COVID-19 Construction Alert

As the Federal Government and individual state governments are responding to the COVID-19 crisis, the impact on construction projects is also growing exponentially. The recent Order by Governor Wolf has left most construction projects and supply-side manufacturing off of the allowable list. While Executive Order 107 issued by Governor Murphy in New Jersey is not as encompassing and arguably allows construction projects to continue, labor and supply-side limitations will cause a significant negative impact on the projects

All levels of the construction industry will face immediate and continuing problems with delays and other impacts to the projects. Whether the projects are entirely halted under the Pennsylvania Order or impacted less directly in New Jersey (which still may reduce the number of businesses allowed to remain active), problems will exist with regard to progress and delays, material and labor shortages, financing pressures, delays in payment and potential cost increases for materials, among others.

Those in the industry experiencing any of these problems, or in anticipation that the COVID 19 governmental and societal reactions will lead to problems should take immediate and pro-active measures:

• Carefully review your contract documents, paying particular attention to certain terms, including force majeure clauses (dealing with “Acts of God” and governmental actions that delay the project), delay provisions including notice requirements, payment terms, change order provisions regarding cost increases and delays, liquidated damage terms and project suspension and termination for convenience terms;
• Send out written notices of delay, consistent with your location within the hierarchy of the project;
• Document all cost increases and delays attributable to the restrictions;
• With respect to materials, assess whether there will be cost increases and issue the appropriate notices to either advise of them or to reject them;
• Start a dialog with any financiers involved with the project to seek re-structuring;
• If payments are being withheld from you, consider filing a construction! n lien if it is available to you;
• If you are the “Developer” and the anticipation was to turn the project over to tenants or ultimate purchasers, review the leases, sales agreements, or Public Offering documentation to assure that you place the ultimate users on notice of the delay and protect your rights;
• If the project has been suspended, make an assessment of what to do with labor to be fair to your workers and make sure that you will still be able to have them available when the restrictions ease up but are not unnecessarily paying for idle workers.

Understand, that simply because a project is slowed or stopped due to COVID-19 restrictions and their impacts, your right to payment for work performed and your obligation to make payment for work performed will in most instances not be affected.

For further information on these and other issues affecting the construction industry as a result of the COVID-19 phenomenon and governmental imposed restrictions, please contact James Landgraf or Mark Schiavo.