Subtle (and Not So Subtle) Effects of COVID-19 on the Construction Industry

Frank T. Cara | Troutman Pepper

When is it going to return to “normal”? We all have been asking that question. Well, for the construction industry, it may never return to “normal.” COVID-19 may have permanently changed the landscape of the construction industry in many ways. Depending on your perspective, many changes could be for the better. We may have to alter how we do business to address some new issues and business concerns. Here are just a few issues that the pandemic has brought to the forefront of our industry.

  1. Virtual Dispute Resolution: Social distancing and closure of the courthouses in many jurisdictions across the country caused numerous meetings, court appearances, depositions, mediations, hearings and arbitrations to be held virtually instead of in person. Once over the initial “discomfort” with using virtual platforms such as Zoom, Skype, BlueJeans, etc., the feedback from many in the industry is that this approach is incredibly efficient. Video conferences eliminate travel time and permit people to participate who would normally not be able to meet in person, due to distance or other commitments. We believe that the use of video conferencing has become entrenched into the daily routine. One additional outcome of this, that everyone needs to understand from the very beginning of a project, is the need to document everything — absolutely everything. Due to the difficulty of meeting in person, we have seen many more disputes initially handled on paper submissions. It is easier to be successful in your claim if it is well-documented. This was true before COVID-19, but now is even more critical.
  2. Work Backlog: Early on in the pandemic, during the initial shutdowns and stay at home orders, private work projects came to a halt, while many public work projects were deemed essential. Not only did these projects proceed, but some public agencies took advantage of the lack of commuters and quiet streets to add work to existing contracts. Now we are seeing a distinct turn. While stay at home orders are being lifted and private construction is returning to pre-pandemic levels, the pandemic has devastated municipal capital budgets. We have seen contracts terminated or suspended, work deleted and future tenders put on hold. For public contractors, as the current backlog of work is burned off, the scarcity of future work can significantly strain cash flow and possibly the viability of the company. It is imperative to remain disciplined in bidding, watch your margins, stay within the geographical footprint and industry sectors. This is not necessarily the best time to expand. Sometimes the best project is the one you did not win.
  3. Employee Safety and Unions: Skilled craft persons working side-by-side on a project has always been the cornerstone of construction. Social distancing is not always possible, and people are worried about contracting COVID-19. This has heightened the health and safety protocols on projects. From additional PPE, social distancing and limiting the workforce on site, these protocols have possible negative effects on productivity and costs. Reduced efficiency and productivity directly translates into increased costs. These additional costs and productivity impacts have to be built into future bids. Additionally, these new necessary worker protections may inject new life into the power of unions. Will this be the rebirth of union strength in certain parts of the country?
  4. Material Procurement: The pandemic has slowed and shut down factories throughout the world. This has caused a scarcity of raw materials and equipment, causing increasingly long lead times and higher costs. It is unclear when the supply chain will recover. These factors need to be accounted for when developing schedules and budgets. You should consider going beyond your regular suppliers, and engage new and multiple distribution chains and suppliers, and even enter into long-term supply contracts to protect yourself from price swings.
  5. Legal Notices/Contractual Issues: The pandemic exposes (no pun intended) contractors to new and different claims and disputes related to COVID-19 You must thoroughly review your contract to assure you provide timely notices of all time and cost impacts, and comply with all claim documentation requirements. Additionally, as noted above, the pandemic has caused a significant increase in contract terminations and force majeure delays. You must understand what you can and cannot recover under your contract, and make sure you document your claims well and make all timely submissions.
  6. Health Insurance and Paid/Unpaid Medical or Family Leave: Local, state and federal responses to the pandemic have impacted the health care and leave benefits provided to workers. A flurry of new initiatives provide paid and unpaid medical leave related to COVID-19 exposures, mandatory quarantines and child and family care requirements. The conflicting requirements among overlapping local, state and federal mandates have created conflicts between employers, unions and benefit providers as to who is the responsible party to cover the additional costs of medical testing and leave. Having an understanding of all insurance policies, coverages, union agreements and your obligations as an employer is vital. It is critical that you take a team approach to assuring compliance with the myriad of benefits.

This is just a partial list of the impacts on our industry. 

Witnesses During COVID Times: Remote Depositions, Virtual Testimony, and Unavailability

Steven K. Davidson, Michael J. Baratz, Jared R. Butcher and Molly Bruder Fox | Steptoe & Johnson

First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. 

