Partner Jamie Frankel discussed risk management issues related to the construction and design industries in the post-COVID era. Jamie suggested that the COVID pandemic is causing a disintermediation that will be different that those experienced during prior recessions.
“Risk as we knew it pre-COVID has been redefined by the unknown,” he said. “Black Monday and the tragedy of 9/11 are only relative benchmarks to the risk we’re now experiencing. COVID has disintermediated relationships, norms, expectations, and many of the historic definitions of risk.”
On ensuring future supply chain continuity, Jamie said, “The contract clauses that guided our performance are now moving into a phase of uncertainty. Price and supply certainty are now open to new supply and demand forces that haven’t been experienced by today’s project managers, professionals, and owners in the private or government sectors.”
Jamie outlined three way that designers, builders, and owners can manage their risk.
“There has to be a continuity of relationships. Every major contract in the chain of design and construction needs to be maintained throughout this indeterminate period of COVID,” he said.
“Subcontractors and critical material suppliers will need to provide assurances of ability to perform. (‘Trust but verify’). Financial resources and contracts for material supply will need to be audited. Supply of labor and back up labor sources will need to be audited if quarantines are imposed due to failed testing for the virus.”
He added, “Set up an ‘auditing protocol’ to examine domestic and international suppliers and their labor sources. That audit should be updated every two week and needs to include financial resources.”
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