COVID-19 is affecting construction in several different ways. The first question to ask is, can I (or even should I) continue to work? That threshold question is in a state of rapid change as policymakers update and refine the sectors of the economy that are deemed essential, and therefore, able to continue despite shelter-in-place orders. Click HERE for the latest developments regarding this threshold issue.
This page gives an overview of the dynamics of delay caused by COVID-19 and discusses the factors contractors and owners must consider when work has not be able to proceed.
COVID-19 can generally be seen as a force majeure event that results in additional days being added to the project schedule without compensation for those additional days. This delay is commonly referred to as “excusable delay.” By adding additional days to the project schedule, the contractor is not liable for liquidated damages or other consequential damages that may result from delayed completion. At the same time, however, contractors are not compensated for their additional time at the project. Force majeure events are unallocated risks that contractors and owners share: contractors by remaining at the project for longer than expected without compensation for that additional time; and owners by incurring opportunity cost as a result of having delayed beneficial use of the project and the capital invested into the project.
There may be extenuating circumstances that affect whether a COVID-induced delay is excusable. For instance, if a contractor is deemed essential and allowed to work but the owner decides to shutter the project, has the owner’s discretionary decision converted the excusable delay into a compensable delay? By that same token, if the contractor is legally allowed to proceed but decides not to out of concern for workers and their families, is the excusable delay converted into unexcused delay? What if the owner or contractor delayed the project prior to the COVID-induced delay? Does that make the COVID-induced delay either compensable (in the case of the owner’s prior delay) or unexcused (in the case of the contractor’s prior delay)?
The answers to these questions are fact-specific and not susceptible to a one-size-fits-all response. In big picture, the contractor and owner should understand that liability for delay is based largely on the parties’ respective abilities to control the delaying event. Similar to other force majeure events like unusually adverse weather or calamities like fire, COVID-19 is well outside the control of either party and squarely fits within the framework of excusable delay, absent other factors.