Delays and Financial Implications of COVID-19 for Contractors in Irrigation Projects

Abstract

Construction project delays are costly to stakeholders. Therefore, extensive research has been carried out in various countries covering different types of construction projects to identify delay factors and mitigation strategies. However, the literature has not documented the impact of a once-in-a-century event such as the COVID-19 pandemic on construction projects’ schedules and costs. The present study uses a case study approach to examine the effect of the COVID-19 pandemic on three lift irrigation projects’ construction programs and the financial implications for the contractor in the Indian construction industry. The findings reveal that the main factors responsible for delays due to the COVID-19 pandemic were fear of an outbreak, imposition of a nationwide lockdown, late return of workers, resource shortages, and changes in operating procedures. Furthermore, the study found that the contract conditions and government directives allowed for time extensions in construction projects by recognizing the pandemic as a force majeure. However, such provisions did not protect contractors’ financial interests. This study evaluates the financial implications of the COVID-19 pandemic for the contractor in terms of worker compensation during the lockdown, idling of resources, overhead costs, cost escalation, and liquidity. The public health crisis from the COVID-19 pandemic led to a series of preventive measures from the government and organizations worldwide that caused severe disruptions in construction projects and disturbed the construction supply chain. This study recommends rethinking the scope and coverage of force majeure and excusable delay clauses in standard construction contracts beyond provisions for an extension of time to protect the financial interests of different stakeholders. The vagueness in assessing and compensating for the losses from unprecedented events such as the COVID-19 pandemic could expose construction organizations to significant financial risks and threaten their existence in a highly competitive industry. Therefore, construction organizations should carefully review the contract provisions of future projects for proper risk allocations to accommodate unprecedented events and pandemics to help them recover successfully from various disruptions and associated financial losses. Moreover, proper communication and negotiation, a supportive and collaborative project culture, and early government interventions are crucial in dealing with such events and avoiding disputes among project stakeholders.