As the COVID-19 related health risks posed by in-person proceedings continue to persist, courts and litigants must decide how best to proceed with civil litigation—in-person or virtually. While parties and courts will generally prefer in-person depositions and testimony, existing procedural and evidentiary rules permit remote depositions (Fed. R. Civ. Pro. 30(b)(4)) and video conference in-court testimony (Fed. R. Civ. Pro. 43(a)) or provide for the ability of parties to admit former testimony of “unavailable” witnesses (Fed. R. Evid. 804).  

Remote Depositions (Fed. R. Civ. Pro. 30(b)(4))

Rule 30(b)(4) of the Federal Rules of Civil Procedure provides as follows:
“(4) By Remote Means. The parties may stipulate—or the court may on motion order—that a deposition be taken by telephone or other remote means. For the purpose of this rule and Rules 28(a), 37(a)(2), and 37(b)(1), the deposition takes place where the deponent answers the questions.” Importantly, if the parties agree by stipulation, a deposition may be taken by remote means without any court intervention.  

Given the current circumstances of COVID-19, recent cases have explained the standards by which courts will consider motions for depositions by remote means. Courts engage in a two-part inquiry: (1) the party seeking remote depositions must advance a legitimate reason; and (2) the burden shifts to the opposing party to make a “particularized showing” that remote depositions are prejudicial. Swenson v. GEICO Cas. Co., No. 219CV01639JCMNJK, 2020 WL 4815035, at *2 (D. Nev. Aug. 19, 2020) (internal citations omitted). If the party opposing remote depositions cannot show a “particularized showing,” then the court should grant the motion. Id. 

Courts across the nation have recognized “pandemic conditions” and “physically distancing orders related to the current pandemic” as legitimate reasons for holding depositions remotely. Swenson, 2020 WL 4815035, at *5; Lee v. Dennison, No. 2:19-CV-1332-KJD-DJA, 2020 WL 4809430, at *4 (D. Nev. Aug. 18, 2020) (“[I]n light of the circumstances occurring around the world with the COVID-19 pandemic, the court will permit the deposition to be conducted via remote means . . . .”); Chase-Morris v. Tubby, No. 65927/2019, 2020 WL 4516920, at *4 (N.Y. Sup. Ct. Aug. 3, 2020) (“New York’s trial level courts are in accord . . . [and] conclude that virtual depositions do not cause undue hardship in light of the technology currently available and the serious health risks posed by the COVID-19 virus.”).  

In-Court Testimony by Remote Means (Fed. R. Civ. Pro. 43(a)) 

Not only are courts authorizing deposition by remote means, they also are permitting testimony in court by virtual means. Rule 43 of the Federal Rules of Civil Procedure provides that “[a]t trial, the witnesses’ testimony must be taken in open court unless a federal statute, the Federal Rules of Evidence, these rules, or other rules adopted by the US Supreme Court provide otherwise. For good cause in compelling circumstances and with appropriate safeguards, the court may permit testimony in open court by contemporaneous transmission from a different location.” Id. (emphasis added). 

The Advisory Committee Note on the 1996 Amendment comments that
“[c]ontemporaneous transmission of testimony from a different location is permitted only on showing good cause in compelling circumstances. The importance of presenting live testimony in court cannot be forgotten. The very ceremony of trial and the presence of the factfinder may exert a powerful force for truth telling. The opportunity to judge the demeanor of a witness face-to-face is accorded great value in our tradition. Transmission cannot be justified merely by showing that it is inconvenient for the witness to attend the trial.”

As if the Committee predicted a pandemic, it found that “[t]he most persuasive showings of good cause and compelling circumstances are likely to arise when a witness is unable to attend trial for unexpected reasons, such as accident or illness, but remains able to testify from a different place. Contemporaneous transmission may be better than an attempt to reschedule the trial, particularly if there is a risk that other—and perhaps more important—witnesses might not be available at a later time.” 

