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Disclaimer:-This article is not legal advice. Its purpose is to bring to your attention issues you may not have been aware of that can affect you in ways you did not expect. If you find that the issues raised in this article do affect you then you should seek appropriate professional advice.

COVID 19 – Dawn on the horizon

Introduction

This article deals with the issues facing trade contractors in the immediate, short term and long term futures.

In order to cover those issues, I will need to deal with a dash of statistics, a little bit of history, some economics and then an outline of the future with a sprinkling of commentary as to what all this means for subcontractors.

Index

Statistics
History
Economics
Short term
Medium term
Long term
What this means for trade contractors
Conclusion and tools available to subcontractors
List of pandemics and epidemics

Statistics

There has been a lot of shrieking about the number of deaths and current death rates.

While death rates are relevant to why we should be afraid of COVID 19 and if we become infected it is valid to have concern about our chances of surviving, the reality is that the relevant number for the purposes of prognostication is the number of new infections each day.

What has become clear is that COVID 19 is going to move through society and countries like a wave. Different countries are at different positions on that wave so do not get traumatised as a new country starts to experience the effects and numbers sky rocket for a period of time.

Countries such as Germany, France, Italy and Australia have started to force the infection rate down. Even the USA has started to bend the trend.

The effect in Australia is that on 15 March 2020 Australia had 52 new cases. The Federal government introduced restrictions on 23 March 202 when new cases for the previous 24 hours were 315.

We reached a peak of 650 new cases on 28 March 2020 and as at 12 April 2020 the new cases of infection in the preceding 24 hours fell to 51.

On 13 April 2020 new cases were 33.

As at the time of writing this article, the new infections for 14 April 2020 were 44.

This figure will oscillate a bit as it goes down due to the last remaining pockets.

History

There have been many pandemics and epidemics throughout history. The first clearly documented pandemic was in 430 BC and they have occurred often since then through to the present day. There is a list of the most notable at the bottom of this article.

Despite the severity of the pandemics and epidemics coupled with the lack of medical resources, the affected countries did not collapse or experience the aftermath of the apocalypse.

The organs of government continued to function. Even bubonic plague patients were provided with food and what passed for nursing care at the time.

All the pathogens referred to in that list of pandemics are still with us, in particular bubonic plague and cholera. We have simply learned to deal with them.

There are also other viruses that the potential to be the source of a pandemic for which there is no treatment. The prime example being Ebola.

Even if there is never a vaccine developed for COVID 19, we will develop a system of dealing with it.

If a vaccine is developed, things will get a bit easier a bit sooner.

Economics

The COVID 19 event is being touted as having an effect far more serious and far reaching than the Great Depression.

While the depression was serious, it is often overlooked that world governments learned a neat trick. The only problem was they did not apply it strongly enough at the time.

That trick was known as the “New Deal” where the US government spent a large amount of money on development projects to stimulate the economy.

The effectiveness of government spending to avert financial disaster was demonstrated during the Global Financial Crisis which was also frequently touted as potentially having a far more devastating effect than the Great Depression.

It is clear that relevant governments understand how that trick works, have started to spend and are intending to spend on projects.

Expect spending on development of strategic manufacturing and so on. There is more comment on this below.

Short term

Australia is in the process of getting COVID 19 under control.

As the situation stabilises there will be more opportunity for governments to carry out the guerrilla warfare to hunt down remaining cases and clear out residual pockets.

The federal government has outlined the three steps to removing restrictions.

They are:

While that may all sound like the never never, this is not going to be over as soon as we would like, but it will be over sooner than the more pessimistic prognostications.

Item one involves a continuation of the current process. Good progress on the numbers is being made.

If you look at the current trend there is a theoretical possibility of reaching zero new infections by the end of this week.

However, that must be tempered with the fact that there are at least three new possible clusters that have just been identified in the last 24 hours. That is going to require a further addition of at least 14 days into the calculations.

On the other hand, if it is clear that new cases are only coming from identified clusters and item two is in place, we can expect to see consideration being given to item three.

Item two is merely a case of establishing teams, processes and protocols plus awareness in the general public.

If we want to progress a return to a less restricted lifestyle, we are going to have to be no less vigilant than our medieval forebears with respect to the likes of plague, cholera and leprosy.

We will also have to adapt some elements of our lifestyle.

In any event, governments are very conscious of the fact that people cooped up with their children who cannot go to the beach will eventually vote at the next election.

There are not enough police in any of the states to enforce isolation once the general populace gets a hint that it can run free without too much fear of contracting the disease.

The bottom line is that item three is on its way.

Medium term

Medium term will start once we have returned to some semblance of normality, even if there are ongoing restrictions.

This will be the initial phase of recovery.

History demonstrates that this will be a tough two or three years.

This period is about survival.

It will be characterised by considerable government spending.

Long term

Once the tough survival period is over the economy will start to expand as more normal business activity comes on line.

Do not be fooled. For those of you who have not experienced an economic restart, the long term will still be a hard grind and you will have to be assiduous in maximising your opportunities.

What this means for trade contractors.

Basically, there are two significant changes that will apply to trade contractors.

  1. The long beautiful wave the industry has been surfing since 2002 has now crashed onto rocks; and
  2. The world is going to be a very different place.

There are large sections of the industry who have no idea what a grind the building industry can be at the best of times when the golden wave of prosperity we have been riding since 2002 comes to an end.

