Covid-19 Update: Force Majeure

By: Hussein Moujalled

In view of recent events, this article will focus on the Coronavirus (“COVID-19”) and its various implications on construction projects. Following the outbreak of COVID-19, many were left speculating its applicability as an event that qualifies as Force Majeure in contracts. While its applicability is in debate, it is apparent that the construction industry has certainly experienced on-going physical effects where the regulation of COVID-19 has impacted projects. These physical effects may include new government directives, procurement disruptions, schedule delays, workforce interruptions, permit delays, delays due to the addition of stringent health and safety requirements (such as, social distancing and heightened sanitization requirements, etc.), as well as financing restrictions which will inevitably affect cashflow.

Any one of the numerous physical effects of COVID-19 on construction projects is capable of causing a severe delay to a construction schedule. As such, with all of the physical effects in mind, working with Primavera to schedule around the obstacles caused by COVID-19 may seem to be a daunting task. However, while some of the physical effects are unforeseeable (e.g. government directives, permit delays, financing restrictions, etc.) others can be predicted and a work-around can be implemented into Primavera to accurately represent the expected delay due to COVID-19. A baseline in Primavera can be altered by anticipating the extent of the workforce interruptions and procurement disruptions and measures can be taken to mitigate the productivity impact that the more stringent health and safety requirements impose.

As the impact COVID-19 has had world-wide is widely recognized, it comes as no shock that many Contractors are filing extensions of time for completion claims and listing various physical effects related to COVID-19 as the basis of those claims. A great deal of these claims may well be justified as many projects are being negatively impacted by COVID-19. Nevertheless, many may be seeking to take advantage of the current climate with claims for extensions of time for completion. In order to safeguard against abuse of the physical effects of COVID-19 on construction, one must consider the various physical effects and ascertain if any of the physical effects are present in the Contractor’s claim. A careful analysis on the effects of procurement and the respective supply sources are required to determine the validity of the Contractor's claim. If a Contractor is expecting materials from areas greatly affected by COVID-19, the claim may be valid but if the materials and equipment are locally produced there should not be any serious impact on procurement, delivery, and installation on site.

Contractor claims of delays associated with administrative disruptions should also be carefully analyzed. The government directives and mandates must be investigated to determine the validity of such claims as many governments have mandated a total lockdown, while others have determined the construction industry to be a vital sector and thus not affected by lockdown or quarantine mandates. One such example is the United Arab Emirates (“UAE”), the UAE has determined the construction industry to be a vital sector and therefore immune to government directives and able to function at 100% capacity if proper health and safety measures are implemented. In the event that office support staff and employees are required to work from home for various safety precautions, the Contractor is fully accountable to ensure that communication and workflow is uninterpreted. 

June 7th, 2020

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