Investigation of dispute factors and effects on construction projects arising from Covid-19 pandemic as a force majeure event

Abstract

Investigation of the dispute factors and their effects on construction projects that are arising from Covid-19  Determination of the relations between the dispute factors and their effects using Structural Equation Modeling (SEM) method  Identification of approaches that should be applied to reduce the effects of the disputes arising from Covid-19 in construction projectsFigure A. Results of Structural Equation Modeling AnalysisPurpose: The purpose of this study is to investigate the effects of Covid-19 on the construction projects in terms of contractual relations between the parties of construction projects.Theory and Methods: Within the scope of this study, data was collected from a total number of 173 construction projects that were carried out by Turkish construction companies. Then, collected data was analyzed by using Structural Equation Modeling (SEM) method to determinate the relations between the dispute factors and their effects that are arising from Covid-19 as a force majeure factor.Results: Results of the SEM analysis show that "dispute factors arising from contract and claims" affect "project-based dispute factors" whereas "project-based dispute factors" affect "dispute factors arising from financial factors". Key dispute factors to be cognizant of are "progress payments", "failure in claim notifications of contractors within the relevant period following the occurrence of pandemic in written form" and "failure in implementing quality monitoring and control processes due to lack of personnel" with the highest factor loadings in their clusters. Among the effects of dispute factors arising from Covid-19, impact on project duration (time extension) has emerged as the most prominent effect in comparison with cost overruns, termination and suspension of work, and appeal to court/arbitration. Conclusion:Despite the unforeseen nature of the Covid-19 pandemic, contractors could still be contractually responsible for delays or cost overruns on their current projects in the long term. It is expected that both contractors and owners will be carefully reviewing contracts to identify where contractual rights and duties exist under the conditions caused by the virus' spread. It is recommended that parties review their contracts and take specific note of any force majeure provisions that prevent possible disputes arising from Covid-19. In this context, the results of the study are important in terms of revealing how construction companies are affected in the short term due to Covid-19, as well as in terms of revealing measures that should be considered by construction companies in order to reduce the effects of possible dispute factors that may arise from Covid-19 in their future contracts.

Impacts of COVID-19 on construction project management: a life cycle perspective

“…It has also created various uncertainties in the management of contracts for construction projects (Kabiru and Yahaya, 2020;Rospigliosi et al, 2020;Sierra, 2021). Aladag et al (2021) stated that COVID-19 would cause the project cost to explode and made it impossible to perform the tasks stipulated in the previous contract. Hansen (2020) attempted to explore the possibility of COVID-19 as a force majeure event for construction contracts.…”

“…After all, the boundary between force majeure, impossible, difficult and impractical contracts were still very delicate at present. Aladag et al (2021) suggested that both contractors and owners should carefully review their contracts to avoid disputes related to COVID-19, especially the provisions on force majeure. Construction companies should not only focus on short-term impacts but also take long-term considerations to reduce possible disputes related to COVID-19.…”

“…After the outbreak of COVID-19, many scholars have carried out considerable discussions on whether COVID-19 can be explained by force majeure clauses in contracts, indicating that the relevant provisions for sudden infectious diseases (e.g. are not clear in law (Aladag et al, 2021;Manurung and Heliany, 2020). In addition, the COVID-19 outbreak requires construction practitioners to re-examine their planning strategies.…”

The impact of COVID-19 on construction labor productivity: the case of Turkey

“…Spending less time on-site can lead employees to feel that their role is marginalized within the company (Pearson, 2021). Therefore, project efficiency can decline due to changes in working hours and quarantine measures (Aladağ et al. , 2021).…”

“…(2021), 44.8% of respondents in West Sumatra Province, Indonesia noted that the labor distribution was worse during the pandemic period compared to normal conditions. Employers have also encountered difficulties in getting their monthly payments (Aladağ et al. , 2021), as most of the projects have slowed down or ceased.…”