Impact of COVID-19 on project performance in the UAE construction industry

Project schedule.

This category comprised three questions on the impacts of COVID-19-related policies on construction schedules. The questions also attempted to collect information on how the construction industry responded to these impacts and to what extent ongoing construction projects were delayed. These questions also attempted to identify the measures and strategies adopted to minimize the effect of these impacts. Furthermore, planning strategies for future projects or early execution phases were investigated.

Project cost.

This category also comprised three questions aimed at ascertaining the true extent to which project cash flows were affected by the pandemic and related policies. This category aimed to determine the disruption in clients’ progress payments to contractors, sub-contractors, material suppliers and vendors. Almost every business around the globe opted for cost-cutting or cost optimization during the pandemic. This study also attempted to investigate the impact on employee salaries. Also discussed were the policies of banks and other lending agencies and how they affected the UAE construction industry.

Project resources.

This category focused on the availability of key resources, such as manpower, materials and equipment, during the pandemic and its effect on project performance. It also focused on alternate solutions adopted to keep projects on track and how different stakeholders worked out strategies to manage this unique situation. Finally, this category addressed how projects were being managed during the pandemic without the required resources.

Contracts.

The most important aspect of managing the pandemic was the “contract.” This category investigated how current contract clauses were handled during the pandemic and gauged the effectiveness of current contracts with respect to the pandemic. This category attempted to identify the changes made to existing contracts related to project deadlines, extensions, cost compensations, specification modifications and liquidated damages. Furthermore, it investigated the “force majeure” clause in contracts and its effectiveness in addressing issues that arose because of the COVID-19 pandemic. Finally, this category inquired about contractual modifications suggested by international contract institutes, such as the International Federation of Consulting Engineers (FIDIC), or changes in local laws by the UAE government.

Working with standard operating procedures.

This category of questions examined the effects of precautionary measures and novel SOPs introduced by the authorities to curb the spread of COVID-19. It also focused on identifying how working with SOPs was different and their influence on project performance. This category also attempted to identify the set of SOPs announced for the UAE construction industry and whether the construction industry required new safety training and equipment to ensure the effective implementation of the SOPs. It also investigated how social distancing was ensured and the extent to which construction workers followed precautionary measures. Finally, this section inquired about the procedures for addressing individuals with COVID-19 symptoms and ensuring the well-being of all workers on a site.

Normalization, future directions and pandemic-proof policies.

This category inquired about the construction industry’s expectations of the potential normalization of the current situation and its view about the new normal for future construction projects. It also investigated the industry’s preparedness for planned construction projects and the most anticipated second wave of the COVID-19 pandemic. Finally, this category investigated how the lesson learned from this pandemic could be used to better prepare for such situations in the future.

Summary of results.

All respondents agreed that the COVID-19 pandemic and the policies announced by the authorities to curb its spread affected the overall performance of construction project schedules. Initially, the rapid spread of the virus halted operations at all construction sites across the country. Soon after, the authorities permitted the construction industry to remain operational, and workers were allowed to travel to and from the worksite after obtaining special permits. This disruption delayed projects and completion dates were renegotiated to accommodate the impacts of the pandemic. Since that time, various techniques were adopted to put the projects back on track by using all available resources. As a result, the relaxation announced by the authorities for the construction industry and the positive attitude of all stakeholders toward resolving the current situation helped the overall industry toward normalization.

All participants indicated that the efficient performance of the construction project schedule depends on many factors, such as the workforce, materials, equipment availability and a suitable work environment. As COVID-19 began spreading in the UAE, the concerned authorities implemented a strict lockdown to stop the spread of the deadly virus, resulting in international border closures, air travel bans, inter-emirate travel bans and industry shutdowns. These conditions forced an operational disruption across the construction supply chain. Most of the materials used in construction projects in the UAE are imported from other countries. However, the pandemic disrupted economies all around the globe, which adversely affected the execution of the projects. Similarly, local suppliers and vendors suffered the same fate, as their operations were also affected by positive COVID-19 cases in their organizations. This supply chain disruption affected the overall performance of the projects, thereby delaying most construction projects across the UAE (Ghandour, 2020).

