Impact of Covid-19 on Construction Projects

1.  The impact of COVID-19 on the construction
industry was not anticipated and it is causing
delays and impacts to construction
operations which is outside of
contractor/owner’s control.
 A formal notice creates a productive
communication pathway regarding the
delays/costs incurred and ways to mitigate
them. Hence, the first step is to notify your
client that you are being delayed.

2.  Time Extensions: At a minimum, the event is
causing delay to project performance. As
such, an extension of the “Contract Time” is
required. Thus emphasis on the fact that the
delays caused by the COVID-19 epidemic
were unanticipated and beyond your control
shall form the premise of the intimation.

3.  Delay Costs: The contract may or may not
permit to recover costs. But, the reality is that
all project participants will incur some
additional labor, material, and equipment
cost. It will be in all parties best interest
to find ways to practice techniques of dispute
avoidance during this time period to the
extent possible. Nevertheless, it is prudent
to include in the notice letter that there is a
cost impact to your operations. Commitment
to provide an update regarding the costs
should be stated.

4.  The contract may also have particular
provisions regarding increased material
costs. If it does not, since there shall be
inevitable supply chain slowdowns and/or
increased costs, the same should be
included in the notice letter.

5.  The letter should tie the cause and effect
regarding how the COVID-19 measures are
directly impacting the project schedule and/or
causing increased costs. This does not have
to be a complete list, but some
consequences of the impact should be
incorporated, making the notice unique to the
facts of your contract and your contractual
performance. State that you will provide
periodic updates.

6. 1) Majority of contracts would require the party
invoking a force majeure clause to
adequately apprise the counterparty, within
a stipulated time, regarding the event which
prompted invocation of force majeure
clause. Further, the invoking party would be
expected to outline an estimation of the
impact and duration of effects resulting from
the said event.

7. 2) Nature of evidence on which the claim of
force majeure would be based is of utmost
importance. It is vital that the party invoking
the force majeure clause must keep all
documents related to the force majeure
event, which might be required in case a
dispute arises in future. In the present
scenario, the said documents may
include (i) national and state government
notice and guideline imposing restriction of
trade,

8. (ii) news articles related to COVID-19
outbreak, quarantines, restricted travel and
mandatory shutdown of airports, trains
stations and seaports, (iii) cargo and freight
booking, (iv) cancelled flight or train ticket or
anything other documents relating to travel
itinerary, and (iv) cancelled visa or rejected
visa application.

9.  The following sample letter attempts to
illustrate how the above mentioned points
can be encapsulated while conveying the
matter to the client.