Courts have started to hold bench trial as permitted under Rule 43(a) taking testimony via “contemporaneous transmission.” See Gould Elecs. Inc. v. Livingston Cty. Rd. Comm’n, No. 17-11130, 2020 WL 3717792, at *4 (E.D. Mich. June 30, 2020) (proceeding with a bench trial via virtual testimony); In re RFC & ResCap Liquidating Trust Action, ––– F. Supp. 3d ––––, ––––, 2020 WL 1280931, at *2, *4 (D. Minn. Mar. 13, 2020) (“COVID-19’s unexpected nature, rapid spread, and potential risk established good cause under Rule 43(a) for conducting the final two days of a six-week bench trial by videoconference.”); Argonaut Ins. Co. v. Manetta Enters., Inc., No. 19-000482, 2020 WL 3104033, at *2-3 (E.D.N.Y. June 11, 2020) (exercising court’s discretion under Rule 43(a) over one party’s objections to order that the entirety of a three-day bench trial be conducted via videoconference). As the District Court for the Eastern District of Michigan commented: “It remains uncertain when the courthouse will reopen to staff members, let alone resume public proceedings. In light of the grave and unprecedented public health concerns at issue, it is unlikely that an in-person bench trial could safely and realistically occur in a courtroom in the foreseeable future. . . . Consequently, proceeding with a bench trial by way of videoconference is preferable to the uncertainty of awaiting the reopening of the courthouse to the public.” Gould Elecs. Inc., 2020 WL 3717792, at *4.4. 

Arbitration tribunals have taken a similar approach, according to a recent post on Kluwer Arbitration Blog, by holding virtual hearings.

“Unavailable” Witnesses (Fed. R. Evid. 804) 

In addition to facilitating live testimony via remote means, the “unavailability” hearsay rules permit the use of deposition testimony when a witness is considered unavailable due to illness. Federal Rule of Evidence 804(a)(4) provides that hearsay is not excluded if the declarant during the COVID-19 pandemic “cannot be present or testify at the trial or hearing because of death or a then-existing infirmity, physical illness, or mental illness . . . .” Fed. R. Evid. 804(a)(4).    

Whether or not a witness is unavailable for purposes of the rule is largely a fact-based inquiry and the burden of proof falls on the proponent of the hearsay evidence, Lamonica v. Safe Hurricane Shutters, Inc., 711 F.3d 1299, 1317 (11th Cir. 2013) (). Additionally, proponents of hearsay that seek to have a witness deemed unavailable due to illness must provide real medical evidence of the witness’s infirm condition. United States v. Yida, 498 F.3d 945, 962 (9th Cir. 2007). However, even a simple doctor’s note attesting to the witness’s inability to testify will suffice. See Finzie v. Principi, 69 F. App’x 571, 573 (3d Cir. 2003) (affirming the district court’s “respectful deference” to a doctor’s note stating that the witness’s medical condition rendered him unavailable to testify); United States v. McGuire, 307 F.3d 1192 (9th Cir. 2002) (finding it appropriate for the district court to have relied on a doctor’s note stating that the 28-weeks pregnant witness was unable to endure the stress of testifying). 

In deciding whether or not a witness is unavailable under Rule 804(a)(4), some courts consider several factors. These include: “the nature of the infirmity, the expected time of recovery, the reliability of the evidence concerning the infirmity, and other special circumstances.” McGuire, 307 F.3d at 1205. In addition, some courts also consider the importance of the absent witness to the case and the nature and extent of the prior cross-examination. Ecker v. Scott, 69 F.3d 69, 72 (5th Cir. 1995); see also United States v. Bremers, 54 F. App’x 591 (5th Cir. 2002); United States v. Faison, 679 F.2d 292, 297 (3d Cir. 1982). 

Availability under Rule 804(a)(4) also turns on the witness’s ability to testify, which can be determined by the severity and duration of the illness. Generally, the rule suggests that witnesses should testify unless doing so would “seriously damage their already precarious health.” United States v. McGowan, 590 F.3d 446, 454 (7th Cir. 2009); see also 30B Jeffrey Bellin, Federal Practice & Procedure § 6967 (2020 ed.). 

Given the fact-based nature of the Rule 804(a)(4) inquiry, courts are likely to reach different results depending on a witness’s situation during COVID-19. There are those who are at a normal risk, are not sick, and are comfortable traveling. There are those who are at a normal risk, are not sick, but who are afraid of traveling. There are those who are not sick but have comorbidities that put them at an increased risk of severe illness. There are those who have mild cases of coronavirus. And there are those who are currently hospitalized, or who have been recently hospitalized, with the coronavirus. Courts will likely weigh whether the witness is simply trying to avoid testifying, which would not amount to unavailability, versus particularized, and justified concerns. Rule 804(a)(4). 

