The new reality in commercial construction due to Covid-19

Commercial construction has started again. Projects across the country are resuming and the industry continues to create jobs. A study shows that 56 percent of industrial losses have been made up since the pandemic began. However, challenges remain for owners and contractors as they face new aspects of liability due to the Covid-19 environment. While many contracts take into account the impact of force majeure events, the uniqueness of this year’s disruptions and adjustments to return to work can open the door to some equally unique claims or litigation. New and frequently changing parameters in the industry require that all parties, including developers and contractors, take a focused approach to their readiness while maintaining the flexibility to remain successful.

One of the riskier things a party to a construction project can do right now is to see a return to work as a return to normal, regardless of whether safety and health protocols are disregarded or the main issues affecting others are not in view Branch. Given the great uncertainty about longer term implications due to the situation we all find ourselves in, communication at all levels of the project is vital to ensure that all team members are complying with the changing parameters. Adjusting procedures and expectations is well worth the time and thought to reduce the risks of a project.

While factors beyond personal control continue to affect all facets of the job, a big part of making sure the liabilities associated with Covid-19 don’t further constrain property development is careful monitoring of vendors and contractors. While many of the risks everyone faces are specific to their own job, due to the nature of the litigation, any party involved in the construction project can be brought into a lawsuit. Your mistakes are not separate from the project itself, especially when developers have failed to set the tone by their own readiness for the possible impact on the project.

In the current and possibly ongoing circumstances, how does preparation look for your team and project to successfully manage the effects of the pandemic?

For ongoing projects, start with thorough documentation of the project’s progress, as well as any disruptions and delays resulting from the impact of the pandemic, in order to create a clear record. This includes separating known or alleged impacts from pre-shutdown from effects caused solely by shutdown due to different issues, factual patterns, and aspects of recovery under each contract. For upcoming projects, accept the new reality that the time and cost of performance can be higher than in the time before Covid. For example, contractors may claim that adequate pre-pandemic planning of how long certain work tasks will take is no longer valid due to safeguards that absorb time and affect work productivity. Likewise, all parties must confirm that the equipment or materials to be made available will not be impaired, as the supplier can deliver on the agreed terms or contractors have sufficient workers, as was the case before the pandemic.

While this review reflects a snapshot of the impact of the pandemic, it is likely to deviate from what was expected during the tender and design. In the current environment, new obstacles and / or restrictions have developed and some required parameters have changed. Now is the time to review all contract documentation to confirm the specific details of the contracts and coverage rather than assuming that you are protected or not affected. Everyone agrees that time extensions will be granted for any period during which a project has been shut down due to construction. Or you can choose to buy back at some price this time (by speeding up the workload), but at what price is always the burning issue. Contractors may find that they are only entitled to an extension of the deadline versus the restoration of extended general conditions. On the other hand, a contract could provide for a reasonable extension of the deadline with suspension of the provision of work, but then allow time and money to be reclaimed once the delay time is determined to be “unreasonable”. If you’re not sure what your contract is, you don’t know what your liability is.

Without proper protection in your contract, the only remedy is to reach an agreed agreement with your contractor that is formalized into a change order that captures all of the time and cost issues that serve as “compliance and satisfaction” for these issues. Too often not all issues are addressed, and a change order that apparently covers all aspects of the impact (at least in the eyes of the owner) turns out to be not as ironic as thought, meaning the problem may get its ugly head back on its feet down the line.

Also, remember that your agreements do not exist in a vacuum and that federal, state, and / or local policies can continue to change plans despite your own attention to detail. Prepare as best you can by creating action plans that adequately reflect the changes needed to comply with Covid-19 while remaining flexible as conditions or parameters change. Make sure you are familiar with the guidelines or regulations of the government agency that applies to your project locale. Take the time to reach out to experts such as consultants, brokers, and lawyers to clarify your understanding of the impact of external factors and prepare for opportunities you may not have previously considered. While it may be the contractor’s responsibility to take steps to meet and enforce these requirements, doing so may prevent the owner from falling off the hook if not followed.

But perhaps most importantly, you are only as good as your people. So you need to protect them by creating an environment (where possible) in which they can work safely during the pandemic. By ensuring that locations limit the number of employees during a shift so that each person can safely maintain social distance, other important elements of compliance are set in motion throughout the project. Access to appropriate PPE (personal protective equipment) and hand washing / disinfection stations is critical to health protection, but it also minimizes tool sharing and disinfection of high contact areas. An unhealthy employee or worker not only jeopardizes that person’s own well-being, but can also harm the health of others. Projects are still built by people, not machines. Hence, the survival of any project with minimal economic damage depends on the availability of administrative, management, supervisory and craft personnel to do the work.

With so many elements of the construction industry already affected, from cost and schedule to personnel, we know the new risks will be an ongoing consideration this year. Despite statements to the contrary, there is a great possibility that such effects will continue until 2021 and beyond. Don’t risk further liability by not preparing – incorporate the preparation regularly in your planning and be ready to change the preparation for any existing and planned construction. [Propmodo]

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