Effects of COVID-19 On The Construction Industry
August 27, 2020
As the COVID-19 pandemic continues to impact so many industries, the construction and design industries are no exception. We have interviewed major contractors and design professionals throughout the state of Florida and New Jersey to discuss the practical impacts of the pandemic on many projects. The primary impacts of COVID-19 that were identified in our interviews are suspension, lost productivity and material shortages.
Many contractors are very concerned that as projects are suspended or slowed, there is the potential that idled workers will not return to their projects. Due to cash flow concerns as many contractors are face challenges onboarding projects crew continuity is becoming an impediment to project delivery. For example, where previously contractors had a pool of skilled full-time employees or independent contractors assigned to projects those same projects are being staffed temporary worker, many of whom are added to projects as others leave for other jobs. The Impact on labor due to the COVID-19 pandemic is unprecedented, however we are finding that many firms are adapting and finding ways to mitigate the impact upon their projects. Specifically, firms are mandating that employees receive regular tests, and should anyone test positive that person is required to work from home if possible. Similarly, subcontractors are required to be tested, and should any subcontractor or subcontractor employee refuse to be tested, that subcontractor can be terminated from their contract. It’s important for all contractors to include language within their contract that allows for the termination of the contract for convenience as this provides the primary legal means for the termination of a subcontractor who refuses to test for COVID-19 and could potentially expose other personnel to the disease.
Many contractors whom we interviewed mentioned they are having problems with material delays, which is effecting critical path delays and delivery of projects on time. Specifically, many firms are finding it difficult to acquire specialized and prefabricated materials due to COVID-19 impacts at the production facilities. The range of materials impacted by COVID-19 includes everything from complex fabricated switchboards and other electrical equipment, to plumbing equipment, elevators, and prefabricated concrete. Impacts in the supply of these pre-fabricated items can have enormous impacts on the critical path of a construction project, and any impact must be analyzed individually based upon the type of item that has been delayed and where it fits in the critical path. Should there be a means of diverting resources elsewhere and prioritizing other portions of the critical path to save time and money, the contractor should take those means as is deemed prudent. Should a pre-fabricated item or material delay present such an impact that there is no way to alter the construction schedule then that impact must be documented by the contractor and form the basis of a future change order to the contract which will include both increased costs for a replacement item and additional labor, as well as an increase in the time allotted within the contract to complete the Project.
With regard to design professionals who have contractual responsibility to approve submittals of materials and products, COVID-19 related shortages also present a challenge. Design professionals may be confronted with unavailability of specified materials and proposed substituted materials by contractors that the design professional is either not familiar with or falls below the design intent. In these situations, the design professional may face a choice between accepting lesser quality materials or having potential Project delay attributed to his failure to approve submittals. In these instances, it is essential to inform the Owner of the ramification of the decisions being faced and document the file as to these communications.
Finally, because of these unique conditions and potential impacts associated with COVID-19, design may wish to insert Force Majeure provisions in their future contracts that preclude liability for external events that interfere with the design professionals ability to perform his duties in accordance with the contract or ordinary standard of care.
We at Shendell & Pollock have handled numerous bodily injury and wrongful death cases throughout Florida, New York and New Jersey, with over 30 years of experience. If you would like to discuss this alert or any concerns regarding defense of legal malpractice claims, contact Gary R. Shendell at firstname.lastname@example.org or William Convey at email@example.com.
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