It had come to the point where builders with grim reputations had almost become benevolent. Builders and Subcontractors who were running their businesses and projects quite badly could still make a good living.

Things have now changed dramatically.

As of the end of March 2020, even the most benevolent of builders have started looking for ways to avoid making a payment. There is now a whole new generation of subcontractors who are about to learn the hard lessons of the building industry.

Welcome to what it was like in the 80s and 90s.

Subcontractors cannot afford to sit back and think momentum and relationships are going to look after them. Failure to take control of your destiny will result in annihilation.

As to the world being a very different place, you have to consider that the Bubonic Plague served to rejuvenate Europe with social changes that have had effects lasting to this day.

World War 1 saw the sweeping away of empires.

There were many societal changes brought about by World War 2. The most far reaching and fundament being the introduction of the Bretton Woods International Monetary System which transitioned into the monetary system in operation today.

There is every indication that there will be significant world change flowing from COVID 19.

Factors to consider are:

  1. There is no guarantee that China will take up where it left off;
  2. Although Sovereign Immunity prevents the rest of the world suing China, there is a significant loss of confidence in China’s ability to perform competently when it comes to meeting its obligations to other inhabitants of the planet and members of the world economy;
  3. The world appears to be looking to remove its factories from China;
  4. People are angry and may well return to pre-millennium shopping which involved turning the packet over and looking at where the product was manufactured;
  5. Any programme of government spending that is not focused on the mainstream is likely to be reviewed and cut;
  6. Insolvencies are going to rumble on for about the next 5 years;
  7. Subcontractors are not going to have the luxury of allowing short or non-payment to run on for long periods;
  8. What appeared to be sure ways of making money two months ago are now showing their vulnerabilities;
  9. Slum lord exemptions (think of backpacker hostels and share rooms) that would have been an anathema to the programs of reform in the 1950s will once again become unacceptable; and
  10. Expect a return to an understanding of why protective and regulatory provisions were initiated between 1945 and about 1995 in the first place and the steady watering down over the last 25 years was such a bad idea, that is, regulation is going to tighten.

Conclusion and tools for subcontractors

Because the wave has crashed, you are now confronted with a landscape where the question is not can you afford to adopt or embrace the items listed below. The true question is can you afford not to.

You cannot rely on working for the builders you have had a relationship with for the last few years because they may well go bust or simply dump you for someone cheaper as a means of survival.

There is going to be a lot of movement within the industry.

One of the main actions to ensure you get paid or are ready to pursue your rights in a timely way is to use a good quality progress claim.

If you are relying on invoices generated by and accounting application or a creature of your own design you are at risk of having to wait another month while a compliant progress claim is prepared.

If you have been successful in an adjudication in the past, be aware the rules have tightened up and the progress claim you submitted previously is likely to be inadequate. You do not want to be wasting time.

The current version of our progress claim is 190716002 for ordinary projects and 191127002 for large projects.

If the progress claim you are using is not up to date contact us.

It is at times like this you find out why the Survival Course is called the Survival Course and not something else.

While it is enlightening and useful in the good times, it is vital in the tough times.

We will be running the next course as soon as government restrictions permit. Contact us to make sure you are on the list.

The Contract Management System will assist you in Administering your contracts properly which is vital.

Be wary of builders that are a threat to your financial survival so you will need to be using Who is Who in the Jungle for Subcontractors before you go anywhere near them.

A good half way house to push for payment is to claim 67P interest.

It is vital you keep an eye on your costs and hours to make sure that hours especially do not run away from you. To avoid that use Subbies Budget Control.

Then there is the opportunity to save money. Accountants are expensive and have been struggling with the last round of amendments to the Minimum Financial Requirements and likely to drown in the amendments in the pipeline.

Now is the time to use the peace and quiet to fully assess what stock, Machinery, tools and other assets you really do have for licencing purposes.

The CS4T (which deals with minimum fiancial requirements) system will save you money and ensure that there are no nasty surprises when it comes time to renew your licence.

Finally, be wary of the risk of preferential payment claims by a liquidator if you are paid money within the period of 6 months before a builder goes into liquidation.

Many of the things you think are a good idea to enforce payment can actually be a guarantee that you will be sued by a liquidator for a preferential payment claim and have to pay it back.

Contact us before you do anything you think is clever, brilliant or good advice from a mate who has no idea about the true state of the law.

And finally – if in doubt-contact us

List of pandemics and epidemics

  1. 430 BC Plague of Athens – Pathogen unknown
  2. 165 Antonine Plague – Probably Smallpox
  3. 415 Leprosy – There are numerous dates for the complex spread of this ancient pandemic – the date given is for the rise of the pandemic in Europe.
  4. 541 Plague of Justinian – Bubonic Plague
  5. 1334 The Black Death – Bubonic Plague
  6. 1494 Syphilis
  7. 1700s Malaria, Yellow Fever and Smallpox
  8. 1817 Cholera
  9. 1855 Bubonic Plague
  10. 1914 Spanish flue – Influenza
  11. 1957 Asian flu – Influenza
  12. 1961 Cholera
  13. 1968 Hong Kong Pandemic – Influenza
  14. 2002 SARS - Coronavirus
  15. 2005 HIV (While HIV appears to have emerged in about 1957, 2005 is the year it was declared a pandemic)
  16. 2011 Bubonic Plague in Madagascar and Seychelles
  17. 2012 MERS - Betacoronavirus

If you need any further information contact us.