Contractors were the first to formally notify clients, consultants and other stakeholders about the prevailing situation and possible delays. At the time the pandemic started, the current stage of the project was a major factor when implementing a revised schedule’s baseline and agreeing on a new completion date. Participants identified three strategies to address the new completion dates. First, projects in the initial execution stage were inclined to submit a revised schedule baseline by transferring the impact of COVID-19 to the end of the project’s lifecycle. Second, partially completed and nearly completed projects applied for an extension of time (EoT) to accommodate the delays caused by the pandemic, without modifying the existing schedule’s baseline. Participant P6 stated that, earlier, their project was supposed to be completed by March 2021. After submitting the EoT and obtaining approval, their revised completion date moved forward to October 2021. Finally, completed projects were given the flexibility or an extension to conduct the necessary testing, commissioning and handing over to the end-user.

Participants identified and discussed four major categories to reduce the pandemic’s impact and complete projects: manpower, material, equipment and finances, as identified by Alsharef et al. (2021). First, as soon as the pandemic hit, authorities in the UAE encouraged a “work from home” policy, and all organizations across the country followed it to minimize the spread of the virus among their employees. Participant P4 stated,

All our meetings and interactions were shifted to online platforms and we were using Microsoft Teams. Our Information Technology (IT) department did a great job and enabled us to perform our duties from the comfort of our homes during these difficult times.

Some organizations followed a 15-day rotation period by dividing their teams in half and asking half the team to go to the office for 15 days and then switch with the other half. Some organizations asked their office staff to go to the office for a short period, attend short meetings, collect their tasks and return home to work remotely for the rest of the time. Similarly, on-site labor accommodations, special travel arrangements and limited work-site attendance with multiple shifts allowed continuous execution of works during this pandemic, as identified by participant P5. Second, to address the shortage of materials imported from abroad, all stakeholders discussed using alternate materials that were readily available in the country, most of which were approved by allowing design changes. Rates were modified accordingly. Participant P1 stated,

Earlier, we wanted better Granite finishes, which were being imported from Italy and took usually 3 months to be delivered. Now, to reduce the delays, we are agreeing to modify the design and adapt to readily available solutions, like marble or ceramic finishes.

Third, participants noted that most of the machinery and equipment used in the UAE construction industry came from China and Europe. Contracting firms were officially notified of this problem. After a series of meetings with consultants, on a case-by-case basis, already available equipment was allowed to be used. Finally, all participants mentioned that additional funds were assigned specifically to address the pandemic situation and steer projects away from the adverse impacts of COVID-19. All these discussed measures were implemented with variations, and they helped reduce anticipated delays.

As per industry reports and internal studies, the UAE construction industry predicted another wave of the COVID-19 pandemic. Participant P1 stated,

When the industry mentioned the second wave, the analytics were not talking about another spread of the virus; rather, they were referring towards the cash flow and contractual shocks that could result from this pandemic.

The organizations considered various factors while planning their future projects. For example, the earlier assumed time duration for slab-to-slab activity was 21 days; currently, most developers consider more realistic durations, such as 30–45 days, to accommodate adverse impacts and avoid legal consequences. The participants emphasized the fact that all lessons learned from this pandemic should be considered when planning future projects, including regarding human resource reserves, alternate materials and equipment arrangements, flexible construction schedules and financial margins to absorb the impacts of similar situations. All these factors should be investigated during the planning phase and must be included in the risk identification and assessment process to ensure that the respective mitigation plans have the provisions and capacity to address such events in the future (Casady and Baxter, 2020).

Summary of results.

The economic decline owing to the COVID-19 pandemic adversely affected the supply chain and posed serious cash flow implications that cannot be underestimated. Banks and other lending agencies stopped payments to carry out various risk assessments and implement risk mitigation strategies; thus, owners delayed payments to main contractors, which had a drastic domino effect on associated businesses. Everyone understood the scale of the pandemic and accepted the reality. Instead of harsh notices and legal actions, all parties showed flexibility and adapted to the situation to a reasonable extent. All the participants indicated that the cash flow impacts were significant but manageable.

This question garnered three different responses categorized as follows:

1. timely payments;

2. partial timely payments; and

3. delayed payments.

