COVID-19 construction audit FAQ for internal auditors and owners

The COVID-19 pandemic is affecting construction projects in a variety of ways, including additional costs to protect worker safety, questions on who is responsible for these additional costs, and project delays related to local ordinances about business closure. This FAQ list highlights issues that will help site owners and internal auditors better prepare and manage COVID-19-related costs.

Who is responsible for project costs impacted by COVID-19?

The construction contract defines the budgets and responsibility for construction costs. Construction site-specific costs will generally be the responsibility of the project owner. Examples of these costs are: housing and transportation for job-site personnel, job-site safety and on-site COVID-19 testing. Back-office costs are the responsibility of the contractor. Examples of back-office costs are: work-from-home costs, accounting staff, company management, general COVID-19 planning and education, and human resources costs.

What are acceptable costs related to COVID-19?

• Hygiene and cleaning costs – Costs to keep the job site germ free and provide a safer work environment are going to be the owner’s responsibility.
• Project delay costs – These costs may arise from construction material shortages, labor shortages and smaller construction crews. While these costs are acceptable, they should be fully documented and negotiated. 
• General conditions costs – Most of these are time-related costs, and as the project schedule is affected by COVID-19 delays, the owner will likely incur the extra general condition costs. Examples of these costs are labor, equipment rentals, security and utilities.

What costs should be avoided?

• Anything that duplicates current practices without adding any additional value
• Delay costs that are not the result of a COVID-19 management plan; COVID-19 could be made a convenient excuse for rework, poor quality and inefficiency, and these costs should not be accepted by the owner or auditor
• General condition costs that are not time-related. Some costs are fixed and do not change regardless of schedule; examples of these include mobilization, office equipment purchases, temporary roads and layout yards