As the number of COVID-19 cases increases exponentially in the United States, the impact on the construction industry will inevitably continue to rise. Although projects in many states continue to progress at this time, some jurisdictions have taken drastic measures. For example, the Pennsylvania Department of Transportation recently suspended all construction projects until further notice in response to COVID-19. Similarly, all construction projects in Boston were ordered to stop for at least 14 days. In addition to shutdowns that may possibly be imposed by potential government action in response to the virus, ancillary issues could adversely impact parties to a construction project and the labor, goods, services, and materials used on projects. Such issues may include disruptions to construction supply chains in the U.S. and abroad, employees becoming ill and under quarantine, a workforce adjusting to changes resulting from school closings and other evolving societal changes flowing from COVID-19, and a rapidly changing and uncertain economic situation.
While the current situation is essentially unprecedented, there are some actions parties in the construction industry can take to help prepare for, and address, potential impacts to their business and ongoing projects.
- Review Construction Contracts: Whether it is a standard form construction contract such as those published by the American Institute of Architects, a contract that has been independently developed, or a public entity’s terms and conditions, most construction contracts contain provisions that could potentially be implicated by impacts from COVID-19. It is important to review the contract, particularly provisions that address changes, force majeure, delays, and suspension of work, to ensure familiarity with the rights and responsibilities that may arise if a project is impacted by this virus. Such rights and responsibilities may include, for example, timely notice of a claim, mitigation requirements, recovery (as well as potential limitations on recovery) of costs for impacts, and adjustments to the project’s schedule.
- Document Impacts: As issues arise relating to COVID-19, parties should timely document any impacts they experience that could potentially increase costs or delay the project. Such documentation includes internally tracking the issue, costs, and time impacts and providing any written notice that may be contractually required. Taking steps to properly document and provide notice of issues may not only be required by the governing contract, but will also allow parties to have contemporaneous documentation to rely on when the impacts are ultimately presented for resolution.
- Consult Applicable Guidance: The COVID-19 pandemic has resulted in a multitude of information from a myriad of sources, and it can be overwhelming. However, there is some guidance published by official sources that can be consulted. For example, the Occupational Safety and Health Administration has published “Guidance on Preparing Workplaces for COVID-19” that provides helpful information to address COVID-19 in the workplace. Similarly, the New York City Department of Buildings sent an industry-wide notification to contractors and construction professionals in New York City, advising them to take precautions on construction sites to protect their workers and the public and referred them to the New York City Department of Health and Mental Hygiene’s guidance on COVID-19.
- Review Insurance Policies: Insurance policies should be reviewed to determine if there is any potential coverage (for example, business interruption coverage) that may be available for impacts from COVID-19. Whether such coverage exists may depend on specific policy language and the loss at issue, but knowing in advance of a loss what policies may potentially be applicable and possible sources of coverage is prudent planning and may help provide timely notice to the carrier if a potentially covered event occurs.
- Review Applicable Financing Documents: As with construction contracts, applicable financing documents should be reviewed to determine whether there are relevant provisions that may be implicated as a result of the COVID-19 virus.
- Become Familiar with New Laws: Congress recently enacted, and the President signed, the Families First Coronavirus Response Act. States are also enacting, and likely to enact, new laws to combat the impacts of the COVID-19 virus. These laws may potentially address workforce issues that could impact projects. It is important to know and comply with any new legal requirements that may arise, and to be prepared to address and respond to any affect new laws may have on the workforce or project. In addition, there is the potential that new federal and state laws will make funds available to the private sector to help certain businesses and industries as they confront the impacts of COVID-19.
- Stay Informed: The present situation is evolving constantly, and today’s reality may no longer apply tomorrow. As a result, it is important to monitor what is occurring in the industry generally and, specifically, in the area of ongoing projects. Timely staying informed of this developing situation is appropriate to prepare for the changes to the industry and your projects that will undoubtedly continue going forward.
COVID-19 has created a lot of unknowns and uncertainties. As with most industries, the practical and legal implications for the construction industry are unsettled and subject to significant changes over the days, weeks, and months to come. Throughout the years, our firm has been a trusted advisor to clients in the construction space, and we have extensive experience on a wide variety of issues that impact construction businesses and projects. Whether you are looking for help in navigating the unique business and legal issues that are arising as a result of COVID-19 or for guidance on how to prepare for and address COVID-19’s potential impact on construction projects, our team is available to help. Please contact Damian Santomauro with questions or concerns.
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