The United States has been transfixed by the spread of coronavirus. To date, over 115,000 individuals in 115 countries and territories have been infected.
It is likely coronavirus will soon reach parts of the country that have yet to be affected. Louisiana’s governor, John Bel Edwards, noted that “it’s a matter of when and not if this will happen.”
What does the spread of coronavirus mean for general contractors, subcontractors, material vendors and sureties?
The message is clear – the virus could impact your project schedule.
As any scheduler knows, one slight schedule slip can be disastrous to a project resulting in delivery delays, the accrual of liquidated damages, increased costs and general conditions and labor cost surges.
Due to the size of the labor/materials impact, or the identity of the project owner, it may be necessary to shut down the job site and/or demobilize.
The time to prepare is now and discuss potential impacts with construction managers, contracting officers or owner representatives. Topics of discussion could include:
- Discussing and documenting the owner’s plan for continuing work if government/owner personnel are unable to report to work
- Whether the government/owner will permit telecommuting or remote work arrangements including off-site fabrication/construction
- How the owner/government intends to respond to performance delays which results from COVID-19
Importance of understanding the contractual terms and provisions
It is imperative that the parties have an understanding of the contractual terms/provisions at play.
Provisions to be reviewed include Excusable Delay provisions, such as Federal Acquisition Regulation (FAR) 52.249-14, which excuses acts of default by the contractor for failure to perform in instances outside of the contractor’s control, specifically including, epidemics.
If your project is impacted as a result of coronavirus, it is vital that the contractor seek a time extension as a result of the delay and document the request in order to preserve potential claims or defenses to wrongful termination. Contractors should not wait until months/years later at project completion to resolve this time impact. It will only become more difficult and costly to determine.
Additionally, it is not unreasonable at this early phase of the virus’ spread to anticipate that your construction project may be impacted by a stop-work order. Once again, it is critical that all members of the project team have an understanding of the contractual provisions which govern in the event that work on the project is suspended.
While federal government construction projects are controlled by the adopted FAR/DFARS provisions, including FAR 52.242-14 (Suspension of Work) or 52.242-15 (Stop-Work Order), other projects may not have such robust provisions in place to deal with these potential impacts. All impacted parties should ensure that such orders are given in writing, and they should comply with the owner/government’s directives. Such suspension or stop-work order will likely necessitate the issuance of further orders downstream including to subcontractors and material suppliers.
Document all notification efforts and keep bonding and insurance companies apprised of the potential impacts to the project. Staying in touch with the entire project team is critical to mitigate losses and prepare for potential claims that may arise.
All parties are encouraged to document costs of compliance with the order, impact costs and schedule impacts. Submissions of requests for equitable adjustment, change order or modifications should be made once the cost/delays are determined.
It is important to comply with the contractual/statutory provisions impacting the request for equitable adjustment, change order or modification and be prepared to submit a formal claim, if required.
Utilization of new technologies
In the event that a project is impacted, but work does not cease, one should consider options such as new technologies to mitigate the impacts and get the project back on schedule.
Drones and other unmanned aircraft systems permit one worker to take the place of teams of personnel. Such drones can, and are actively employed on many construction projects for visual inspections, surveys, system delivery and thermal imaging. Drones should be considered an additional mitigation tool if and when labor shortages arise and could help to reduce job costs in the event that labor/service rates abruptly rise.
Our team will continue to share the latest developments and provide insights on the spread of coronavirus and potential impacts across sectors including the construction industry.