Some people, while presently not sick with the coronavirus, may have other conditions that put them at an increased risk of severe illness or death should they contract it. In fact, over 86% of people who have died from coronavirus had at least one comorbidity. Thus, having a comorbidity puts those people at significant risk when traveling and interacting with others. As in Yida, while a witness may have a condition that puts him at increased risk of severe illness or death, it is not sufficient for him to just say that he has a condition; rather, in order for the court to consider deeming him unavailable, there must be actual medical evidence of the condition. With such proof, the factors discussed previously (the nature of the illness, the duration of the illness, the reliability of medical evidence, and special circumstances), tend to weigh in favor of considering the witness with a comorbidity unavailable. The nature of the “illness” in this case is a comorbidity which puts the witness at an increased risk of severe illness or even death.   

While just having a condition that makes traveling, or life in general, riskier for the witness may not always be sufficient for unavailability in normal times, the world is in the midst of a pandemic and is without a vaccine for this particular illness. People in general, and especially people with the conditions mentioned above, are being strongly encouraged to stay home and to take extra precautions when around other people. Given these unprecedented circumstances, it would seem likely that a court would deem someone with a comorbidity unavailable under Rule 804(a)(4) given the significant risks that travel and exposure to others present to them at this time. 

Most people infected with the coronavirus only experience a mild sickness—out of every 100,000 people in the United States, only 113.6, or 0.11%, are hospitalized. Those fighting a mild case of the coronavirus typically recover within one to two weeks and do not require a hospital stay. Even though ordinarily these symptoms may not excuse live-testimony, it is likely that a person who has COVID-19 would be deemed unavailable.   

Throughout the coronavirus pandemic, special attention has been paid to those who are not sick themselves but who have a responsibility to care for another. With respect to whether these caregivers can be considered unavailable under Rule 804(a)(4), the relevant question is whether Rule 804’s five criteria for unavailability are exclusive. The discussion and holdings in Acosta and Nelson seem to indicate that the answer is yes, Rule 804’s criteria are exclusive. Arguably, because the Rule explicitly lists five specific criteria for unavailability, it does not include any additional criteria—reasoning which both cases seem to support. On the other hand, while there is no case law supporting the proposition that sickness of another falls within Rule 804’s unavailability criteria, courts could be more open to deeming caregivers as unavailable given the exceptional circumstances.   

An additional consideration arising from the coronavirus pandemic is that many states require those traveling from certain other states to self-quarantine for a period of 14 days before entering society within that state. However, there is no law discussing the impact of state travel restrictions on unavailability under Rule 804. In the situation where a witness is required to quarantine for 14 days before testifying, it may be a better alternative to consider allowing them to testify via video conference, as discussed above.

How to Prepare for Potential Construction Disputes Resulting From COVID-19

Helga A. Zauner and Sonia Desai | Construction Executive

Every industry has been affected by the COVID-19 pandemic, and construction is no exception. While construction work was deemed essential in some places, it has been limited only to pandemic-related projects in others.

In the current climate, construction companies face a myriad new challenges, including concerns about health and safety, delays resulting from employee illnesses, supply chain disruptions and increased prices for materials, as well as contract delays or cancellations by concerned contract owners. Contractors must keep their employees safe and institute what could be costly best-practice measures, while facing potential claims from employees if they get sick due to a company’s perceived lack of response to the dangers of the coronavirus.

Stakeholders in the construction process need to prepare for potential disputes and understand their rights and responsibilities. This includes understanding applicable clauses in construction contracts and subcontractor agreements as well as business interruption clauses and other provisions in insurance contracts. Stakeholders may need to seek professional counsel to help them understand their rights and responsibilities in potential disputes.

Here are some steps to take in preparing for potential disputes arising from the effects of COVID-19:

KEEP RECORDS IN ORDER

Maintaining good business and financial records will be vital in determining costs incurred by builders and potential reasons behind delays or cost overruns. This includes all contracts, signed Authorization for Expenditure (AFE) forms and change orders (with supporting budgets, estimates and documentation), all invoices with supporting backup, such as material invoices and time sheets, as well as internal accounting documents such as percentage of completion schedules. Project owners must keep good records of payments to contractors and any direct payments to subcontractors. Any communications, including memoranda, letters and emails related to a potential claim, should also be preserved. Contractors also need to file and document notice of delay with the project owners in a timely manner.

DETERMINE WHETHER YOU HAVE A CLAIM OR WHETHER A CLAIM MAY BE FILED AGAINST YOU

Owners may have the option of filing a delay claim. Their contract will specify whether liquidated damages are applicable or if they have a basis for a claim. A fundamental issue that will be resolved in COVID-19 claims is whether construction delays fall under a force majeure clause, meaning the construction delays were excusable. The nature and responsibility of delays resulting from the disruption of the supply chain also will need to be assessed.

