Impact of Coronavirus on the Building Industry

As federal and state governments try to contain COVID-19, aka coronavirus, its impact is being felt in industries across Australia.

And while building and construction sites continue to operate, lack of supplies could become a concern - an anxiety centred on goods made in China.

Let's look at the effect the virus is having on the building industry in Australia and just how dependent we are on imports.

Made in China?

COVID-19’s impact on building supplies in Australia was addressed by the Queensland Master Builders Association in mid-March. Regarding imports, the Association reported that in the second half of 2019, China supplied a large proportion of building materials and goods, specifically:

·         Furniture – 69.4%

·         Clay construction materials – 50.5%

·         Glass – 56.4%

·         Nails, screws, nuts & bolts, etc. – 41.4%

However, these figures relate to imports. With the exception of appliances and furniture, the majority of construction-related products used in the 2017/18 financial year were Australian made.

For example, although Chinese imports accounted for 56.4% of glass imports, Australian-made products made up 70% of the total used. Only 10.2% of plaster and concrete products came from overseas, while sawmill product imports accounted for only 13.3% of the total.

Scarcity of imports

It seems that managing the scarcity of products is the challenge, rather than a total absence. Paint, glass and cladding were singled out by Master Builders Association executive director Brian Seidler as facing shortages.

“The factories that make these products all closed down for the Chinese New Year celebrations and then coronavirus hit, and so they extended their closing down period. And now no one knows when they’ll start up again,” he told Domain.

If there’s a silver lining to be had, you can count on a TV host to find it. Celebrity tradie Dan Reilly, formerly of The Block, says the shortage of supplies from China could be a good thing for Australia as people buy locally-made materials.

A Queensland perspective

The Queensland Master Builders Association says the impact of COVID-19 will be felt in the second half of 2020 as supplies dwindle.

The Association suggests contractors check with suppliers before placing orders to be clear on delivery dates.

 “Ensure you read your supplier agreements to understand what your rights are if goods are not received by the date that you have requested and agreed with the supplier.”

It also suggests contractors submit a claim for an Extension of Time to the Date for Practical Completion within the contract timeframes, as well as determining whether a contract has a force majeure clause.

Contractual obligations

The legal concept of force majeure protects parties in a contract from unavoidable or unforeseeable events. In Australian law, a force majeure clause must be stated in the contract; there is no recourse to this legal concept outside the contract.

The clause is negotiated by the project company and the contractor. It could state, for example, that neither party is responsible for any failure to perform its obligations under this contract if it is prevented from, or delayed in, performing those obligations by an event of force majeure. Those events must be clearly defined.

Law firm Piper Alderman raises the issue of how contractors are legally exposed or protected when supply chains are interrupted by global crises. It recommends contractors consider the following in relation to events like COVID-19:

·         Do I rely on key/significant imported plant equipment or materials in order to meet hard date contractual obligations?

·         Is my supply chain for that equipment particularly exposed to force majeure events?

·         Do my suppliers have the benefit of force majeure relief?

·         Does my contract provide me with relief for this type of event and does it limit that relief to events at site only or through the supply chain?

·         Is there a gap between the relief to which I am entitled and the relief to which my suppliers are entitled?

Although commercial carpenters and other building contractors are not solely responsible for procurement – and in some cases not responsible at all – that role may become more proactive.

As habitual sources of overseas building products dry up, having a savvy contractor who knows how to source local products could keep a project moving that would otherwise be stalled due to a lack of overseas supplies.