Post-Covid Projects “Restarts”: Contractors Caught Between A Rock & A Hard Place?

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Even after New York Governor Andrew M. Cuomo’s New York “PAUSE” program was replaced by the New York “FORWARD” program and its related executive orders (permitting both essential and non-essential projects to resume), many public and private improvement construction projects remained suspended.  Now, more than six months after implementation of the New York Forward program, many public improvement and private improvement projects are belatedly coming back “online” with a vengeance!

Many owners and construction managers on these long-suspended projects are now ordering the immediate resumption of project activities and demanding “recovery schedules” from their contractors. Contractors then demand the same from their subcontractors, all notwithstanding the fact that many of these owners previously indicated they would entertain Covid-related claims arising from project shutdowns. This has left many contractors and subcontractors feeling as if they are caught between a rock and a hard place.  They must respond to demands to immediately resume project activities, and, in many cases, provide recovery schedules indicating how they would make up several months’ worth of Covid and post-Covid owner-caused delay.

Even after the New York FORWARD program allowed projects to resume in phases throughout the state, many projects remained shut down due to the economic concerns of the project owners.  Many public owners concerned about their budgets post-Covid, and private owners concerned about the financing and ultimate economic usefulness/success of their project, kept their projects shuttered while they considered how best, or whether, to move forward.

In turn, many contractors, experiencing huge gaps in work due to the extended shutdown of these projects, economic pressures facing their own businesses, and the uncertainty as to when or if these paused projects might resume, took on other contracts or began work on projects that were moving forward, and now face labor, equipment and material shortages conflicting with requests to immediately restart.  Others are simply daunted by the potential costs of the restart and recovery schedule efforts and the task of preserving their rights and remedies under their contracts in these extraordinary pandemic circumstances in the face of the pressure from owners, CM’s and/or GC’s to immediately resume work and to recover the lost schedule time.

LEGAL “TRIAGE” IN THE COVID-19 ERA

Given the proliferation of notice and condition precedent provisions in public and private construction contracts it is more important than ever to comply with your contract’s requirements in order to preserve your rights and remedies to pursue claims for additional costs, delay, and/or other forms of relief, such as termination for owner breach.

As we often advise, paramount to this effort is to read and know your contract, including the provisions of the prime contract if those are “flowed down” to you by your contract. Moreover, in light of the typically short time frames for providing notice of claim, and thereafter, in certain instances, documenting the categories of damages arising from such claim, it is crucial and time-sensitive for you to focus on providing the contractually required notices, sometimes even before you can begin to quantify and/or determine the merits of the underlying claim, so as to preserve your rights to pursue these claims later.

All public and most private construction contracts contain notice and damage documentation requirements.  These provisions are not optional and are strictly enforced. Compliance with notice provisions is essential to preserving all your potential claims (e.g., delay, extra work and/or disputed work) and your ability to collect actual, increased costs during dispute resolution, project close out process and/or litigation.

NEED TO ACT NOW TO PRESERVE POTENTIAL CLAIMS FOR LATER

The following are some examples of notice and damage documentation requirements in contracts.  These examples are not exhaustive.  You must review your specific contract and, in many cases, the upstream prime contract, in order to determine those that apply to your situation.

New York City Standard Construction Contract:

  • Delay: notice must be provided within 15 days of delay causing event.  (Article 11)
  • Extra Work: daily and monthly T&M reporting.   (Article 28)
  • Dispute/Claim: notice must be provided within 30 days of written determination by                                    Engineer/Commissioner. (Article 27)

Under the terms of the New York City Standard Construction Contract, failure of the contractor to strictly comply with the contract notice requirements shall be deemed a conclusive waiver by the contractor of any and all claims for damages for delay arising from such condition and no right to recover on such claims shall exist. (Article 11.2), and failure to comply strictly with these requirements shall also constitute a waiver of any claim for extra compensation or damage on account of the performance of such extra work or compliance with such determination or order. (Article 28.5).  Failure to abide by the record-keeping requirements and periodic submission of verified statements as to damages may also result in waiver of your claim.

New York State Department of Transportation (DOT) Contract:

  • Disputed Work: within 15 calendar days of direction
  • Notice and Recordkeeping (Section 104-06)
  • Extra Work: daily, weekly and monthly
  • Time Related Disputes: within 15 calendar days of event
  • (If late notice – NYSDOT has no liability for damages which accrued more than 10 work days prior to notice – Section 105-14B)

Under the New York State DOT contract, “[f]ailure of the Contractor to provide such written notice in a timely fashion will be grounds for denial of the dispute and the Department does not have to show prejudice to its interest before such denial is made.” (Section 104-06(c))

Further, “[i]n the event the Contractor fails to provide the required written notice within the time limit established, or fails to maintain and submit the records specified above, any claim for compensation shall be deemed waived, notwithstanding the fact that the Department may have had actual notice of the facts and circumstances comprising such dispute and is not prejudiced by such failure of notice or recordkeeping.” Id.

In private improvement construction contracts, similar notice provisions also abound, often in conjunction with “No Damages for Delay” clauses.  For example:

“(a)  In the event Contractor’s Performance of this Contract is delayed or interfered with by acts of Owner, or by other events for which such Contractor is entitled to a time extension under the terms of this Contract, Contractor may request an extension of time for the performance of same, as hereinafter provided, but shall not be entitled to any increase in the Contract price or to damages or additional compensation as a consequence of such delay or interference.

(b)  No allowance for an extension of time for any cause whatsoever shall be claimed by, or granted to, Contractor unless Contractor shall have made written request upon Owner for such extension within forty-eight (48) hours after the event giving rise to such request.”

Moreover, in public contracts, a contractor delayed in completing its work is often required to file a request for an extension of time in order to continue to perform, and importantly, in order to continue to submit payment requisitions.  This process, aimed at avoiding exposure to delay or liquidated damages, is not automatic and must be justified by proof of the delay-causing event and the impact on your work.  Attention to detail when preparing and filing a request for an extension of time is essential to insure all your claims are reserved, otherwise they will be forfeited!

Notwithstanding the current “re-start” pressures asserted by owners and construction managers, contractors and subcontractors are not without important and valuable rights and remedies arising from Covid-19 restart demands.  Preservation of these rights and remedies, however, requires careful and timely consideration and evaluation of the contract documents and the facts and circumstances of your situation.  Absent prompt and timely notice and satisfaction of any contractual conditions precedent to asserting and maintaining a claim or contractual remedy, those options may be waived, released and lost.

The time to protect late job-completion claims is now, not later. Preserve your claims now, so you can decide whether to pursue them later when the merits of your claim on a delayed project can be more fully assessed.

In these types of situations, in order to determine your rights and potential remedies and how best to proceed, review of your contract documents with experienced construction counsel is critical to successful resolution and/or preservation of your valuable and important rights and remedies.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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