Due to Covid-19 Shelter-in-Place and Stay at Home Orders, The Time to Send Your Delay Notice Is Now
Now that the San Francisco Bay Area has been under a Shelter in Place order for a full week and the balance of California has joined us, the significant impacts of the COVID-19 pandemic to your construction projects are starting to be realized. While the various local and state wide orders all list construction, and especially public works construction, as essential services which may continue to operate during the shelter in place orders, that does not mean that you will not be experiencing delays. As with all delays, the time to send written notice, is when the you first have notice of the delay and its potential impacts. As the impacts of the Shelter in Place orders are now starting to be felt in the construction industry, it now time to send out your delay notices.
The Delay Notice that you want to send is informative in nature, and is the start of a process pursuant to your contracts. Your first steps in preparing the notice will be a review of the notice and delay related clauses in your contract. You need to review your contract specifically in relation to what the notice specifically needs to include, where the notice needs to be sent, and when it needs to be sent. Many contracts required notice to be sent as soon as you learn about an impact. You do not want to waive any potential claims relating to delays, by failing to send a timely notice. It is also important to note that your notice should not be adversarial. Everyone is being affected by Covid-19, and your contracting party will understand the impacts you are experiencing and should appreciate that you are being proactive in providing notice of the potential impacts this will have on your scope of work. Even if you have had telephone or in person discussions relating to potential delays relating to the pandemic, you should send written notice so that you avoid future legal complications that can arise from failing to send formal notice as required by your contract.
Delays and impacts associated with Covid-19 on your scope of work were not anticipated at the time your contracts were negotiated and entered into and these impacts are outside of your control and the control of the prime contractor and/or project owner. The extent of the delays and other impacts are at best unknown at this time, and as these are fact intensive inquires, you need to establish a method to track these delays. Consider establishing costs codes, maintaining separate files, and developing contemporaneous narratives so that you can track the delays and impacts, as they relate both to your budget and progress on completion. While the extent of the impacts in unknown, you do know what delays you are starting to experience, for example difficulties in manning the job, material and supply disruptions, delays associated with slow downs in progress due to social distancing of your workforce at the project.
Your notice should include discussions of the following:
- Time Extensions. While you may not know the extent of additional time that is required, you should include a statement that you are experiencing delays and that you will need an extension of the “Contract Time.” If your contract includes a force majeure and/or time extension provisions, review it to see if the language includes items such as epidemics; adverse governmental actions; unavoidable accidents or circumstances; and/or causes beyond the contractor’s control. These are all typically found in AIA, ConsensusDocs, and Government contracts. If your contract includes such excuses for delay, you should reference these in your notice. Your notice should specifically state and emphasize that the delays are a result of the Covid-19 epidemic and were unanticipated and are beyond your control.
- Delay Costs. Your contract may specifically state that you cannot recover costs associated with delays, regardless of the cause of that delay. Even if costs of delay are not recoverable under your contract, your notice should state that you anticipate that you will incur additional labor, material, and equipment cost associated with Covid-19. Other possible delays may result from an inability to obtain necessary inspections and approvals from county and local inspectors. You should be as specific as possible regarding the costs you are already incurring and the costs you anticipate you will incur. Include costs related to labor issues and material and supply chain issues. You should also explicitly state that you will provide ongoing updates as the additional costs incurred due to the pandemic and the ensuing delays become known. Continued notice of costs incurred will avoid any surprise and will hopefully result in project wide participation in cost mitigation efforts.
- Indication that You Will Provide Updates. Your notice does not need to, and likely cannot be a complete list of the impacts you are currently experiencing and will experience. Make and indication in your notice that you will provide periodic updates as more information on delays and impacts become known to you.
- Be as Specific to Your Contract as Possible. While it may be tempting to prepare a general notice that can be used on all of your projects, you will be best served by sending a specifically tailored notice for each project. Describe the specific cause and effect of how Covid-19 is directly impacting the project schedule and your costs. Where possible make reference the contract and your particular contractual performance. Again, full detail on all impacts is likely not possible, but describe the impacts you are aware of, and those that you anticipate, and commit to providing periodic updates.
- Project Suspensions. If your project has been suspended by governmental order, such as the current San Francisco Bay Area Shelter-in-Place orders, or by the owner or other authorities, provide a notice of project suspension as well. Some of the standard form contracts have particular suspension provisions that allow the contractor remedies if there is an extended suspension of the Work. For example, the AIA A201, section 14.1 permits a contractor to terminate a contract if the Work is stopped for 30 consecutive days through no fault of the contractor (or its subs) because:
- Does your contract require notice to be sent by a particular method? If so, follow that notice requirement. If you are unsure, then send the notice in a variety of methods to ensure it is received by your contracting party. At a minimum, I suggest sending it by email, overnight courier, and certified mail. Many contracts still have the certified mail requirement in them. Another alternative is to contact your contracting parties and confirm that they will accept service by email and waive any contractual requirements. This could be incorporated into your notice, and if used, I would be sure to follow-up to confirm receipt within a day or two.
- Explain impacts on project performance. Make the cause and effect tie in the letter regarding how the COVID-19 measures are directly impacting the project schedule and/or causing increased costs. This does not have to be a complete list, but put some effort into making the notice unique to the facts of your contract and your contractual performance. State that you will provide periodic updates
- Project Suspensions. You should also include in your notice if the project has been suspended, by the owner, or by the order of a state or local government agency. Again, it is important to review the particular terms of your contract, as some contract include specific rights to contractors and owners in the case of a suspension of work.
Remember, this is not an adversarial notice. The intent is to provide the formal contractual notice required so that you avoid legal issues related to delay as the Covid-19 epidemic and the project go on. This notice is intended to be the start of an ongoing communication about delays and resultant increased costs, so that to the extent possible the delays will be excusable, and you can potentially recover your additional costs.
This article, ©2020, was written by William C. Last, Jr. and Patrick J. Whitehorn. Mr. Last is an attorney who has been specializing in Construction Law for over 40 years. In addition to belonging to a number of construction trade associations, Mr. Last holds a California “A” and “B” license. Mr Last has been designated as a Super Lawyer and a Fellow, Construction Lawyers Society of America. Mr. Whitehorn has been practicing construction, and commercial litigation for over fifteen years. Both can be contacted at 415-793-7411 or 650-696-8350. A number of his past articles can be found on his website (lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.