the
stakeholders involved in the fulfillment of the complete supply chain for workable strategies?
• How are they gearing up to prioritise cyber security and system resiliency in response to significantly higher levels of remote access to core systems, and because employees and management could be more susceptible to social engineering efforts in the midst of a crisis?
• Considering India’s variable geographies, how are they evaluating logistics needs of the projects, keeping in mind the changes in Central and state government regulations as the COVID-19 crisis unfolds?
• What are the changes in government policies for use of public transportation post the COVID-19 crisis?
Maintain continuity in supply chain
The COVID-19 crisis has resulted in organisations re- evaluating their liquidity scenario to make sure that they do not face a severe cash crunch. The following issues must be considered by organisations with regard to liquidity concerns:
• Are they contemplating paying the amount pending to the contractors for work completed, on a case-to- case basis?
• How are they checking if any financial bills are held up due to the lockdown and if any contractors are facing any financial problems?
• Are there any contractors or subcontractors facing liquidity issues or financial crises due to blockage of bills in the financial system?
• How are they checking available liquidity and what are the possible resources which can help to produce instant liquidity?
• Are there any other bypass techniques that should be adopted for gearing up the cash flow?
• Are they proactively communicating with lenders and other stakeholders to avoid surprises and enable potential rescheduling of debt or alternative financing sources?
• Are there any major issues in the cash flow channel due to the lockdown or semi-lockdown?
• How can businesses streamline procurement practices and cut down costs by removing redundant activities?
• What are the frequent changes in financial policies released by the Central Government in terms of tax and GST policies?
• What are the potential tax-related changes announced by the government that could impact employees (e.g.
payroll tax cut, sick leave pay, etc.)?
• Which insurance measures can help mitigate the effects of this situation of construction projects across the country?
Review options to release liquidity
Cash flow analysis
Site infrastructure
Construction companies must evaluate the following factors with regard to site infrastructure:
• Are they checking the availability of material storage space for contractors?
• Are they relooking at the site work fronts of roads and drains and identifying the incomplete work fronts on priority?
• Have they identified site infrastructure tasks on critical paths?
• Have they assessed how the reconciliation and documentation of works completed will be done and which elements will define the priority for these measures?
• How do they assess the expected underground excavations and depressions that might get waterlogged due to heavy rain in the monsoon?
• Are the sites prepared for movement of heavy machinery during the monsoon for unhindered erection works?
• Have they identified the capacity of the discharge canals to dispose rain water with uninterrupted flow?
Companies should look to improve project outcomes by taking into consideration the following factors:
• How are they looking to manage project shutdowns/
slowdowns to protect investments?
• Are they relooking at the capacities/scale planned for investments?
• How can they remote monitor projects through drones, digital war rooms and other emerging technologies?
• Henceforth, how do they monitor productivity of manpower and equipment?
Improve project outcomes
Monsoon readiness
Companies must display their monsoon readiness by assessing the following factors:
• Have they identified the structures, the construction work for which is still at the foundation level?
• Which buildings need roof sheds to be completed on priority before the monsoon arrives?
• Have buildings in which the structural work has not yet started been identified, as without a roof the progress may get hampered in the monsoon?
• Are they prioritising buildings in terms of masonry work before the monsoon to facilitate them with favourable working conditions for electrical, mechanical and instrumentation erection work without delay?
• Are they taking adequate measures and precautions for on-field fabrication works to continue during the
monsoon as there might be shortage of necessary equipment and consumables?
• Are they monitoring the availability of labour force during the monsoon as most workers go to their hometowns for agricultural activities?
• Considering that there might be a shortage of surfactants and other required products on the account of disruption in supply chains, what necessary precautions are being considered to maintain good health and hygiene of workers?
• Have they charted a detailed plan to overcome and deal with the compounded effect of the COVID-19 outbreak and the monsoon?
Work from home
Construction businesses should evaluate work from home (WFH) conditions for their employees and assess the following factors:
• How much design, planning, billing and
management related work can be done from home?
• What are the most available digital platforms that can be used for maximum communication during the lockdown period?
• How much of the delayed engineering work can be completed during the lockdown period?
• How many new procurements need to be ordered as per newly arrived engineering drawings?
• How much extension should be given to contractors so that they can revise the detailed schedule?
• What alternative duties can be assigned to those staff members who are unable to mobilise on site?
Construction companies should evaluate the following contractual options:
• Going forward with the current scenario, what legal options do they have to keep a track of contractors?
• How are they planning to assess claims by contractors on:
– force majeure
– relief under applicable law
– cost escalation and damages and financing arrangements
– claiming relief on account of force majeure and duty to mitigate
– suspension – extension of time?
