Perspectives
15 April 2021
The COVID-19 pandemic has been the dominant feature of the past 12 months, and its effect on the world's infrastructure construction sector has been to refine the way it develops and delivers large scale projects. In the process, it has encouraged new work practices, forged new collaborations between developers and government and created new business models.
"COVID-19 has brought unforeseen challenges to the infrastructure construction sector, forcing it to adopt new work practices while rewriting risk," says Adam Nancarrow, Managing Director at Macquarie Capital.
"However, the sector continues to forge ahead and many of the changes have already made it stronger and more resilient."
"When you’re operating 58 sites across 18 different countries, you need to be across a lot of detail and to be able to respond to it flexibly."
Adam Nancarrow
Managing Director, Macquarie Capital
As with many sectors, infrastructure projects have incurred some unexpected costs as builders and developers navigate construction of their projects through the pandemic. However, through broad government support, strong partnerships with suppliers and by adopting new work practices most projects continue to perform as expected while incurring limited cost or time overruns.
Nancarrow says where costs have been incurred, they often come in two forms. The first are those associated with simply continuing to carry out work in a pandemic-affected world - such as enforcing social distancing, increasing hygiene and taking other measures to curtail the virus's spread.
"We have never really had to consider social distancing on our projects before. Fortunately, most of our sites have vast quantities of space that allow for continued working at a distance; for any sites that have less space, we've adopted different shift patterns. One limiting factor has been in common and meeting areas, which we've addressed by offsetting breaks and through staff training."
The second and potentially greater - though rarer type of costs are those incurred when sites have been closed through government directives. Most governments around the world deemed construction sites as critical and directed construction to continue whilst mandating social distancing and providing guidance on improved work practices.
While the majority of Macquarie's development of assets has continued without significant disruption, one area being watched closely is government projects with a forecast imminent start. The RICS Global Construction Monitor showed that in Q2 2020, 25 per cent of new construction projects globally had been put on hold1. In some jurisdictions, this figure was much higher, like Singapore, where 58 per cent of projects were paused.
For Nancarrow one of the biggest challenges has been coming to terms with very different - sometimes conflicting - requirements, even in countries with similar transmission rates.
"When you operate 58 sites across 18 different countries, you need to be across a lot of detail and to be able to respond to it flexibly," Nancarrow says. "Our strong relationships with our builders, operators and our teams on the ground have allowed us to adapt quickly."
When it became apparent just how diverse the world's response to COVID-19 would be, Nancarrow said his team reviewed each of its sites to determine how to limit their potential exposure and keep each project moving.
In the United States, where the construction sector faced a smaller but potentially more protracted drop in productivity than many jurisdictions according to the RICS survey, this meant introducing new work practices, as well as finding a more prominent role for technology.
"We've incorporated a variety of new practices to respond to COVID-19 impacts and review the control measures on our sites," says Cecile Fleckten, Global Head of Workplace Health, Safety, Environment, and Social (WHSE) and Managing Director at Macquarie Capital.
"In some cases, we've used drones and conducted site inspections virtually. This has allowed us to maintain a level of visual observations and engagement, in addition to reviewing documents and doing our regular check-ins and reporting."
"By aggregating and analysing data collected across our global portfolio, we can identify trends and anticipate issues during certain phases of our projects. It also gives us a basis for forecasting and potentially avoiding incidents at our other assets by prompting more active engagement across teams and amongst our partners."
Fleckten says that Macquarie has incorporated new COVID-19 prevention practices onsite and that these are continuing to evolve as the pandemic lingers. "At a basic level, our contractors have carried out regular temperature checks and increased distance between workers. More creative measures include the use of 'COVID-19 monitors' to constantly check sites and ensure that coronavirus-related protocols are being followed."
"This has allowed us to receive frequent updates and collaborate on new practices we've gleaned from other assets," she says. "It's meant we've also been hyper vigilant on performing regular COVID check-in calls with high-risk construction assets, which have continued to operate through the pandemic."
"By aggregating and analysing data collected across our global portfolio, we can identify trends and anticipate issues during certain phases of our projects. It also gives us a basis for forecasting and potentially avoiding incidents at our other assets by prompting more active engagement across teams and amongst our partners."
Cecile Fleckten
Managing Director, Global Head WHSE
Adam Nancarrow says that ultimately, all companies will need to remain agile and adapt to both the current state of affairs and whatever lies ahead in the near future.
Nancarrow believes a silver lining of the pandemic is the rapid adoption of new technology practices, especially around the use of data and technology. In many cases the pandemic has forced the rethinking of legacy work practices and resulted in positive outcomes for the sector.
"Changes made as a result of the outbreak are likely to have wide implications for future infrastructure construction projects when it comes to the way contracts are structured and risk is allocated," he explains.
"The future of infrastructure construction definitely favours the nimble. We're likely to see a rationalisation in the space, where those that are vertically integrated, have a strong balance sheet and adapt and change quickly to disruptions and new requirements are likely to come out strongest."
Because of this, Nancarrow says it is possible that more businesses will attempt to follow a similar model - one which includes developing, financing and delivering infrastructure and energy assets using a combination of financial and industry staff.
"That said, it took us over a decade to refine what we do so I don't expect it will change overnight."
Instead, while some of the changes COVID-19 has precipitated in infrastructure and energy construction have been immediate, a more profound coronavirus-inspired transformation of the sector is likely to evolve over many years.
