Protecting Public Works Projects from COVID-19 Economic Impacts
Written by Grant S. Degginger and Andrew Gabel
The recent surge in COVID-19 infections throughout Washington has resulted in Governor Jay Inslee’s use of his emergency powers to impose additional limitations on business activity in an effort to reduce the spread of the infection. While many public works projects were deemed “essential” and avoided the spring 2020 lockdown, the current conditions are a sobering reminder that both current and upcoming public works projects must be planned and managed to minimize the impacts of the ongoing pandemic.
What follows are some considerations for limiting potential economic impacts of COVID-19 on public works projects.
Construction Site Safety: Statutory and Common Law Responsibilities
First, general contractors have statutory duties to ensure that all persons on a construction site are safe. RCW 49.17.060 requires that each employee be provided a worksite that is free from recognized hazards that are causing or are likely to cause serious injury or death. The statute also requires contractors to comply with all rules and regulations promulgated to provide a safe workplace, including but not limited to the safe place standards set forth in WAC 296-155-040.
General contractors also have common law duties to protect the safety and well-being of all workers on the project site. Just last year, in Vargas v. Inland Washington, LLC, the Washington Supreme Court reaffirmed the principle that the general contractor has a non-delegable duty to ensure site safety and compliance with the Washington Industrial Safety and Health Act (WISHA). The contractor’s statutory and common law responsibilities extend to all workers and visitors on the site. A project owner, too, has duties to its employees to provide a safe workplace, including duties to those whose responsibilities include being present on the site.
Construction Site Safety: Contractual Responsibilities
Construction contracts typically allocate responsibility for site safety to the general contractor. Several examples are illustrative of how this risk is allocated:
- WSDOT Standard Specification Section 1-07.1 requires the contractor to comply with all federal, state, tribal, or local laws and regulations that affect the work. Furthermore, the section provides that there will be no additional payment to compensate for changes in the law.
- The American Institute of Architects (“AIA”) Owner-Contractor Agreement A-201 in Article 10 makes the contractor responsible for initiating, maintaining, and supervising all safety precautions in connection with the performance of the contract. The contractor’s responsibilities extend beyond the employees on the jobsite to “other persons who may be affected thereby.”
Provisions like these support allocation of the costs of compliance with the COVID-19 site safety requirements issued pursuant to the Governor’s Proclamations 20-25 and 20-46 to the general contractor. In some cases, contractors have been granted additional time for completion of projects that were started before the spring 2020 shutdown or limited compensation for the purchase of additional personal protective equipment. In many cases, contractors are seeking not only additional time but additional compensation for supply chain disruptions, the inability to secure sufficient trades due to the pandemic, and lost productivity. Recovery of these costs involve fact-intensive inquiries and could lead to an increase in disputes.
Equitable Adjustments Under Force Majeure
Some contracts also contain Force Majeure provisions that permit contractors to seek an equitable adjustment for certain triggering events deemed to be risks outside either party’s control; however, courts narrowly construe Force Majeure provisions. If “pandemic” or “epidemic” are not specifically called out as triggering events, it may be difficult to enforce the provision. In many cases, the remedy provided for a Force Majeure event is additional time to perform the contract but not additional compensation.
Strategies for Managing Pre-COVID and Post-COVID Contracts
Project owners have to both manage projects that were bid, awarded, and commenced before the pandemic’s impact arrived early this year and consider revisions to its contracts that were bid or awarded after the pandemic’s effects were reasonably foreseeable. What follows are some strategies to consider for pre- and post-COVID contracts.
- Determine whether there is a Force Majeure provision or other contract provision that covers pandemics or delays outside the control of the contractor and evaluate permissible remedies.
- Review site safety plans and ensure contractor compliance.
- If the risk of new laws and rules are allocated to the contractor, then insist on performance as agreed.
- If the risk of new laws and rules adopted after the project commences, provide a basis for equitable adjustment and determine if the contract only allows additional time or whether additional costs are compensable.
- Consider a process for monitoring claims for additional costs in a systematic, auditable manner.
- Consider use of suspension, termination, or liquidated damages remedies.
- Within the contract provisions, include the existing laws, regulations, and directives related to COVID-19 to establish the foreseeable conditions at the time of contracting.
- Allocate the risks of current and future COVID-19 costs based upon existing and future proclamations or regulations.
- Consider whether it may be appropriate to provide a time extension remedy but no additional costs for any additional regulations that become effective after the contract is executed.
- Review the contractor’s site safety plan carefully to ensure that it covers all COVID-19 site safety requirements.
In sum, successful management of ongoing projects affected by the pandemic requires fidelity to the risk allocation provisions in the project contract as well as pragmatism in accomplishing successful project outcomes. Contracts for future projects must incorporate provisions recognizing what are clearly foreseeable risks flowing from pandemic conditions.
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