The impact of coronavirus crisis on the construction industry varies significantly from state to state, as each state’s social distancing measures and shelter-in-place orders treat the construction industry differently. As the country returns to business, states like Ohio, where construction was deemed essential and allowed to continue, will have fewer issues to address as compared to states like Pennsylvania, where all construction stopped for several weeks under government orders. Nevertheless, there are a number of issues that all participants in the construction industry must be aware of as the country begins to return to some sense of normalcy.
- Safety: First and foremost, the safety of all participants and the general public must be of utmost importance as it always is for the construction industry. That should include health checks for workers as they return to work to identify potential exposures as soon as possible. Employers should also ensure the availability of adequate personal protective equipment (PPE). That will bring new challenges as other industries come back online and those employers now compete with construction employers for the purchase of PPE where they previously did not need or use it. Employers should also consider social distancing (and whether it is aspirational or mandatory), as well as potentially using staggered shifts to help with that distancing (and the cost and schedule impacts of doing so). Again, the PPE and social distancing requirements for projects will vary from state to state.
- Availability of materials and labor: As projects come back online, industry participants must address the availability of materials and labor. That will present particular challenges as various states return to work at different times as materials are often fabricated in other states and then shipped to project locations. Similarly, work crews, design professionals, manufacturer’s representatives, and other individuals traveling from other states to work, perform inspections, start up equipment, and the like may face travel restrictions that will impact costs and schedules.
- Adjustments and claims: There are sure to be various requests for adjustment and/or claims resulting from the coronavirus impacts. It will be important for all industry participants to understand the relevant contract provisions, including force majeure and notice provisions, and to perform the required schedule analysis to determine the full extent and responsibility for all schedule impacts. The affected parties should also consider what role, if any, the applicable insurance policies may play with respect to any losses resulting from COVID-19 impacts. That could include business interruption, builder’s risk, and other similar coverages.
- Financing: Financing for projects will also be a critical issue. That includes both ongoing projects and future projects where lenders and other financiers may reconsider their prior commitments based upon revised outlooks for the economy in general and/or the need for the facility that was to be constructed. Contractors should understand their ability to secure adequate assurances that the funds are, in fact, available for the work being performed. Again, all parties should understand their rights under the applicable contracts.
- Plan for the future: As participants consider the immediate needs and impacts, they should take this opportunity to plan for the future. Everyone should consider what they have learned from this pandemic and what processes and procedures they can put in place to better address things if they find themselves in a similar situation in the future.
- Peter D. Welin