Do yourself a favor: Don’t sign a construction contract that doesn’t address COVID-19 or any pandemic or epidemic from this point forward!
As the number of COVID-19 numbers rise, it would be reasonable to think this could have an impact on ongoing or future construction projects. For this reason, I want to revisit the subject of addressing COVID-19 (and any pandemic or epidemic) in your construction contract.
The potential impact caused by COVID-19 could result from governmental regulations that impact construction of the project, shutdowns due to affected workers, owners’ decisions to suspend performance or adjust the way the project is being constructed, increased deep cleaning requirements, and increased measures associated with social distancing and re-sequencing of shifts. This all plays into the timeliness of performance and the productivity of manpower and equipment usage. When submitting a price, a lot of these considerations may not be factored in because doing so could lead to a price that will never get accepted.
The question then becomes, how do you deal with this?
The answer is easy.
Be prudent when entering into a contract to make sure you address this risk. Now that we know about COVID-19 and the ramifications, the last thing you want to do is not address it at all and create the argument that you have assumed all of the risk for COVID-19. The best thing is to specifically address this in the contract, whether in the force majeure provision or another provision along with what specifically requires a contractor to equitable adjustment of the contract sum and contract time due to COVID-19. I am not suggesting that this contractual provision is used as a tool to avoid proof of the impact caused by COVID-19. Demonstrating the impact absolutely needs to occur, but pretending that COVID-19 will never result in an impact (or increased direct costs to keep the site sanitized) and, thus, does not need to be addressed in the contract is naïve.
Contingency language in the contract could be included with a specified amount to cover certain direct costs (e.g., masks, temperature screening, having a dedicated safety person ensuring masks are being worn, hand washing stations, frequent deep cleaning) and delays or inefficiencies caused by COVID-19. This way this money is not necessarily built into the price, but can be utilized to cover the “contingency.”
Language in the contract could be included to demonstrate the type of proof a party must submit to demonstrate the COVID-19 impact or the lost productivity / inefficiency caused by COVID-19.
Language in the contract could also specify what, in particular, about COVID-19 constitutes a force majeure issue (e.g., shutdown) and whether a party is entitled to money if there is a COVID-19 issue, or just time.
Language in the contract could further address how long a job can be suspended before a party may terminate the contract.
Regardless of the specific negotiated language, the key is simply to be PROACTIVE and address the risk in the contract. As mentioned, with rising numbers, do NOT neglect this consideration. Indeed, this consideration should be broader than just COVID-19 and cover any pandemic or epidemic as this concern becomes more prevalent in contract drafting from this point forward. Prior to COVID-19, addressing pandemics or epidemics in most contracts was an afterthought. That should not be the case anymore!
If you need assistance drafting or negotiating contractual language regarding COVID-19, work with construction counsel that has experience factoring in this risk. I have dealt with a variety of language in the last few months that accounts for this risk where the parties understand the language, have accepted any risk allocation, and have made the business decision associated with the risk.
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.