Contractors may have the right to file breach-of-contract claims if it was the project owner who delayed or cancelled a project, outside of the provisions in their contract.

In addition, employees who are getting sick are filing claims against employers for lack of due care to protect them from the virus.

CALCULATE DAMAGES

The calculation of lost profit damages derived from COVID-19–related delays will be particularly complex. A classical shifting-the-curve or profits-delay approach will be insufficient. Unrelated market factors will need to be considered, such as the general downturn in the economy, industry-specific effects and even the trend in energy prices. Delays caused by different actors may need to be evaluated separately.

If project owners cancel or delay construction projects, contractors may also be able to claim losses. A lost profits calculation in this case would require a detailed analysis of the lost revenues, the cost of mitigating efforts and an assessment of whether any other factors are directly causing the contractor’s losses. It will be important to determine whether revenues are truly lost or merely delayed.

In addition, if a company benefited or may benefit from the Paycheck Protection Program (PPP) forgiveness provisions in the CARES Act, it could affect the calculation of their lost profits. The following example shows the lost profits calculation for a company that suffered a two-month delay due to COVID-19. Cases I and II show the lost profits calculation without and with the PPP loan forgiveness program, respectively. Case II assumes that the company received forgivable PPP loans, which it used to pay eligible rent and payroll costs. The forgiven loan proceeds must be used to offset the costs, or alternatively, recognized as income.

The IRS has disallowed the deduction of expenses paid using PPP loans for income tax purposes. However, Congress has alluded to the possibility of revising this rule. In any calculation of lost profits, the impact of the non-deductibility of expenses should be considered.

Note that PPP loans may or may not reduce a company’s lost profits, as they are designed to improve liquidity, rather than mitigate losses. For example, if a company retained non-essential employees to maximize forgiveness of its PPP loan, it may incur higher expenses than if the company had not taken advantage of the PPP loan.

Property Valuations In Uncertain Times

Adam Levine | Ostrow Reisin Berk & Abrams

Valuation plays a critical role in real estate, from appraisals for residential mortgages to the sales of commercial real estate. But the COVID-19 crisis and resulting economic uncertainty pose some challenges for valuation experts across the country.

Limited physical access

Site visits have long been an integral part of the valuation process, but stay-at-home orders blocked access to many properties earlier this year throughout the country.

Fannie Mae and Freddie Mac have recognized this hurdle by temporarily permitting exterior-only and desktop appraisals for eligible mortgages. Banking regulators allowed certain commercial and residential loans to close without having an appraisal completed, though appraisals have been required within 120 days of closing.

Savvy valuators quickly turned to technologies, like Google Earth, Street View and drones, to help fill in the gaps created by the inability to physically access properties. They are also taking advantage of online databases of municipality property assessment records to obtain necessary information.

Lack of comparable sales

Under the comparable sales method, valuators look at the sales prices of similar properties in recent transactions, making adjustments for differences between those properties and the subject property. It is debatable whether pre-COVID-19 sales can be considered comparable with post-pandemic sales, though. Moreover, deal volume for certain types of properties has fallen in many areas.

Valuators are looking beyond comparable sales and considering individual circumstances on a more granular level. This approach acknowledges that generalities are of limited value when COVID-19 may have different effects on different properties in the same neighborhood.

Tumultuous conditions

Essential data inputs for valuations are shifting constantly, sometimes daily. Unemployment numbers have been at historical highs, while interest rates have been at notable lows.

Businesses that were healthy months earlier have boarded up threatening the continued vitality of neighborhoods and increasing expected vacancy rates. Struggling tenants may have fallen behind on monthly payments. Governments are not only mandating rent relief, but also providing financial support to prop up troubled companies. Plus, operating costs may be higher to comply with health and safety concerns, as well as to adapt property use and features for changes in demand.

Valuators must address all these factors in their reports. But users of those reports must understand the limitations and consider obtaining fresh appraisals when fewer uncertainties exist.

Heart of the matter

2020 has not been kind to the values of many types of properties. But it is always better to have an accurate, data-based assessment of value than rosy, speculative estimates that do not pan out.

