As a Construction Contractor, What Should You Do in This Pandemic?

What Should A Construction Contractor Do in This Covid-19 Pandemic?

The COVID-19 pandemic has resulted in extensive social and economic disruptions in many industries, altering the business scene and putting various business operations on hiatus. Particularly, the engineering and construction industry has been significantly challenged in a range of ways, with the escalation of these challenges being proportional to the length and gravity of the pandemic. As a construction contractor, you must work as a responsible leader for your employees.

Last month, Boston became the first US city to suspend all construction activities. Thereafter, other major cities and states, such as San Francisco and Pennsylvania, have started to follow the same measure in an attempt to control the spread of the virus. As a result, many construction contractors have been unprecedentedly presented with a line of challenges, including supply-chain issues, cash-flow concerns, labor shortages, funding restrictions, and so forth.

Although there has recently been a movement to resume construction activities in the states and cities by the government bodies – Pennsylvania has announced that all construction works can resume on the 1st of May, the landscape of the engineering and construction industry will likely be reformed in terms of work arrangement and construction operation.

With uncertainty surrounding the length and seriousness of the calamity, it is extremely vital for construction contractors to come up with a mitigation strategy as soon as possible to increase their chance of surviving through this pandemic with as minimal losses as possible. You must seek help from the construction owner’s representative services to implement a better work plan.

Prioritize The Health and Safety of Your Workers And Identify All Relevant Regulations

If your construction project is still in operation, you should prioritize the health and safety of your employees and also be taking precautionary measures to reduce your employees’ exposure to the virus. These measures include encouraging your employees to stay home after work, canceling any arranged large meetings, conducting meetings virtually, and so forth. At the same time, all on-site amenities should be cleaned and sanitized regularly, and measuring your employee’s temperatures before allowing them to enter the site is also recommended. In the case where it has become known that one of your employees has been exposed to the virus, you must not allow the employee to come to work for at least 14 days after the last exposure.

You must check whether your state or city has implemented a set of regulatory requirements that you are obligated to comply with when it comes to managing the health and safety of your employees. For instance, in San Francisco, all essential construction projects must have a site-specific health and safety plan that conforms with their guidelines. Whereas, in Pennsylvania, all construction activities that will resume on the 1st of May must follow the COVID-19 safety guidelines established by the state government. These guidelines include requiring workers to wear masks and continue practicing social distancing, designating a pandemic safety office at each construction site, establishing hand sanitizing and washing stations, and so forth. In addition, the state government has allowed the local governments to establish their own respective requirements.

However, if your construction project is not required by law to have a written health and safety plan that deals with COVID-19, you should still create and adopt a relevant plan at your construction site. OHSA recommends the development and implementation of an Infectious Disease Preparedness and Response Plan by construction contractors in their workplaces for the employees.

Seek Payment for Your Work Conducted And Observe The Notice Requirements

In the event that your construction project has been halted, you should take photographs of all of the works you have completed and seek payment for the works from your client according to the contract. Your client is still liable to pay you for the work that you have completed.

In addition, you shall serve the owner a notice indicating the types of costs that will continue to accrue despite all the construction activities having been stopped. However, depending on the contract, you may not be able to recover all the additional costs you have incurred.

You should also pay attention to the notice provisions in the contract. A construction contract usually specifies the time period within which a certain written notice or claim is to be served. If you fail to serve a notice to your client within the specified time period after the occurrence of the event that has given rise to the notice, your client may reject your notice and you will lose the contractual entitlements that you would have been given if you had served the notice accordingly.

On the other hand, if you are served with a notice by your client, you should respond according to the contract to prevent yourself from breaching any contractual terms or giving up any contractual rights.

Read Your Construction Contract

You must pull out the contract that you have entered into with your client and read it thoroughly. The contract should spell out which party is responsible for a certain type of delay, disruption, and commercial risk. Generally, it should guide how a time delay or a cost increase resulting from this pandemic shall be handled and managed. You must consult a legal practitioner if you do not know what your contractual rights are.

The consequences of this pandemic have been bringing up the legal term, known as “Force Majeure”, which relates to forces or events that are not able to be reasonably foreseen or controlled and cannot be the fault of either party. These consequences include cost increases and time delays stemming from interruptions in the relevant supply chains, stop work orders, lack of workers, implementation of new safety protocols, and other unforeseen events due to the pandemic. However, most Force Majeure provisions only allow for a time extension without any monetary compensation. You need to refer to your contract to see what your entitlements are.

Some construction contracts do not use the term “Force Majeure”, but they contain a different clause that more or less compasses the same concept depending on its wording. For instance, the AIA A201 General Conditions of the Contract for Construction does not use the term “Force Majeure” and includes a clause that allows the involved contractor to claim for a time extension if the project has been delayed due to a certain event or force that is beyond the contractor’s control.

In the case where your contract includes a price-escalation clause and the pre-agreed thresholds or percentages of the baseline cost estimates have been exceeded due to the consequences of the pandemic, you can negotiate a price increase with your client. Depending on the wording of the clause, you may be required to supply the client with sufficient evidence in relation to such a price increase.

Read Your Insurance Policies

In addition to your construction contract, you should also carefully review any insurance policies that you have purchased and consult the relevant agents if you have any doubts. Several insurance companies have been advising their clients that there is no coverage for any COVID-19-related cases, either on the basis that the virus does not result in any physical property damages necessary to give rise to coverage, or simply because the coronavirus is excluded from their insurance coverage. However, various jurisdictions have introduced regulations that require insurance providers to cover some losses related to COVID-19.

Therefore, if you happen to cause harm to a third party due to you having failed to exercise reasonable care in executing and enforcing measures to minimize the risk of exposure to the virus and the third party decides to file a bodily injury claim against you, you will likely be covered by your general liability insurance.

You should also review your workers’ compensation insurance if you have one. It may or may not protect you against any bodily injury claims related to COVID-19 as most worker compensation insurance does not cover any ordinary disease of life, which is related to diseases that the general public is also exposed to. If you are unsure, you must contact your insurance provider.

Seek Relief from The Bank and Government

Apart from your contract, you should look for other potential sources of relief, and fortunately, the federal and state governments have introduced various financial aids for COVID-19-affected businesses. For instance, the U.S. Small Business Administration is offering an SBA loan for which various types of businesses are qualified to apply. The loan has an interest rate of only 1% and requires no collateral. Additionally, many major cities have also released their own financial relief packages. If you are based in Chicago, you may be eligible for the city’s Chicago Small Resilience Fund. This facility comes with a 1% interest rate for the first 18 months and a longer maturity period of 5 years. In this time of crisis, you should look for and consider all of the available options that may help you survive through this pandemic, which has no end in sight, with as minimal losses as possible.

Contact Consult Leopard for Construction Owner’s Representative Services now.