Addressing the Pandemic
April 15, 2020
Experts anticipate the COVID-19 pandemic will have a major impact on the construction industry. It is important for contractors to be diligent in understanding the impact and what they can do now to protect themselves and their balance sheets.
For protection, contractors should look into the extension of the time/delay clause associated with new work/contracts. Many projects are already getting delayed. Contractors should make sure they would be allowed extension of time or additional compensation if projects get delayed due to quarantines, labor shortages, material/supply delays and/or price escalations that could occur.
Contractors should also review their existing contracts to confirm they would have protection/relief on current projects paying close attention to the force majeure clause. Would the delay fall under the definition? Would the delay fall under another listed event? In either occurrence, the delay clause should outline how to put the owner/obligee on notice of delay and how to document the effects (time/costs).
Questions Contractors should consider now:
- What rights do you have in the event of a project delay? Including delays with materials and supplies?
- Do your Force Majeure clauses meet the criteria for delays caused by COVID-19?
- How will you address a reduction in work, or find labor for future projects?
- Are you closely monitoring your overhead, bank debt and insurance coverage?
During this unprecedented time, contractors should stay up-to-date on the news and effects of the COVID-19 pandemic. We encourage our contractor partners to start dialogue with both their surety agent and construction attorney now as they will be helpful resources when navigating these challenges.