Participants identified that government agencies handled the pandemic well, as most government projects had approved budgets for the fiscal year 2020. Given the availability of the budgets, all payments were made on a timely basis to all contractors, subcontractors, suppliers, vendors and employees alike. Payments from government agencies were also delayed, not because of a lack of funds but because of the disruption caused to normal operations when everyone stopped going to work and finance teams faced difficulties in getting the approved invoices from consultants and contractors, preparing payments and obtaining the required signatures within the stipulated time. In other development and infrastructure projects, payments were delayed from main contractors to sub-contractors, vendors and suppliers, because most such payments were linked to pre-set milestones and deliveries of various items that were not realized because of the restrictions imposed for the pandemic. For imports, payments were linked to letters of credit (LCs), and LC conditions were not being met because of COVID-19 disruptions; thus, payments were stopped. In this scenario, most firms paid full salaries to their employees (Khalfan and Ismail, 2021). Finally, all the participants indicated that real-estate developments were adversely affected, because most end-users stopped receiving payments from banks and lending agencies and even their salaries. Thus, payments were stopped from developers to main contractors, which disrupted the overall supply chain and resulted in downsizing and salary cuts. All stakeholders understood the situation and negotiated various strategies to curb the impacts of the pandemic and address the delayed payments.

The estimation of cost overruns required detailed analysis and assessment of the situation by identifying the key factors and their respective effects on every activity present in the work breakdown structure. All participants indicated that clients were notified about potential risks and associated delays; additionally, they were told that detailed risk quantification would be subsequently submitted. Different strategies were proposed and implemented by stakeholders to address the cost overruns and reduce their impact on the overall cost of the project. Participant P6 mentioned that they implemented an innovative method in the organization and asked their sub-contractors, vendors and suppliers if they wanted quick payments without achieving pre-set milestones; if so, they should announce discounts. In that way, the associated stakeholders received the required payments to effectively conduct their operations and survive the pandemic, and the main contractor saved funds to cover the additional costs incurred to curb the impacts of COVID-19. Some suppliers and vendors agreed to the offer, but others rejected it. Participant P6 stated that their organization successfully convinced the clients and modified their contract type from lump-sum to cost plus a fixed fee. Additionally, all the participants identified factors that could accommodate cost overruns. For example, given the downsizing, labor availability increased and, as a result, the cost of labor dropped, which to some extent addressed labor shortages during critical times. Additionally, given the uncertainty, many organizations increased their risk appetite and reduced their profit margins to secure jobs and strengthen their positions during the pandemic. All of these identified strategies and methods significantly reduced the impact of COVID-19 on project cost overruns.

All of the participants highlighted the fact that as the pandemic hit the UAE, banks and other lending agencies halted payment issuances. In the early months of the pandemic, banks reevaluated their risk management strategies and implemented more regulations for funding construction projects. “At the time, it was difficult to even secure performance guarantees from the banks,” participant P6 stated. To ease financial troubles and support economic activities throughout the country, the Central Bank of the UAE (CBUAE) announced the Targeted Economic Support Scheme (TESS), which encouraged almost all banks to come forward and join the relief efforts (CBUAE, 2020). TESS pumped in approximately AED100bn, which was subsequently increased to AED256bn, to support private sector companies and other private customers. Multiple relief measures were introduced to support the UAE construction industry, such as a liquidity relief fund of AED50bn through local banks to support eligible customers. These customers were not required to pay the banks any principal amounts or make interest payments for the agreed deferment period. The account opening duration was set to two days, and minimum payment requirements were scrapped temporarily. This supported the UAE construction industry and helped it revive its former glory.

Summary of results.

The COVID-19 pandemic affected all aspects of construction projects and disrupted resource availability and management the most severely (Jallow, 2020). The UAE construction industry was highly reliant on human resources, materials and equipment being imported from all over the world. Therefore, strict lockdowns, travel bans and other stringent measures to curtail the disasters resulting from the pandemic adversely impacted resource availability and the management aspect of almost all construction projects across the country. Various relaxation measures from the authorities, the positive attitude of all stakeholders, different design modifications and the acceptance of using available resources helped relatively reduce the overall impact and absorbed the delays.

