Chapter 7: COVID, talent and cross-border complications

Securing the right level of construction and engineering skills and expertise has become more challenging in an age of travel restrictions and quarantine.

Japanese contractors have broken ground on Manila’s first ever subway, with an optimistic completion deadline of 2022. The $6.9 billion project is the responsibility of a consortium of Japanese firms, consisting of Shimizu Corporation, Fujita Corporate, Takenaka Civil Engineering and EEI. It is the latest example of how major infrastructure projects across Asia are involving cross-border cooperation, particularly in countries that lack the expertise.

Vietnam is another example. In July, Siemens Gamesa secured its fifth near-shore wind farm project in the country, with the company forming a consortium with PowerChina Huadong Engineering, a leader in China’s offshore wind power industry, to deliver engineering, procurement and construction expertise.

When planes are grounded

“A major trend in for major engineering and construction in Asia right now are the cross border projects, where Korean, Japanese and Chinese contractors are running projects in other Asian countries,” says Henry Shen, lead construction and engineering underwriter at Swiss Re Corporate Solutions. “There are some unique  risks related to such projects.”

“One risk relates to  transportation and logistics, which could be a significant risk for the contractor or client,” he continues. “Take cement, for example. There are numerous plants in China but in Myanmar there could be no qualified suppliers. Hence, they might have to import cement from Thailand or Vietnam.”

“Another risk related to cross border projects is where local countries do not have enough experience for the project,” he adds. “For example in China, over 100 metro projects have been completed in the past few years and there are many engineers with expertise on the metro lines. However, there are far fewer in other countries.”

The restrictions introduced by the COVID-crisis have exacerbated the situation, making it harder for projects to secure the talent they need.

When it comes to the near-shore wind projects in Vietnam, the ships have kept coming with deliveries of construction materials and equipment. It is the specialist contractors and engineers who are sometimes missing, says Patrice Nigon, head of construction and engineering, APAC, Swiss Re Corporate Solutions.

“The logistics chain is still happening – the boats are sailing and the goods have been transported with a high level of efficiency. But when it comes to people, it has been more complicated. Specialists from London or the Middle East could not access the country. The planes were grounded so it was impossible to enter the country, and that situation has only been relaxed very recently.”

“This results in costs or delays which can delay the process or increase the risk, because you don’t have the best specialists available on site,” he adds.

Lost in translation

Differing legal systems are another hurdle that sometimes needs to be overcome where cross-border projects are concerned. Building codes and standards can also differ considerably from one country to the next. In countries such as Taiwan and Japan, for instance, the building codes are particularly strict with the requirement to use reinforced concrete, deep foundation piles and seismic joints.

“From a contractor point of view, they are moving from one country to another doing the business, so the local employment policies or regulations could be totally different from their home country,” says Shen. “From a building code perspective, it will already have been considered in the design phase but in the construction phase challenges may arise if the contractor is not very experienced with the building codes in a new country.”

Securing the right talent for the construction phase is inevitably more difficult in the current circumstances. “For the underground metro project in Manila, it is hard to tell how many qualified engineers are available in the local country or if there are plans to import some of the engineers from Japan,” says Shen.

“There must be a limitation on the number of engineers they can bring in, especially in the COVID-19 scenario. So that could be a challenge for risk managers – how to balance the quality of the works, the cost and COVID-19 exposure. It’s a new challenge for risk managers.”

The handling and adjustment of complex claims is another area that has been prone to setbacks in 2020. Shen says the inability to access specialist claims and loss adjusters has hindered efforts to understand losses that have happened since the pandemic began. “It delays the whole claims process and that’s not good for any of the parties involved.”

Case study: A tipping point in Australian construction?
Employers on Australian commercial construction projects are finding it difficult to secure top talent due to increased demand, according to recruitment firm Hays.
Simon Bristow, senior regional director of recruitment specialist Hays Construction, said a recent slowdown in the residential sector and growth in infrastructure and commercial projects meant there was an imbalance of supply and demand.
Bristow said the Australian property market was at a “tipping point”. He added: “This shift from residential to infrastructure will naturally impact skills in demand, with candidates with civil infrastructure experience now in high demand and short supply.
“The commercial market is also adding to vacancy activity. So, for employers working on infrastructure and commercial projects, it can be challenging to secure top talent.”
Bristow said different regions of Australia needed specific skills and expertise. “In New South Wales, Site Managers and Supervisors with $150m project experience will remain highly sought after as projects in the commercial, health and transport sectors increase in size across the CBD,” he said.
Bristow added: “Canberra’s construction market remains strong with project managers with large-scale commercial experience, as well as project engineers and contract administrators in high demand.”
“Victoria’s market remains active too, with increased demand for experienced contract administrators, project managers, design managers, engineers and site managers in civil infrastructure and the commercial market.”
Kevin Bates, President of the Risk Management Society for Australian Professionals, says the high volume of construction projects make it difficult for companies to secure the right talent. He cited a supply and demand issue, with a lack of top candidates to high-level roles.
Bates added: “The sheer number of major complex projects afoot right now does not have a corresponding volume of high calibre individuals to execute against these projects.”
Bates said increased client demands made the staff shortage more problematic, with “clients pushing as much risk on to the contractor as possible”.

About the author

Henry Shen

Lead underwriter, Engineering & Construction SEA, Swiss Re Corporate Solutions

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