BINUS University and the UK’s Institution of Civil Engineers (Jakarta Local Association) have enjoyed a special relationship spanning more than a decade. In this short article, Mr. Matius Marcelino, a civil engineering student at BINUS, explains some of impacts of Covid19 on the Indonesian construction industry…
Civil engineering development planning and implementation of major infrastructure projects during the current Covid-19 pandemic is a major challenge for all countries in the world. Until now, no patented drug has been developed which can ameliorate Covid-19 adequately and allow a ‘new normal’ life to emerge following the Covid-19 crisis. Transitioning towards a new normal has impacted the construction industry here in Indonesia, as the industry tries to work through the constraints of protecting its workers, while the government distributes vaccinations in the hope of achieving herd immunity at some unspecified time in the future. Combined with this has been the enforced Covid-19 protocols which have evolved in an ad hoc way, and continue to do so worldwide, leaving us with a global imbalance in supply and lower productivity. These factors have created uncertainty and risk which discourages investors.
The Indonesian government had planned for more than US$400 billion investments in infrastructure between 2019 and 2024 with 35% coming from the private sector, but of course this will now change. The focus of short-term plans has largely shifted to tackling Covid-19 while a number of planned infrastructure work programmes in the water, drainage, housing and highways sectors with combined capital value of around IDR200 trillion, (US$14billion), have been adversely affected. The government is reportedly pursuing additional financing of around Rp27 billion, (US$2 billion), this year, using sharia-compliant ‘sukuk’ bonds.
Covid-19 led to sudden and disruptive changes to contract policies, (including occupational safety and health requirements), and supply chains (including the availability and delivery of materials), resulting in lower productivity levels, reduced efficiency and delays. As the world grapples with recovery from the pandemic, the construction industry is faced with developing roadmaps to mitigate the adverse impacts. Some areas requiring attention are briefly outlined below:
- Contract Review
Review and/or define new contract clauses to try to capture the evolving risks of the pandemic. In some cases relief allowance from contract penalties will need to be considered so that contractors are protected from unforeseen events and controls associated with the evolving restrictions and protocols. The implementation of construction starts with a mutual Agreement between the parties. The Agreement is a contract of employment. However, the COVID-19 pandemic has fueled speculation that the employment agreement may be voided due to force majeure or require re-negotiation in some cases.
- Assess Project Procurement Impacts and Forecasts
The cost, planning, resources and logistics are all affected by the pandemic. In general what we have seen so far is that projects are either postponed, reduced in scale or are taking much longer to procure. These early signs of impact will need to be taken into account going forwards with forecasts adjusted accordingly.
- Update Risk Registers
As the effects will have a significant impact on the continuation of projects, preventative steps must be taken. Risk registers should be active documents throughout the life of any project so these form the ideal platform to frame the risks and open communications. The owner and the contractor need to recognise the dangers that might arise. The contractor may need to negotiate time extensions and/or cost increases to avoid the usual contract penalties, but these must be carried out in good faith.
- Devise and Execute Revised Plans
Directing and coordinating work by incorporating improvements that have been negotiated with the project owner/ employer in order to meet agreed deadlines in a timely manner. In a pandemic like this, where the price of goods can increase, there is also a need for price negotiations. The owner, contractor and others involved need to coordinate on solving problems equitably and reasonably.
- Communicate Plans
Communication across all levels is the key. Parties to the contract need to be able to have open and honest dialogue about how each is being impacted. A give-and-take balance will be needed; employers will need to be sympathetic to the disrupting effects, and contractors will need to use their ingenuity and innovation to minimise delay and cost. This will help the project run smoothly and efficiently. In situations like this, where face-to-face meetings cannot be conducted, or are restricted, the most effective way to conduct a meeting is to use tools such as Zoom. We have all become much better at using these audio-video-presentation tools where we are still able to present or explain a problem in detail.
References
CNN. (2020). Proyek Infrastruktur Senilai Rp7,83 T Tertunda Akibat Corona. CNN Indonesia.
Critelli, J., Jbara, K., & Sahota, R. (2020). Impact of COVID-19 on Construction Projects.
Muhyiddin. (2020). Covid-19, New Normal dan Perencanaan Pembangunan di Indonesia.
Rokom. (2021). Menkes: Vaksinasi Tembus 10 Juta Dosis, Indonesia Masuk dalam 4 Negara Besar di Dunia. Sehat Negeriku.
Adrian Wail Akhlas. (2021). Indonesia plans $2b sukuk issue to fund infrastructure projects – Business – The Jakarta Post https://www.thejakartapost.com/news/2021/01/21/indonesia-plans-2b-sukuk-issue-to-fund-infrastructure-projects.html