This question garnered various responses that can be grouped into three major categories: a) availability of labor (human resource), b) availability of materials and c) availability of equipment. Most staff in the UAE is hired primarily from Asian countries. Some of these employees were out of the country on vacation and for other official purposes when the pandemic struck. Given the suspension of visa issuances and international travel bans to contain the COVID-19 spread, people could not return to the UAE and continue their jobs. Many labor camps in the country were also severely affected, and most workers were in quarantine. Similarly, most of the materials and equipment were being imported from the Far East, Europe and the USA, where production facilities and international flights were affected, as stated by Baldwin and Mauro (2020). Many subcontractors, vendors and suppliers were unable to continue offering their services because of the identified issues and, as a result, execution of most projects across the country was delayed.

All participants identified that the UAE authorities had modified regulations and allowed contractors to set up on-site labor accommodation facilities instead of a designated labor camp. This measure reduced the need for special care to practice social distancing measures and arrange for special transportation, also suggested by Ahani and Nilashi (2020). As a result, labor and staff were less prone to the risk of contracting the virus. Additionally, relaxations announced by the authorities for inter-emirate travel eased the pressure, as many workers traveled from Abu Dhabi to Dubai in response to the market demand. Participant P1 stated that their organization had modified its policy of hiring sub-contractors. They had defined the “availability of labor” as high risk and prepared their mitigation plan accordingly. While hiring, they specifically searched for readily available labor and made deals with those who did not require new hiring. Long lists of terminations from human resource departments across the country also absorbed the disruption in the supply and demand to some extent. Moreover, various design modifications were made to accommodate the supply chain disruptions and reduce delays. Participant P2 stated that their organization previously required all electrical fixtures to be imported from various European countries. To reduce delays in projects, they relaxed this requirement and allowed the use of locally made or locally available fixtures after receiving the end-users mutual consent. All the participants noted similar solutions to equipment unavailability.

Summary of results.

All participants indicated that current contracts did not have clauses that effectively addressed the pandemic situation, and the impacts of COVID-19 made project execution “burdensome.” Force majeure clauses were introduced by most execution parties, and special amendments were suggested and implemented to address the situation. Local authorities also introduced a series of amendments to the law, relaxations and subsidies to support stakeholders. Participants suggested that all stakeholders should conduct detailed studies on the current situation and consider such pandemics and other COVID-19-related events in their future scope of work and contracts.

To analyze the utility of contract clauses, a participant indicated that in the UAE, under normal circumstances, the construction industry is generally driven by FIDIC contracts. In these contracts, some clauses outline methods and guidelines to deal with the situation, such as Clause 8 Sub-clauses 8.4 and 8.7 and Clause 19 Sub-clauses 19.1 and 19.4. However, these clauses failed to efficiently address the pandemic situation because such impacts had not previously occurred and were unanticipated. Participant P1 indicated that the force majeure clause was most relevant, and many parties added this clause to early notices to clients and consultants, as identified by Casady and Baxter (2020). However, this pandemic caused operational disruptions all across the globe and not merely for one project or locality; thus, prevailing contract clauses failed to address the impacts.

All participants indicated the positive attitude of all stakeholders. Participant P6 stated, “We have incorporated the COVID-19 pandemic into the existing force majeure clause so that these situations won’t affect our projects in the future.” Many amendments were made to existing contracts to accommodate the agreed-on revised completion dates, payment methods, project delivery methods, requirements for a specific number of skilled people, liquidated damages, material and equipment specifications, authority approvals and inspection methods. For example, participant P1 pointed out that they previously had a requirement of six quality assurance and quality control engineers in the contract. Subsequently, this number was reduced to three because of social distancing measures and the non-availability of skilled workers. Similarly, some organizations modified their contract type from lump-sum to cost plus a fixed fee. Some organizations also announced incentives related to liquidated damages and reductions in fines if contracting firms finished projects within the stipulated timeframe. The positive attitude and friendly amendments to the prevailing contracts proved fruitful in steering the construction industry out of the dire situation caused by the pandemic.

