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INSIGHT: Coronavirus Advice for Construction Contractor Clients

April 1, 2020, 8:00 AM

Undoubtedly, Covid-19 is going to impact the construction industry in myriad ways and contractor clients will need advice and guidance to navigate these novel circumstances.

Response to Covid-19 is and will continue to evolve and here are two key areas for counsel to provide initial advice to contractor clients.

Focus on Worker’s Health and Safety

Contractor clients must be advised to take reasonable steps to protect the health and safety of their employees, contractors, and others on their job sites. OSHA guidelines on preparing workplaces for Covid-19 are a good first resource for your contractor clients.

It is important to note that these are not mandatory standards or regulations. Still, following OSHA guidance where possible is advisable. Not all the OSHA guidelines will be sensible or even possible to implement on a construction site, but some key guidelines that can be stressed include implementing basic infection prevention measures and developing, implementing, and communicating about workplace flexibilities and protections such as:

  • Actively encourage sick employees to stay home.
  • Ensure that sick leave policies are flexible and consistent with public health guidance and that employees are aware of these policies.
  • Talk with companies that provide your business with contract or temporary employees about the importance of sick employees staying home and encourage them to develop non-punitive leave policies.
  • Do not require a health-care provider’s note for employees who are sick with acute respiratory illness to validate their illness or to return to work, as health-care provider offices and medical facilities may be extremely busy and not able to provide such documentation in a timely way.

Review Your Contracts and Protect Your Interests

Know the Terms of Your Contracts

Most construction contracts include terms that address unforeseen conditions and conditions outside of the parties’ control. These clauses might be identified in the contract as “force majeure” clauses and they might be included within provisions for “excusable delay,” but these are not the only possibilities so contracts should be reviewed in their entirety to identify any relevant provisions dealing with unforeseen or uncontrollable conditions.

These provisions may apply in the event of worker shortages, material shortages, material price spikes, government mandated shutdowns or delays, all of which are likely to occur as a result of Covid-19, and they may impact a contractor’s obligations to perform and their right to time extensions and/or to recover additional compensation for costs incurred as a result of Covid-19.

Contractors must scrutinize these contract clauses to determine whether they apply to their current situation and, if so, what notice provisions apply and what other relevance they have to their projects, rights and obligations under the contract.

Many construction contracts also include provisions that allow for suspension of work and/or termination of a project by the owner and/or the contractor. Given the many uncertainties surrounding the response to Covid-19, it is important that a contractor understands what right it has to terminate a project in whole or in part and the rights, obligations and entitlements of the parties in the event of a contractor termination.

It is also important for contractors to understand the owner’s rights—often an owner can terminate a project for convenience without restriction and a contractor will want to understand what its rights to payment are if that occurs.

It is also critical that contractors analyze the contract to determine what rights it will have in the event a project is suspended for any length of time. There is always the possibility that a project could be suspended either by the owner or as mandated by the government, and the contractor will want to know what its rights and obligations are if a project is suspended indefinitely.

With respect to all of these issues, contractors must remember to analyze all their subcontracts in addition to their owner contracts because the rights and obligations between the contractor and its subcontractors might not exactly mirror those that exist between a contractor and an owner and contractor will be responsible for navigating those differences.

Document, Document, Document

It is always important to advise contractor clients to focus on controls and procedures to document construction projects. But, given the inevitability of delays, disruptions, claims and disputes arising from the impacts of Covid-19, it is imperative to stress this now.

First, contractors must be familiar with the notice provisions in all their ongoing contracts. Construction contracts typically require contractors to give notice of any delays, changes and additional costs incurred for which it will seek compensation. Failing to comply with these notice requirements can have devastating effects, including in some situations foreclosing the contractor from ever recovering the costs it reasonably and actually incurs.

Notice provisions often include detailed requirements including who notice must be provided to, how notice must be delivered, what must be included in a notice and when notice must be provided by. Contractors need to know all these details so that they can be prepared to give all contractually required notice in a clear and compliant manner.

Helping your contractor clients to organize this information into a quick reference sheet so that nothing is missed is a good first step. It is also advisable for contractors to have form notice documents, fully compliant with all contract requirements, at the ready for each job.

It is important to note that construction contracts are often drafted to require contractors to include specific, detailed information relating to the length of delays and/or the specific costs or other impacts and it is often very difficult for the contractor to provide this information at the time that notice is required.

Contractors should be advised to include clear language in all notices stating that the situation is fluid and unpredictable and therefore it is not possible to provide a detailed impact assessment, but that delays and added costs will result from the impact and be quantified in the future. But it is equally important that contractors are cautioned to make all reasonable efforts possible to provide as detailed and accurate an impact assessment as is possible in all notices.

Second, contractors must carefully and accurately document the impacts to the project. All costs and delays should be carefully tracked and segregated in job reports.

Detailed descriptions of the cause of delays and costs must be identified and documented clearly and with as much detail as possible in the project record, including in daily logs, daily reports, time sheets, schedule updates and meeting minutes. And, contractors must ensure their schedule is updated and that there is proper baseline schedule for any time impact analyses they may need to perform.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Judah Lifschitz is principal and co-president of Shapiro, Lifschitz & Schram. He has extensive experience in construction related matters, including power and energy construction representing clients in EPC contracts and disputes. He represents governmental and private owners, regional, national and international contractors, construction managers, subcontractors, design professionals, sureties and insurance companies in disputes, trials, ADR proceedings and negotiations.

Laura C. Fraher is a senior attorney in the trial and construction group at Shapiro, Lifschitz & Schram, focusing on complex commercial and construction litigation. She has extensive experience in civil litigation at both the trial court and appellate level and drafts construction contracts for large-scale commercial and residential construction projects.

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