3 Things You Need to Do Now to Recover Construction Stoppage Costs
Owners and contractors facing work stoppages at the direction of state and local stay-at-home or shelter-in-place orders are struggling with the question of how much the work stoppage is going to cost. The COVID-19 pandemic is causing disruption to a wide range of industries and construction is no exception, as many projects deemed “non-essential” have been suspended for the near term by state and local authorities. In addition, many “essential” projects are also being suspended at the discretion of project owners. These delays not only affect the scheduled milestones of a project but can significantly impact the project’s financial health. Contractors could seek relief under various contract provisions or theories of recovery:
- Force Majeure: In many contracts that contain Force Majeure provisions, Force Majeure claims are considered excusable but non-compensable. Generally, the contractor is entitled to additional project completion time, but is not entitled to additional compensation for these delays.
- Suspension of Work (Stop Work Order): In many public works contracts, Suspension of Work or Stop Work Orders (SWO) issued by the owner are considered excusable, compensable delays. It is therefore favorable for the contractor to have owner-issued SWOs for project shutdowns.
- Change Orders: Some owners might want to maintain the original completion date. In this case, contractors could recover acceleration and mitigation costs under the change order clause of the contract.
- Constructive Acceleration: If the owner fails to address schedule impacts and hold the contractor to the original contract completion date, the contractor might be able to recover its additional costs under a constructive acceleration theory.