In response to inquiries about the guidelines issued by international contract institutes and local authorities, all the participants agreed that both the international and local authorities took prompt actions to address the situation and channelized the construction industry in a better direction. One of the participants, who was an expert in contracts, mentioned that the FIDIC released a memorandum that discussed various scenarios and suggested possible solutions to address the pandemic (FIDIC Guidance Memorandum, 2020). Even though the contracts were driven by FIDIC guidelines, the local laws of the land prevailed in dealing with the COVID-19 pandemic, and all participants identified the importance of the civil law of the UAE. Local authorities introduced many guidelines to protect and safeguard this vital industry and the people associated with it. Even during the lockdown, the construction industry was exempted from the restrictions issued by local authorities. The Dubai Development Authority introduced various measures to support construction activities in the emirate, including the creation of digital platforms for a variety of permits, processes, approvals, licensing and attestations. They also introduced various relaxations in the payment of dues and fees to government authorities and extended building permits, fit-out permits, temporary construction permits and other related permissions for the three months. To observe social distancing measures and continue construction activities, virtual inspections of construction sites were introduced that allowed inspectors to inspect work sites at the various stages of construction using Microsoft Teams and Zoom. The Ministry of Human Resource and Emiratisation (MoHRE) permitted on-site construction labor accommodations and facilities to keep workers safe. The Government of Abu Dhabi also introduced 16 dynamic initiatives under the country’s economic stimulus package that waived off the requirement to submit bid bonds and performance guarantees for start-ups. Various subsidies were also given, and penalties were waived. The participants stated that all these changes in local laws, whether at the federal or individual emirate level, prompted stakeholders to issue change-of-law notices to each other and ask for relevant concessions and amendments in prevailing contracts.

Summary of results.

The COVID-19 pandemic disrupted normal operations across all industries, and people feared contracting the virus. All international and local authorities announced various SOPs to contain the virus. The MoHRE issued a ministerial decision on precautionary measures, which described key SOPs to be followed in different work environments. The construction industry quickly followed the instructions by investing in the required personal protective equipment and other necessary items to measure, monitor and control the spread of the virus. All the participants reported that all the measures were implemented at all worksites and offices, as per local authorities’ directions. Initially, these measures affected overall work performance, and other delays occurred, because the management and workers were still getting used to the changes. Subsequently, everyone adjusted to these SOPs, and progress became normal. Enforcement of the new SOPs to curtail the spread of COVID-19 proved effective and allowed the construction industry to continue operating during the pandemic.

In response to the identification of the key SOPs issued by the authorities for the UAE construction industry, all the participants grouped their responses into the following two categories:

1. employer’s obligations; and

2. employee’s obligations.

The authorities instructed immediate reduction in the number of employees to 30% in a workspace to ensure the required social distancing. All employers were asked to modify their labor accommodations to ensure safe living conditions by providing various checkpoints at all entrances and exits, avoiding all gatherings and social events, maintaining only 25% occupancy on all worker transports, and reporting all cases of potential symptoms to the concerned authorities. All employers were asked to implement a remote working system and provide necessary electronic support to enable all workers to efficiently conduct their duties. Participant P4 stated that the authorities also instructed employers to approve the remote working systems for workers over 50 years of age, people of determination, workers suffering from respiratory or chronic diseases and women with children. Similarly, these guidelines instructed employees to obtain approval for a remote working system, visit their workplaces when required, perform all assigned duties within the stipulated timeframe, answer all calls and emails to ensure smooth execution and observe the productivity and confidentiality guidelines set by their employer. All participants mentioned that these SOPs initially slowed down workers’ overall performance and, as a result, construction project performance (Stiles et al., 2021). Once organizations implemented the required systems and workers became accustomed to the new normal, project performance improved and overall positive feedback was received.

When focusing on investigating how the construction industry ensured the successful implementation of the precautionary measures announced by the local authorities, the respondents identified several organizational measures to achieve the stated target. Participant P6 stated that their organization announced a separate budget to purchase masks, gloves, sanitizers, thermometers, thermal scanning equipment, walkthrough sanitization gates and handheld spraying equipment, also identified by Amoah and Simpeh (2020). Participant P3 identified that their organization made special transportation arrangements and built special on-site worker accommodations following the introduced social distancing measures. Also identified was that strategies were implemented to ensure on-site social distancing, such as dividing workers into smaller groups and tasking them to work at various distanced places where possible, rather than deploying a large number of workers to one place. Different timings for breaks were announced to prevent large gatherings at lifts, entrances and exits, dining halls and other facilities. Emails, awareness banners, circulars and instructions were continuously shared among the management and workers. Training on safety measures was conducted. Furthermore, various monitoring teams were assigned the task of monitoring offices and worksites to ensure that precautionary measures were being followed. Participant P1 explained the budgetary requirements to arrange all necessary items, tools and equipment to ensure a safe working environment. This respondent said,

Earlier, everybody was working with full capacity, and contracts required a certain number of staff members and workers on-site as well. Now, contracting firms are working with reduced staff, and they are diverting their surplus operational budget to purchase the required items.

