NOTE: This is part four of a series designed to present thoughtful topics on the effects of COVID-19. This edition focuses on the impact of the pandemic on active construction projects.
As the headlines continue to rock an already stressed construction industry, the COVID-19 pandemic will continue to cause further impacts, varying in both type and magnitude, on active project sites, both immediately and for the months to come. Over the last few decades, the modern construction industry is accustomed to, and relatively resilient to, project-specific impacts (excluding the late 2000s financial crisis). For the last 100+ years labor and material shortages, material recalls, severe weather patterns, natural disasters, inflation, labor disputes, catastrophic on-site accidents, and an insufficient labor pool to meet project demand, have all been a part of construction projects and related contractual relationships. However, the construction industry is not accustomed to, and was not prepared, to absorb a blow from a worldwide pandemic with the magnitude of COVID-19.
When evaluating your options as an Owner to suspend an active project, consider the following:
When the decision is made to suspend the activities of the project, clear communication is key. Provide written notice to all design, construction, and consultant team members that includes, at a minimum, the provisions set forth in each agreement and prescribed delivery method of notices along with the following basic information:
Documenting the status of the “Work in Place” may seem like a daunting task, but remember, if we know where we left off, we will be better positioned to re-start. Below are select data points to gather when embarking upon a suspension:
Photographic documentation of Project site
Collect current project controls documents
There can be financial benefits, as well as impacts, to the implementation of Project suspensions. Consideration should be given to the costs associated with a Project suspension, including but not limited to:
The period of suspension is typically defined in parties’ agreements. Suspensions, regardless of cause, may become terminations of existing contracts between some, or all, of the relevant parties at some point. It is important to understand these key contractual clauses to ensure all vested parties are aligned and aware of stipulated contractual dates and notice provisions. However, as is the case in many traditional situations, termination should never occur without a great deal of diligence and forethought.
It is important to remember that everyone on the project team is impacted and has concerns when a project is suspended. Consider maintaining periodic update calls to keep all project participants up to date on the status of the suspension.
As the timing becomes appropriate to resume the project, the Owner must be prepared to address outstanding costs associated with the suspension. Further, as the Owner, you will likely be required to, or requested to, provide information to support the financial capacity of your organization to complete the project.
Project suspensions are never ideal but, in instances like what occurred with COVID-19, they may be a necessary action when responding to large-scale disasters, pandemics, or economic hardships. Knowing your contractual obligations, key dates, notice provisions, and taking a principled and measured approach will ensure a higher degree of success when the time comes for a suspended project to restart and resume on-site work.
J.S. Held is a global consulting firm with expertise in construction, environmental health & safety, forensic accounting & economics, water & fire restoration, equipment, and forensic architecture & engineering matters.
Our Global Advisory Services Division specializes in matters involving project and program management, construction claims and disputes, contract management, surety, and arbitration and litigation proceedings.
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View article one: "The Effect of COVID-19 on the Insurance Claims Market"
View article two: "The Effect of COVID-19 on Time Element Claims"
View article three: "The Effect of COVID-19 on Business Interruption Losses"
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