This article was originally published May 22, 2020, as part of the Portland Business Journal’s “How Oregon Works” series.
The experts do not know what will happen next with COVID-19. There is no timeline for a vaccine, no evidence the virus will slow in summer, and no proof that people cannot get infected twice. But even without a clear plan, we know the economy must reopen, people must work again, and confidence needs to rebuild in financial markets.
In the construction industry, it is common to start projects before plans are complete. We are used to “uncertain times.” And we can make some educated guesses about what construction, construction contracting, and construction claims will look like over the next 12 months while we await a vaccine.
Jobsite Safety
While safety is always the top priority, the risk profile has expanded significantly to encompass “virus safety.” Staying six feet apart, wearing masks, washing hands, wiping touchpoints, and pumping hand sanitizer are here for at least several more months.
Most jobsites will include a subcontractor who provides daily health screening services for all workers. Gone — for now — are the days when you could power through a fever and get your work done. You will be sent home. And you won’t be allowed back until you have no symptoms or obtained medical clearance, which you may have to obtain virtually.
Architects, owner representatives, government inspectors, and others visiting the jobsite will also have to stand in line for a health screening.
All of this is a major inconvenience but a relatively minor impact to most projects.
More Liens and Claims
More troubling will be the increase in liens and claims. There will be a variety of reasons for the increase: suspensions and delays caused by state and local shutdown orders; unanticipated costs to preserve suspended jobsites; demobilization and remobilization expense; material production and delivery delays; manpower availability; extra costs for virus safety; labor inefficiency from social distancing; and tighter funding for change orders.
While every project is different and contract language varies, you should not count on being exonerated from — or compensated for — COVID-19 impacts. Arbitrators, judges, and juries will struggle with cost allocation where the losses are nobody’s fault. These claims will likely not be resolved until 2021 and the outcomes may be highly variable.
New Challenges in Contract Negotiation
Contractors, owners, and designers will be reassessing which clauses need more focused attention going forward. At a minimum, the following clauses will get reevaluated: force majeure; termination and suspension; consequential damages; liquidated damages and delay damages; price escalation; contingency; changes in law; emergencies; jobsite safety; insurance; unforeseen conditions; and claims for cost and time.
Expect to see some changes to traditional risk allocation, and possibly some new insurance products (and exclusions). Among other changes, force majeure clauses may be broken into tiers of risk with varying allocations to project participants at each tier. You may also see detailed clarification about which costs are reimbursable and which are not under a force majeure event. Within the next twelve months you will likely see new clauses dealing with COVID-19 as a “known unknowable” risk.
New Attitudes?
Despite the new grounds for disputes and the uncertainty that follows, we have also found a common enemy. We all hate the virus. We all know it’s not the other party’s fault. And most of the construction industry does not want to fight about it. This commonality appears to have bred — in some corners — an increased willingness to share in the burdens and risks that are ever-present in the construction industry.
Let’s hope that willingness outlasts the virus.