August 1, 2022

Review of American Bar Association Articles Regarding COVID-19 Impact on the Construction Industry

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This blog post is the first in a series of eight that summarize the potential impacts of the COVID‑19 pandemic on the construction industry, including the potential applicability of typical contract clauses to the impacts, best practices for mitigation of the impacts, and recommendations for avoiding claims related to COVID-19 in future contracts.

This blog post summarizes information published in articles and blog posts by various attorneys and law firms, and the intent is to provide a brief summary that may be beneficial to owners and contractors. This post is not written by attorneys and does not constitute legal advice.

The American Bar Association (ABA) published several articles regarding the impacts of the COVID-19 pandemic on the construction industry in 2020. The following articles are reviewed herein:

Stover et al. present a comprehensive summary of COVID-19 factors with the potential to cause increased construction costs, including: increased sanitization costs due to increased frequency of office cleanings and addition of hand-wash facilities; increased staffing requirements to facilitate compliance with new guidelines such as on-site temperature checks; decreased productivity due to absenteeism, quarantines, social distancing, and working from home; and increased material costs due to supply chain impacts. Bartman, and Conrad and Manson, also cite supply chain issues due to COVID-19 as having the potential for significant impacts on the progress of construction projects.

All four articles discuss the potential applicability of force majeure contract clauses to COVID-19 impacts. Stover et al. discuss two primary categories of force majeure delay clauses:

  1. Clauses containing a non-exclusive list of examples of force majeure events with a high-level provision for “anything outside of either party’s control;” and
  2. Clauses that specifically list out every event that would qualify as a force majeure event.

Marmins discusses the applicability of the above force majeure clause categories to COVID-19 impacts and also writes that force majeure clauses typically apply only if the triggering event was unforeseeable. Based upon Marmins’ commentary, it may be difficult to argue that force majeure impacts are applicable to COVID-19 delays in the case of contracts that were entered into subsequent to the beginning of the pandemic, once the potential impacts of the pandemic were known. Additionally, Stover et al. write that once it is determined whether COVD-19 impacts fall within a specific force majeure clause, further assessment is required to determine whether the clause provides only an extension of time or also provides compensation for delay costs.

In addition to the potential applicability of force majeure clauses, Stover et al. discuss additional relief strategies that may be applicable to COVID-19 impacts, including delay and extension of time clauses, suspension of work and termination for convenience contract clauses, the impossibility of performance defense, and the frustration of purpose defense. Stover et al. and Bartman discuss the potential applicability of the various clauses and strategies for a variety of standard contract types including American Institute of Architects (AIA), ConsensusDocs 200, and the U.S. Federal Acquisition Regulation (FAR).

Stover et al., Marmins, and Bartman all stress the importance of adherence to contract requirements regarding providing timely notice for all potential claims, including force majeure claims. Marmins and Bartman also note the contractor’s duty to attempt to mitigate damages and delays, and Stover et al. note the contractor’s duty to protect the site, work, materials, and equipment in the event of a project shutdown. Further, Conrad and Manson discuss the importance of maintaining contemporaneous project documentation—including progress reports, daily logs, change orders, schedule updates, meeting minutes, and safety plans—to substantiate claims and facilitate dispute resolution.

Finally, the articles discuss potential risk mitigation tools with respect to COVID-19 impacts. Stover et al. and Conrad and Manson discuss the potential use of business interruption insurance, payment bonds, and performance bonds with regards to mitigating COVID-19 impacts. Stover et al. note the potential relief available under the CARES Act and through expansion of the Small Business Association’s (SBA’s) Economic Injury Disaster Loan Program (EIDL) in the U.S. Additionally, Conrad and Manson suggest that the parties may want to consider drafting custom contract amendments or adding a form cost-adjustment clause to document baseline prices and calculation methods for adjustments to material prices to account for increased costs due to COVID-19-related supply chain issues.

As detailed above, several authors discuss various aspects of COVID-19 impacts in the construction industry. As always, fully understanding the specifics of the contract and documenting the impacts contemporaneously are key for supporting (or defending against) potential claims.

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