AGC Webinar Recap: Latest Developments and Impacts on the Construction Industry
Mon Mar 23, 2020
The AGC of America hosted a webinar on Friday, March 20th addressing the latest economic, legislative and legal developments regarding COVID-19 and what that means for the construction industry.
The Economic Impact
Ken Simonson, Chief Economist of AGC of America, gave an overview of the organization’s recent survey, the purpose of which was to measure impacts thus far from COVID-19. Out of 909 responses, 28 percent of members reported an owner or government agency ordered a full or partial stop to current work; 11 percent have been ordered to suspend future work. Of those who have experienced project delays or disruptions, a number of causes contributed: 16 percent cited shortage of materials, equipment or parts; 11 percent cited shortage of craftworkers including subs; and, 18 percent cited shortage of government workers for approvals, inspections, etc. Fortunately, only 8 percent reported an infected individual on a job site. Additionally, 22 percent of survey responders indicated that suppliers have sent notice that deliveries will be late or cancelled.
In terms of the economic timeline, the industry has not been affected as immediately as hospitality, cruise ships and airlines. Mr. Simonson believes the bulk of construction projects will continue as long as government agencies in those jurisdictions are allowing work to continue and owners are allowing workers on site. So far, the number of jurisdictions prohibiting construction to proceed have been small. However, in some cases, owners may run into their own financial difficulties and operational issues which would cause delays in receiving payment.
AGC also expects some projects may be added as a result of COVID-19. Examples include additions to hospitals to allow for more space to handle patients, lodging for people who have been displaced or homeless, and manufacturing and scientific testing.
Updates on COVID-19 Legislation
Jimmy Christianson, VP, Government Relations for the AGC gave an update on what’s happening in Congress right now, in the context of the four phases.
On March 6th, the President signed into law a $8.38 billion Emergency Spending Bill, pumping billions of dollars into prevention efforts and research in hopes of quickly producing a vaccine.
On March 18th, the Senate passed “phase two” of Congress’ legislative efforts. In addition to other requirements and assistance, the Family First Coronavirus Response Act, H.R. 6201 requires employers with fewer than 500 employees to provide two weeks’ worth of paid sick leave if employees are unable to work because they are subject to quarantine or isolation, are experiencing symptoms of COVID-19, are caring for someone who is in quarantine or isolation, and/or have children in schools that have closed. Employers will receive tax credits to offset the costs of providing this paid leave. The act takes effect on April 2, 2020. To listen to the full section on government relations and family paid leave, you can listen to the recording here, beginning at minute 18.
Senate Majority Leader Mitch McConnell said the Senate will stay in session until “phase three” is passed. Talks are still fluid, but the White House is pushing for an additional $1 trillion to combat the economic effects of the virus, which also includes cash payments to some Americans. The measure also includes relief for small businesses and major industries hammered by the global pandemic. In addition to those things, AGC is looking to see if the plan will include cash deposits into federal construction accounts, highway trust funds, The Clean Water State Revolving Fund (CWSRF) program, and Army Corp Simple Works and Military Construction Accounts, as well as, Multi-employer pension and health plans that are very stressed right now.
The details of Congress’ “phase four” are unknown, but AGC is hoping it will include resources for infrastructure and pension funding.
COVID-19 Legal Impacts
COVID-19 may be considered a force majeure event. The key question is, will contractors be able to recover for delays and/or extra costs resulting from the pandemic. The language in your contract is key. For instance, AIA A201 General Conditions clause only has a catch-all for acts beyond your control…”as determined by the Architect.” If you are using ConsensusDocs, Section 6.3.1(j) contains specific language regarding epidemics and adverse governmental actions. While contractors may be “stuck” with the language in their existing contracts, contractors should carefully review any future contracts to see how the parties will deal with delays or additional costs caused by a force majeure event.
Proactive steps contractors can take under their existing contracts include:
- Give prompt written notice. Notice preserves your rights to seek adjustment of the contract price and/or time. Multiple or amended notices might also be necessary. Things are happening quickly, and so a notice initially claiming a force majeure event because of a supply chain back up, might quickly change to notice of delay or additional costs based on the government’s decision to stop work.
- Organize and Record. Document all facts related to the delay or changed condition, including the associated costs involved. You may not need to immediately present this information to the owner or government, but documenting such information in real time will help your chances of recovery down the road.
- Think about including a Price Escalation Clause like that included in ConsensuDocs 200.1. Such a clause can address increases in labor or material costs.
- Think about how other clauses in your contract might impact or protect you. For example, does your contract include certain safety provisions under which COVID-19 would require your workers to take additional precautions? What sort of indemnity obligations do you to the owner or general contractor if your lack of manpower causes delays?
Navigating the Outbreak in the Coming Weeks
Information about and the impacts of COVID-19 rapidly change each day. To help deal with uncertainties and keep the construction industry informed, Mike Kennedy, General Counsel, announced the AGC will be holding a comprehensive eight-part webinar series starting on March 23rd, at 2:00 p.m. EST.
The eight-part series includes the following:
- Part I: Your Federal and State Legal Obligation to Provide Paid and/or Unpaid Leave to Your Employees – Monday, March 23
- Part II: What the Federal and Many State Labor and Employment Laws are Likely to Require of Your Contingencies – Tuesday, March 24
- Part III: The Contractual and Related Legal Protections and Risks for Construction Companies – Wednesday, March 25
- Part IV: How to Protect Your People and Your Projects – Thursday, March 26
- Part V: The Components of a Comprehensive Project Continuity Plan – Friday, March 27
- Part VI: Insurance Coverage and Claims for Losses Resulting from the Outbreak – Monday, March 30
- Part VII: The Additional Pressures that the Outbreak Could be Putting on Your Information Technology – Tuesday, March 31
- Part VIII: What You Need to Watch, as the Outbreak Continues to Unfold – Wednesday, April 1
AGC asks that all members participate in their nationwide survey, so they can develop trendlines and plot the direction of the construction industry during this crisis. Please keep checking back at the AGC Resources Page as they will be adding information daily.
Additionally, if you require legal advice on an issue related to force majeure, contract delays, or any contract issues arising out of the COVID-19 pandemic, Oles Morrison Rinker & Baker LLP can help.