The Construction Advantage, COVID-19 Best Practices and the Challenges of COVID-19

COVID-19 Best Practices

By Zachary B. Brandwein

As the economic disruption resulting from the COVID-19 pandemic expands throughout the country, many contractors are left to react to abrupt and dramatic changes to ongoing or planned projects.

We recommend taking five simple proactive steps right now to better position your company to quickly adapt to these changes and come out on the other side of this crisis ready to resume work.

1. Read Your Contracts. There are understandably many demands on your attention right now but, closely reviewing the contractual requirements for each of your projects will inform your next steps. Contract clauses that concern delays, unforeseen conditions, excusable conditions, and force majeure are all relevant. Because delays are likely, an extension of the contract time for your projects will probably be necessary. It is important to understand the procedures for informing owners and other parties. The AIA, ConsensusDocs, and governmental contracts all have force majeure and/or time extension provisions that permit extensions of contract time, and potentially, the recovery of additional costs. Find these and read them to determine your obligations, your rights, and how to exercise them.
2. Consult Legal Counsel Before Taking Action. If you have questions about a contract, the time to talk with your legal counsel is now. It is far better to get the right advice first before you take action.
3. If Delayed, Notice the Owner. If a project is delayed, or you anticipate it being delayed, the first step is to notify the other parties to the contract. Most contracts require prompt notice by a particular method. Your contract may also have particular provisions regarding increased material costs. If it does not and you are experiencing increased costs, include an explanation of that in your notice letter. Remember that despite the notice, you still have an obligation to perform the best that you can despite the event causing the delay.
4. Record Impacts and Losses. Keep an accurate record of any impact and losses that your projects may experience as a result of COVID-19. The two key elements to establish in order to recover for delays are almost always: (1) the right to an extension of contract time, and (2) the amount or extent of the delay and added cost. Your records about these losses are the most important evidence.
5. Think About Insurance. You should evaluate, preferably with legal counsel, whether your current insurance policies cover COVID-19 related losses. It is important to review all policies and request that project owners provide copies of applicable insurance policies, such as builder’s risk and business interruption policies. Like your project contracts, policies may also include notice provisions and there may be adverse consequences if notice is not provided in the way required by the policy. A policy may also require evidence of actual loss of business income due to the necessary suspension of a project. This is yet another reason to carefully and continually document your losses.

We are closely monitoring legal and regulatory developments that may impact the construction industry, and we will keep you updated. Bernstein Shur’s Construction Group is one of the largest in the Northeast. Our attorneys regularly review contracts and have extensive experience with construction industry insurance policies.

The Challenges of COVID-19

By Richard C. Gagliuso

The construction industry is facing an unprecedented array of challenges as a result of the COVID-19 pandemic. We have survived catastrophic weather events, economic downturns and individual setbacks, but we haven’t seen anything quite like the public health crisis currently threatening not only normal construction activity but our collective, personal well-being.

Here are some FAQs that contractors, project owners and other participants in the construction process are asking in the midst of this crisis:

• Can we protect ourselves, our employees, subcontractors, suppliers and others on job sites if we continue normal operations?
• What do we do if one of these project participants is diagnosed with COVID-19?
• Do we have to notify other parties that our ability to perform in accordance with our contract is going to be impaired?
• Can we expect to be paid for our work in the normal course? And what steps should we be taking to protect ourselves?
• Do we have insurance for any harm caused by the pandemic?
• How can we undertake new work when we cannot be assured of our own ability to perform as promised?
• What kinds of provisions do we need to include in our contracts to protect ourselves against conditions we cannot predict or control?

These are new and difficult questions which defy simple solutions. These are also the kinds of questions that those of us who practice construction law at Bernstein Shur have been thinking about, discussing and researching since the pandemic started to affect us just a very few, though seemingly long weeks ago. Even as we collect answers to provide practical guidance to contractors, owners and others, we continue to identify new questions that are likely to confront our clients in the days, weeks and months to come.

While legal advice of general or specific application is well beyond the scope of this short article, our work on these issues to date permits at least a few observations:

• First, the course of this pandemic and its impact on the construction industry in New England and beyond cannot be predicted with any degree of confidence.
• Second, certain basic assumptions that underly the commitments of all parties to the construction process – for example, that labor, materials and equipment will be available on the usual terms, or that authorities having jurisdiction over projects will fulfill their legal responsibilities – must now be questioned.
• Third, patience, tolerance and a spirit of cooperation will be at a premium.
• And finally, all parties share the common goal of the safe and successful completion of any project; and toward that end, the parties must work together and in harmony to achieve this goal.

In our interactions with clients and others since this crisis started, we have been uniformly impressed by their resourcefulness and resiliency. These qualities will be in great demand in the weeks to come.