Construction Industry Professionals: Check Your AIA Contract Documents For Your Rights And Obligations In Response To COVID-19 Related Construction Delays

Alexandra A. Fahringer | Schnader Harrison Segal & Lewis

In the wake of the COVID-19 outbreak and subsequent state and local government shutdown orders, some construction projects have come to an abrupt halt while others face significant delays. Across the industry, project owners, general contractors, subcontractors, sub-subcontractors, and architects are reviewing their AIA Contract Documents looking for a standard force majeure clause to decide whether they will be entitled to an increase in Contract Time or Contract Sum, how to best respond to this kind of request, or whether they will have an option to terminate the contract altogether.

This article will address where to look for the key provisions in the AIA Contract Documents that could assist in assessing an owner’s, contractor’s, subcontractor’s, or architect’s response to project complications related to COVID-19. As parties confer in dealing with the impact of COVID-19, these various provisions may be important to clarify basic rights and obligations.

OVERALL CONSIDERATIONS

The AIA Contract Documents do not have a clearly labeled force majeure clause, but they do have several provisions drafted to address the same risk-shifting concepts as a standard force majeure clause. When a contract does contain a traditional force majeure clause, it typically provides that if an unforeseeable event occurs without the fault of either party, performance under the contract will either be excused or delayed. Although standard AIA Contract Documents do not include this specific clause, the related provisions in the standard AIA forms generally create an option for both parties (i) to request a change in schedule, Contract Time or Contract Sum, and (ii) to exercise suspension or termination rights.

In addressing issues related to COVID-19, construction professionals should consider: (1) reviewing their existing contracts; (2) discussing their possible needs for modifications to the Contract Time or Contract Sum internally; and (3) documenting the ongoing COVID-19 response and local governmental orders in the vicinity of the project which caused a delay or increased costs. It may also be important to initially review and understand the notice provision in the Contract and confirm compliance with the notice provision even as verbal or electronic negotiations proceed about these issues.

LIST OF RELEVANT AIA CONTRACT PROVISIONS

The following sections in AIA Contract Documents may be helpful to construction professionals facing challenges related to COVID-19:

Owner / Contractor Contract (A201-2017)

  • Section 8.3 governs delays and extensions of time. The standard AIA documents permit the Contract Time to be extended if the Contractor incurs delays beyond their reasonable control.
  • Section 15.1.6.1 addresses the method for applying for claims for additional time.
  • Section 15.1.3 advises of method of notice. It is crucial for all parties to closely read the notice provision. For example, if the method provision requires notice by certified or registered mail, the sender (Owner or Contractor) will want to confirm they are abiding by this provision in giving COVID-related notices (even if it would be more convenient to send an e-mail).
  • Owner’s suspension for convenience and termination for convenience are governed by Sections 14.3 and 14.4, respectively. Please note, under owner’s termination rights, depending on the terms of the contract, the Contractor could be entitled to a termination fee, among other expenses, which should be specified in Section 7.1.
  • Should a contractor or owner need to make a claim, it is also important to review the claim process in Section 15, including the role of the Initial Decision Maker and alternative dispute resolution.
  • Lastly, it is worth noting that the standard contract includes a waiver of consequential damages by both owner and contractor in Section 15.1.7.

Subcontractor / Contractor Contract (A401-2017)

  • Subcontractors should pay particular attention to the language in Article 2 of their contract with the contractor. The standard A401 incorporates the applicable provisions of the A201 and gives the contractor the rights and remedies of the owner and the subcontractor the rights and remedies of the contractor.

Architect / Owner Contract (B101-2017)

  • The schedule for performance of Architect’s services is governed by Section 3.1.3 and per the terms of the standard contract, the Architect’s time frame can be extended for “reasonable cause.”
  • Section 3.6.2.1 sets forth the expectations for the Architect’s evaluation of the work at different stages of construction.
  • If the Architect anticipates needing to perform additional services, outside the original performance obligation, Section 4.2.1 sets forth the method by which the Architect must notify the Owner.
  • Similar to the A201, the Owner also can suspend or terminate the agreement under the standard B101. The sections which govern the Owner’s suspension and termination rights are set forth in Sections 9.2 through 9.6.

CONCLUSION

At this point in their COVID-19 response, many parties are simply trying to work things out, and to take whatever next steps are most sensible and efficient. This is appropriate; however, it is critical to be aware of a specific contract’s provisions for delay and additional expense, and confirm that all parties comply with all required notice provisions in order to preserve their rights under the contract. Finally, do not assume all contracts have standard provisions. As always, construction industry professionals should consult their specific project contracts because provisions are often negotiated outside of the standard AIA Contract Documents.