October 2021

Determining the impact of the Victorian COVID-19 construction workforce restriction legislation

Article by Delay Expert Andrew McKenna, Director of Delay and Planning

Download a PDF version here.

Following Victorian Government COVID-19 restrictions issued on the 16th August 2021, ‘large’ scale construction sites were mandated to reduce workforce capacity to 25 per cent or five workers on site, whichever is higher.

The Victorian Government reduced capacity on large construction sites to 25% until the 5th October 2021 after a 2-week industry shutdown. From the 5th October 2021, workforce capacity could increase to 50% if all workers were fully vaccinated and crib rooms meet best practise standards. From the 21st October 2021 workforce levels can return to 100% if all workers are fully vaccinated.

Determining the peak workforce

Given that ‘large’ construction projects are likely to be managed (from a time perspective) using some form of critical path method, logic linked bar chart or program, it would likely be simplest to resource load the construction program.

This should have been done at the time of tender in the development of the construction methodology to determine the preliminary costs determined by the resource level (and availability) governed by the size and value of the project.

However, given the nature of the tendering process, it might be that the sub-contractors did not or were not required to disclose their anticipated resource level or the main contractor was not required to produce a resource profile.

To understand what the resource level ‘would’ have been, one can ‘reverse engineer’ the sub-contractors pricing to determine a level of resource based upon the time the contractor was on site, the value of the trade package and a typical split of the material/labour resource split of the package. Although this is theoretical it may be an appropriate method if no other evidence is available.  A Claimant should ideally provide evidence to support its claims.  However, an Employer can carry out a reverse engineering exercise to ‘test’ the Claimant’s claims.  Engaging a construction delay expert to provide an independent opinion will assist both parties in this instance.

The approximate trade labour cost percentage is around 25% to 50% of the total package cost. The average being around 35%. However, different trades have different weighting. For example, material cost will be far greater in a concrete package than labour (~80/20), whereas a labour-intensive package, such as demolition will have a far greater labour than material cost (~75/25).   Again, this is a theoretical exercise and engaging a quantum expert may assist in this type of exercise.

Using the baseline program (or the approved construction program), the timings of when those trades are/where scheduled to be onsite can be determined. The determined level of resource can be distributed over the total duration of the planned trades’ works linearly, or more accurately it can be determined by applying an ‘S’ curve profile, whereby the works ramp up gradually, peak and then fall off.

By way of example, a $50m commercial/residential refurbishment project of 12 months duration might have a typical peak resource level of around 280 operatives.

Given the mandatory workforce restrictions, one can surmise that the 25% restrictions would constitute a maximum workforce of 70 operatives.

Labout Histogram

The chart determines that had the restrictions occurred between January and July, the workforce restrictions would have had little theoretical impact on the progress of the works. However, given that the 25% restrictions were enforced between August and October and reduced restrictions up until November, one can surmise that the works (and completion) would be impacted.  This exercise is not enough to claim an extension of time.

Determining the criticality

It is not sufficient to simply assert that the 25% workforce restrictions between August and (likely) November (when all workers are vaccinated) would impact the planned works to a corresponding order of magnitude of 4 months at approximately 25%, which equates to 1 month productivity in 4, ergo an EOT of 3 months is applicable.

The Claimant must demonstrate that the impacted works were on the critical path (the most time or resource sensitive sequence or network of activities through the program from start to finish).

Mitigation

A competent contractor should be able to demonstrate what mitigatory measures could be undertaken to divert the available resource level to the critical tasks, whilst postponing the non-critical works as far as is reasonably practicable, i.e., resequencing at no additional cost.

Acceleration Measures

Other strategies might also include working double shifts (through seeking an acceleration instruction) or by reviewing what works could be ‘ramped-up’ post restrictions by preparing multiple areas for the labour resource intensive works. For example, finishes trades working over multiple floors post restrictions, subject to actual resource availability.

Claiming an Extension of Time

In claiming an extension of time, the Claimant must demonstrate to the Employer that all available mitigatory strategies have been explored, and similarly provide potential recovery or acceleration strategies post the lock-down restrictions.

  • The ‘baseline’ or planned resource level must first be ascertained to understand both the peak project level of resource and the forecast resource level over the course of the project.
  • The resource level applicable to the critical works must be determined and the extent to which the peripheral works can / could be postponed understood.
  • Mitigatory strategies should be explored and deployed where reasonably practicable.
  • The construction program should be rescheduled and optimised to minimise the impact of the workforce restrictions through multiple scenario analysis.
  • A request for an EOT to be made and subsequently updated inline with the contractual mechanisms.
  • The Contractor should seek employer approval of the revised construction program, which incorporates an agreed mitigation or acceleration strategy.
  • Indirect and Direct costs must be separated and only costs at the time the delay occurred should be claimed – AVOID GLOBAL AND TOTAL LOSS CLAIMS!

Disclaimer: This paper does not in any way constitute any type of legal or professional advice whatsoever and in no way should be relied upon by any party whatsoever in any jurisdiction.

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