In a March 19 webinar from the American Subcontractors Association, Brian Wood, partner with Smith, Currie & Hancock LLP, offered tips for subcontractors as they navigate construction market disruptions caused by the coronavirus.
Wood took an in-depth look at the contract and legal considerations for subcontractors as they face potential challenges, from project delays to materials cost escalations to health and safety concerns. Window + Door presents four key takeaways from the webinar—immediate action items for contractors and other subs, as they work to protect themselves.
1. Review health and safety recommendations and requirements.
The top consideration for contractors is determining how to protect the health and safety of employees during the COVID-19 outbreak. It is a difficult decision-making process as to when to send people to jobsites,” says Wood. “There is no bright line.”
Companies should ensure they are following recommendations from the CDC and meeting requirements from OSHA, Wood says. They should also contact state health officials for additional guidance. “There are some directives in some states that are mandates. Otherwise, they are guidelines,” he says.
2. Examine project contracts.
How can companies protect themselves in the event of project delays, suspensions or cancellations? “We should spend some time now examining our contracts [for] every available form of relief,” Wood says.
Wood notes several contract clauses that could offer relief: force majeure clauses, delay provisions, changes and claims clauses, suspension of work clauses, termination for convenience clauses and escalation clauses. Contractors should also consider impracticability, which excuses performance in face of conditions of which the company had no control.
3. Contact suppliers.
How will COVID-19 impact material supply for projects? Many contractors say they are concerned they will see delays and/or price escalations. Wood recommends companies reach out to their suppliers now. “Notify your GCs as soon as possible if there is even a question,” he says. “Erring on early notice is where we want to be.”
Several contract clauses could provide protections for subcontractors in the event of material delays or price escalations, Wood says. They include the aforementioned suspensions and terminations clauses in addition to indemnification clauses.
4. Review insurance policies.
Insurance may also provide some protection to address delays and other impacts of COVID-19 on business, Wood says. “Contact your brokers to see whether you have coverage and, if so, if there are limits,” he says.
He also recommends that subcontractors incorporate insurance protections into contracts that are being negotiated for upcoming projects. The protections could address delays and other impacts. “It’s no longer unforeseeable that you may be impacted,” he says. Things to include: disruptions to material and/or equipment supply, unavailability of labor and quarantines. “Include that broad pandemic or epidemic provision going forward,” he says.
The ASA webinar, “Practical Considerations for Subcontractors Dealing with Coronavirus,” is available for viewing and download here.