When I elected to cover this topic in early March 2020, few anticipated the breadth and scope of the crisis facing the construction industry. So, I hope I can be forgiven if anything that follows is no longer relevant or topical. But, here we go.
What started as an overseas health crisis has quickly escalated into a global pandemic. Local, state, and national responses are widespread, total, and indefinite, leaving construction contractors and the business community at large analyzing the next right move and the long-term consequences.
In the following best practices and analyses, perhaps some value can be gleaned, affording companies the ability to best respond now and to prepare for how to get back to normal once this storm passes.
Nathan Jurowski, William Mitchell 2009, is the executive director of Building Advantage, advancing the interests of the men, women, and companies in union construction in the greater Milwaukee area.
General Impact on Construction
The general response to COVID-19 by the building community is a mixed bag at best. All communities are bracing for impact, with larger cities and communities expecting indefinite delays.
In Chicago, contractors are trying to limit the impact by introducing staggered workdays, infrared technology to monitor employees’ body temperatures, and working with the city to loosen early morning construction restrictions.1
It’s not a stretch to argue that the communal reactionary response and indefinite nature of the crisis are demonstrative examples that this event was unforeseeable and out of the contractor’s control.
Pointing to already thin margins on many projects, the National Association of Industrial and Office Properties (NAIOP) cites to material, equipment, and labor supply as key factors that could drive up costs and result in significant project delays.2
Cities like Boston have taken the extreme step of issuing a city-wide, stop-work order, and locally investors are skittish.3 Significant magnet projects like the Wisconsin Center are delayed indefinitely amid travel and hospitality uncertainty.4
As national and local voices urge restraint on project closures,5 and some declare that an overreaction could lead to bankruptcy for contractors,6 contractors can apply best practices to keep jobsites running safely.
Personnel and Safety
In a recent, widely circulated notice, the Center for Construction Research and Training (CPWR) and North America’s Building Trades Unions (NABTU) provide – in addition to general guidelines – construction-specific precautions, including:
Do not go to work if you are feeling sick.
Do not shake hands when greeting others.
Try to stay six feet away from others on the job site, including during morning gatherings, meetings, and training sessions.
Avoid contact with sick people.
Avoid touching your eyes, nose, or mouth with unwashed hands.
Cover your mouth and nose with tissues if you cough or sneeze or do so into your elbow.
Clean your hands often by washing them with soap and water for at least 20 seconds or using an alcohol-based hand sanitizer that contains 60% to 95% alcohol. Soap and water should be used if hands are visibly dirty.
Clean hands after going to the bathroom, before eating, and after coughing, sneezing, or blowing your nose.
Employment law presents its own challenges but, with proposed legislation changing or being enacted daily, it would be impractical to attempt a thorough review of the relevant areas (i.e., NLRA; OSHA; FLSA; ADA; FMLA; WARN Act; HIPPA; Federal Contractor Paid Sick Leave Title VII; WI FMLA, Unemployment Insurance, and Workers Compensation).
Labor relations is even folded into the mix of this elaborate fruitcake of a gift we’ve all just received. In consideration of when work picks up again, parties to a collective bargaining agreement (CBA) are permitted to agree upon certain exceptions to workweeks that exceed the FLSA standards (see 29 U.S.C. 201, §207. Maximum Hours). This appears to provide labor and management an expedited path to get back to normal. In addition, with social distancing preventing bargaining parties from meeting in person, MOUs may be necessary as several CBAs are set to expire June 1, 2020.
Clients Relations and Contract Provisions
Supply chain disruption and labor shortages will prove the greatest strain on schedules, requiring heavy reliance on contract provisions or negotiating new terms to allow the relationship to continue.
Construction may be local, but supply chains are global. At the time this article was written, U.S. borders to the east, west, north and south are all but closed. All contractors should review their Escalation Provisions to assess the degree of protections they may provide, and whether more reasonable terms need to be renegotiated.
Damage for delays are of obvious primary concern, with the presence of standard force majeure clauses likely affording contractors additional time, due to excusable delay that is outside the contractor’s control. It’s not a stretch to argue that the communal reactionary response and indefinite nature of the crisis are demonstrative examples that this event was unforeseeable and out of the contractor’s control.
It may also be helpful to think back to first year law school, Contracts 101, for the contractual defense theories of impossibility and commercial impracticability. Our friends at Michael Best have provided a quick refresher on these and the preceding topics as they relate to COVID-19 in their article, COVID-19 and Construction Projects: Who is responsible for Delays and Cost Increases?
Going forward, all new construction contracts should include COVID-19 related force majeure clauses, with the following considerations, complements of ConstructionDrive:
What events are considered force majeure?
Who is responsible for suspending performance?
Who is allowed to invoke the clause?
Which contractual obligations are covered by the clause?
How should the parties determine whether the event creates an inability to perform?
What happens if the force majeure event continues for more than a specified period of time?
Sound business practices should always prevail, with a thorough review of such items as:
Also, it's best to ensure that any necessary amendments are properly memorialized.
Unfortunately, many of these issues cannot be resolved short of litigation. However, as a necessary backstop, it is also essential to consult various applicable insurance provisions, such as business interruption coverage.
Conclusion: Focus on Where You Have Control
Preparing for uncertainty may feel like a fool’s errand, but focusing on the areas where you have control is essential to weathering this storm. Implement sound safety practices with personnel, and rely on government relief where available. Pour over agreements, supporting documents, and insurance policies for obligations and protections. And negotiate with owners and stakeholders to establish an equitable course of action.
Certainly, a more comprehensive analysis of each of these topics is warranted. However, given the fluid nature of the response to the COVID-19 pandemic, contractors are likely better served with a quick review of the basics, augmented by their own business judgment.
1 Coronavirus imperils Chicago’s more than decadelong construction boom. ‘We’re mentally preparing for a shutdown’, Chicago Tribune, March 18, 2020.
2 Taking the Pulse of Commercial Real Estate in the Face of Coronavirus Outbreak, National Association of Industrial and Office Properties, March 10, 2020.
3 Investor pulls out of Waukesha apartment development due to concerns about coronavirus, economy, BizTimes, March 12, 2020.
4 Wisconsin Center’s $425 million expansion delayed indefinitely by coronavirus pandemic’s financial turmoil, Milwaukee Journal Sentinel, March 20, 2020.
5 Evers declares ban on gatherings of 10 or more doesn’t apply to construction, The Daily Reporter, March 20, 2020.
6 AGC: Halting construction over COVID-19 could ‘bankrupt’ contractors, The Daily Reporter, March 17, 2020.