The participant also indicated that organizations arranged special quarantine facilities to keep workers for a certain period before allowing them to go back to work. The company immediately referred their suspected cases to the designated government COVID-19 health centers. All identified measures taken by the construction industry to ensure a safe working environment for workers and staff proved effective and helped the industry thrive in these difficult times.

Summary of results.

The exemptions and relaxations specifically for the construction industry, economic support programs and precautionary measures introduced by local authorities enabled the construction industry to recover from the disruptions caused by the COVID-19 pandemic. Everyone quickly accepted the situation and adapted their behavior accordingly. Most participants stated that the construction industry has almost recovered and is expected to re-achieve its full potential within the next three-six months. The participants suggested that the lessons learned should be carefully recorded and considered when preparing risk assessment and mitigation plans, contingency plans, formal agreements, supply orders and contracts for future projects.

All participants responded optimistically to the inquiry about the normalization of the current situation. Participant P4 stated that, although there were struggles, some organizations were halfway to normalization. Furthermore, participants P1 and P2 mentioned that many contracting companies had achieved a new normal and were working at their full potential. Participant P2 even stated that their excellent planning and integration of technology-enabled their organization to complete one iconic project ahead of schedule during the pandemic. Therefore, the UAE construction industry expected normalization soon, and their optimism pointed toward the fact that normalization was near.

The participants also mentioned that accepting the pandemic situation was vital. Organizations that realized this fact early on were among those that handled the pandemic situation most efficiently and hence survived. Participant P1 stated,

The best move to tackle the situation is to accept the reality and form a normal relationship with this pandemic, because sooner or later, people will have to adjust their lives according to the situation at hand.

The participants pointed out that many organizations modified their operating procedures according to the requirements and regulations imposed by the authorities to survive the pandemic situation, such as a sudden digital transformation. In a nutshell, the respondents emphasized that flexibility in accepting the current situation and molding their behavior as per the needs of the situation are expected to be the key success factors for the construction industry in the foreseeable future.

Economies worldwide took a hard hit because of the disruptions caused by the COVID-19 pandemic. The construction industry depends heavily on government agency expenditures on different infrastructure projects. The disruptions caused by the pandemic forced governments worldwide to spend heavily on containing it and support their economies through a variety of economic stimulus packages. As a result, the construction industry slowed down, as did other industries. The participants indicated a significant decline in the number of tenders being floated by agencies. Participant P1 stated that because opportunities are scarce, contracting organizations should remain focused and rearrange their resources. However, all participants were optimistic and indicated that the government had announced various infrastructure packages that would be directed to local businesses. While recommending policies that could be adopted to minimize the impacts of such future pandemics, participant P10 identified that their organization prepared in advance its resources for the next six-eight months. Participant P6 indicated that this pandemic situation should be included as an employer risk in all future contracts, and special cost contingencies must be assigned for similar situations. All the participants agreed that lessons learned should be properly examined and considered when planning and formulating future contracts.

As per the input provided by the participants, Figure 2 displays the timeline that represents the stages of COVID-19 in the UAE and the occurrence of the events scheduled from January 1, 2020, to December 31, 2020. The timeline is divided into three significant periods: a) pre-COVID-19, b) peak COVID-19 and c) recovery. In the pre-COVID-19 period, the construction industry performed normally and targets were being met as per expectations. The peak-COVID-19 period started with the WHO declaring COVID-19 a pandemic. Local authorities promptly responded to the situation at hand and announced various economic stimulus packages to support the industry during these difficult times (Ghandour, 2020). After the completion of the national sanitization drive and partial resumption of international flights, the UAE construction industry entered a recovery period, as shown in the timeline.