May 20, 2020

Addressing COVID-19-Related Delays in Construction Contracts

You signed a construction contract in February. Then, in March, the world as we know it changed due to the COVID-19 pandemic. Whether you’re the project owner or the contractor, you may now face delays to your project due to government-imposed stay-at-home orders, supply chain disruptions or an inability to mobilize construction crews. So, are these COVID-19 related delays excusable? In other words, can the contractor receive extra time and money under the contract?

A Common Delay Provision — the AIA A201, 2017 Section 8.3.1

If you’re in the commercial construction business, one of the most commonly used series of construction contracts is the AIA 2017 “A Series” Owner/Contractor agreements, many of which incorporate the A201, General Conditions of the Contract for Construction. The A201 contains Section 8.3.1, Delays and Extension of Time — a section that has been the topic of much conversation in this current state of affairs.

Section 8.3.1 May or May Not Provide Relief to the Contractor

Section 8.3.1 does not contain the words “force majeure,” but it is considered to be the A201’s force majeure provision, as it provides for an extension of the contract time for excusable delay events, such as “labor disputes, fire, unusual delay in deliveries,…adverse weather conditions,” etc. In light of COVID-19, the glaring exclusion is the word “pandemic,” which is a term sometimes included in other force majeure provisions. However, as noted, Section 8.3.1 does consider an “unusual delay in deliveries” to be an excusable delay, and the section also contains some broad-form inclusions, such as “other causes beyond the Contractor’s control” and “other causes that the Contractor asserts, and the Architect determines, justify delay.” Whether these provisions will be interpreted to include COVID-19 is, at this point, anybody’s guess.

Options if You’re a Contractor

If you’re a contractor who signed a construction contract pre-pandemic, and you’re experiencing a pandemic-related delay, one option is to assert a delay under Section 8.3.1’s existing, albeit somewhat vague, delay provisions. This may give you more time, but it will not increase the contract sum. If a pandemic-related event has changed your scope of work, you may also submit a request for change under the contract documents’ change provisions, which may include an increase in the contract time and the contract sum. If you are about to enter into a contract for construction, try to negotiate an increase in the contract sum for pandemic-related force majeure events.

Options if You’re an Owner

If you’re an owner who signed a construction contract pre-pandemic, and a COVID-related event has caused a legitimate delay to the contractor’s critical path, it may be in everyone’s interest to negotiate a realistic extension of the contact time. However, under Section 8.3.1, the contractor is not entitled to additional compensation. If you don’t believe the critical path has been affected, a good argument is that “pandemic” is not a force majeure event under the contract, and thus no time extension may be granted. If you’re about to enter into a contract for construction, you can negotiate the specific exclusion of pandemic-related delays, or at least those that were known when the contract was made. If your contractor continues to demand concessions, you may consider offering carve-outs that provide for an extension of time (but not more money) where the contractor’s scope of work is altered by very specific events (such as shelter-in-place orders) caused directly by the pandemic and which are unknown when the parties enter into the contract.

Conclusion

COVID-19 related delays may or may not be excusable under your construction contract; it depends on the language and how that language will be interpreted. If you’re using the AIA’s A201 document, it is possible that the contractor may be eligible for an extension of time, but not for more money. If you’re entering into a contract for construction now, i.e. post-outbreak, there are steps that both the contractor and owner can take to protect their interests in response to pandemic-related delays.

This article summarizes content from Bruner & O'Connor on Construction Law. For more information on this topic, or for additional citations, see Section 5.

As the number of cases around the world grows, Faegre Drinker’s Coronavirus Resource Center is available to help you understand and assess the legal, regulatory and commercial implications of COVID-19.

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