When contractors bid and win construction projects for Municipal, State or Federal Government work, they are beholden to the issued contract provided by the governing body of their project. These contracts can be upwards of 80 to 100 pages and contain project specifications, insurance and bond requirements, and legal ramifications for late or unfinished work.
As California continues to roll out more clarification on “Shelter-in-Place” orders and guidelines for who is considered essential, contractors on different infrastructure and government construction projects are left with questions about how to stay compliant with issued mandates and signed contracts.
In our piece written for private sector contract review in the midst of the COVID-19 pandemic, we shared common best practices for contractors to ensure compliance and prepare for requests a court may have if a claim were to arise.
State and Federal Government contracts typically adhere to much stricter statutory guidelines. Understanding the contract language as it relates to delays and financial penalties for said delays is imperative to protect a contractor’s business and reputation.
Below are some practical steps to take with regards to government contracts during the COIVD-19 pandemic:
Don’t Wait for the Delay, Reach out Now: Given the constantly changing environment related to COVID-19 and its effect on construction, contractors should send notices of delay immediately. Waiting until delay costs have been incurred will reduce your likelihood of success when seeking Force Majeure protection for such delay under a contract. Even if the full extent of the delays and costs have not been realized, beginning the written conversation with the governing body helps a contractor stay compliant with any contractual time-delay notification requirements. It also creates a clearly established pattern of communication which is looked upon favorably should legal action come into play. To notify the governing body of a delay, you may either use basic templates or draft your own.
Keep Fastidious Notes & Document Everything Related to the Delay: After the initial notice of delay has been provided to the Contracting Officer, continued documentation is key for ensuring that legal action is not taken against a contractor. Many discussions regarding project changes may happen over the phone, however, contractors should follow up with an email reiterating what was discussed for confirmation and record keeping. Maintaining cost tracking for all COVID-19 related delay costs is important as well. Should a surety company or court need to review records related to contractual delay claims, having all related costs tracked will serve the contractor well in a dispute.
Review your Contract for Delay Provisions: Contractual delay provisions are established by statute applicable to the governing Federal, State or Municipality contracted with.
The Federal Acquisition Regulations (FAR) are the governing set of rules that address Federal construction. There are three sections of the regulation that address delays, given the type of contract issued. FAR Section 52.249-14 is for cost reimbursement/time and materials contracts, FAR Section 52.249-8 (section C & D) deals with fixed-price supply and service contracts and FAR Section 52.212-4 (section F) addresses commercial contracts.
While each of these sections relates to different types of issued contracts, the consensus for actionable items to mitigate delays and supply cost incursion is similar. Federal contractors must:
- Attempt to acquire materials or crew staff from other sources to avoid delays or project default; and
- Actively communicate and set forth a plan with the project Contract officer for ways to move forward despite the delay and strictly adhere to the newly agreed upon contract specifications.
For many city, county and state-issued contracts, The American Institute of Architects (AIA) issued contract language is generally adhered to and referenced. AIA section 8.3.1 states the stipulations for allowed delays and time extensions. With a lack of clarification over the applicability of the stipulations with the COVID-19 orders in place, contractors should assume they apply and follow them.
AIA Section 15.1.3 addresses a claim filing on the contract. A change in the contract is considered a “claim”, so should a contractor need to file a claim for delays or cost changes due to COIVD-19 orders, the following requirements in this section must be adhered to:
- Claims (changes to the completion time) must be initiated within 21 days after the delay has been established;
- Written notice must be provided for all related changes to the contract; and
- Documents estimating costs for time-delays or material interruptions must be included in any claim as well as an established timeline for the new completion date.
Much of the current information available for contractors is very speculative with respect to exactly how government construction, contracts, and contractors will be affected by COVID-19. However, contractors with concise documentation and clear written communication will hedge their business against potential legal damages and business character damages.