• Are they evaluating the impact on equipment warranties?
Contractual options
Impact of COVID-19 on key areas of capital projects
Financial issues among stakeholders/
contractors/subcontractors Unavailability of skilled migrant labour
Shortage of material and interupted supply chain
Delay due to contractual extension conflicts Impact on monsoon readiness
Limited availability of local/interstate/
international transportation
Apprehension among workers
Local and government-imposed regulations during the lockdown
Source: Based on interactions with select industry professionals.
Price escalation of critical materials due to high demand Economic slowdown and global recession due to COVID-19
Extreme High
Low Moderate
We recommend the three steps of regrouping, preparing and responding to ensure that capital projects contribute to the recovery of the country’s economy and its social fabric. We should look to utilise the lockdown period to prepare for similar scenarios in the future and focus on areas that are likely to be affected the most. The recovery plan should be based on thoughtful measures and designed for quick implementation.
As project stakeholders, we, along with our clients who are project owners, engineering, procurement and construction (EPC) contractors or engineering consultants, need to think and introspect as the COVID-19 crisis unfolds.
Local substitutes: Contractors have to plan in advance for replacing the unavailable labour force with readily available local labour force. They can also arrange for health and safety workshops to convince and motivate the local labour force to increase productivity.
Alternative sources: Contractors have to plan in advance for any alternative suppliers of critical materials and also have to maintain minimum stock of critical materials.
Increase liquidity: Alternate liquidity options and
emergency funding can also help contractors to maintain cash flow. Contractors should also verify the cost
escalation due to volatile market prices resulting from the COVID-19 pandemic.
Motivation with healthcare facilities: Increased incentives, motivational workshops and extra healthcare facilities can also help contractors to increase the
confidence and boost the morale of the labour force to increase weekly productivity.
Pre-planning with extra resources: A large number of construction projects will get hampered if readiness targets are not fulfilled. Thus, extra subcontractors and extra labour force are needed to achieve the target of monsoon readiness.
Advance planning: Frequently checking the government regulations for transportation with pre-planning for alternate transportation facilities.
Personal protective equipment: Providing all possible healthcare facilities and personal protective equipment (PPE) for all the staff members and the labour force can help maintain healthy working site conditions. Healthcare facilities and safety insurance provisions can also help contractors to protect workers from unexpected health disasters.
Possible recovery strategies
Reduced labour force: Due to the COVID-19 pandemic, a majority of the migrant and skilled labour force is unable to mobilise on construction sites due to prevalent uncertainty and apprehension, unavailability of public transport, financial problems due to
unemployment during the lockdown, uncertainty about health and safety, etc.
Disrupted supply chain: A majority of industrial units are non-operative during the lockdown, disrupting the supply chain.
Financial impact: Almost all financial institutes are facing high demand and severe stress that can result in interrupted cash flow and liquidity problems for many contractors.
Low productivity: The widespread impact of COVID-19 can induce low productivity and reduce the participation of labour force.
Impact on monsoon readiness plan: The monsoon readiness plan can also be disrupted due to the unexpected delay caused by the lockdown.
Impact on procurement: Procurement of critical equipment may get affected due to closure of state borders and unavailability of local and international transportation.
Increased health and safety requirements: The staff and labour force have lost confidence due to apprehension, which can have an impact on the emotions of the people involved in a project.
Critical impact areas
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Contact us
Sanjay Garg
Partner, Capital Projects and Infrastructure PwC India +91 9717598023 [email protected]
Priyanshu Gundana
Partner, Capital Projects and Infrastructure
PwC India +91 9820413236
[email protected] Rajshekhar Saha
Director, Capital Projects and Infrastructure
PwC India +91 9910248145
Sanil M Mhatre
Associate Director, Capital Projects and Infrastructure PwC India
+91 9892019339 [email protected] Kunal P Patil
Senior Consultant, Capital Projects and Infrastructure PwC India
+91 9833998115 [email protected]
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This document does not constitute professional advice. The information in this document has been obtained or derived from sources believed by PricewaterhouseCoopers Private Limited (PwCPL) to be reliable but PwCPL does not represent that this information is accurate or complete. Any opinions or estimates contained in this document represent the judgment of PwCPL at this time and are subject to change without notice. Readers of this publication are advised to seek their own professional advice before taking any course of action or decision, for which they are entirely responsible, based on the contents of this publication. PwCPL neither accepts or assumes any responsibility or liability to any reader of this publication in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take.
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AW/April 2020/M&C-5551
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