Suspension of construction projects to ruin small companies

Regional officials decided to suspend construction works, which may hit construction market participants, according to CEO of the Perspektiva construction company Mikhail Ivanov.

“Suspension of any construction process creates substantial financial costs for the construction company. These expenses occur because the quality of unfinished projects lowers due to the disruption of the work cycle, as well as because of prolonged period of construction, idle time for construction equipment and because regular contributions are required to the payroll budget,” Mikhail Ivanov says.

The expert notes that every day of a construction project entails large monetary and labor costs that are worth millions of rubles depending on the scope of the project. In every specific case, the cost of construction is divided into the number of days fixed in a contract plus potential penalties and damages due to deadline changes. There may be additional expenses if the construction works have to be rescheduled to the seasons that are incompatible with the construction technology used in the project.

“This amount of financial burden may be beyond capacity for small companies although large construction companies will be able to withstand the blow, especially with the help from the government,” the CEO states.

According to the expert, the subsequent re-launch of suspended construction projects will take at least a week depending on their specification. In a standstill situation, many facilities may need to be temporarily shut down, which is a rather lengthy process worth 8-10% of the overall construction costs.  

In certain cases, a halt to the construction may lead to non-observance of manufacturing technologies and, subsequently, to reduction in quality; for instance, it is unacceptable to stop such process as concrete pouring.

It’s noteworthy that efforts have been taken to strictly observe all epidemiological requirements in the well-organised construction sector, with companies spending finances to take all necessary measures at construction sites.

Also, temporary shutdown of construction sites poses a social issue as well as a personnel problem. Many construction workers are migrants who arrived from other cities and countries, and depriving them of the opportunity to work means taking away the opportunity to earn their livelihoods.

“Many laborers work together with the project developer on a piece-work basis. In case work is not performed the developer does not receive money either, and workers hired on a piece-work basis are the first who can be put on unpaid leave,” Mikhail Ivanov concludes.

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