A few weeks into the state’s re-opening, and life in California is beginning to return to normal. Although there are some concerns over coronavirus variants, it appears that the worst is behind us. As the pandemic relents, now is an opportunity for companies involved in California’s construction industry to revisit their operational practices and make changes necessary to thrive in the “new normal.” Given the challenges presented by the pandemic, preparing for the “new normal” is no easy task. But below are a few key considerations to help your business thrive in the post-pandemic future.
Review Your Obligations
The business landscape has changed since the pandemic erupted. Many projects paused or were mothballed altogether. As the world restarts, construction industry businesses are wise to take an honest look at the status of work in progress, and work that was delayed. Evaluate whether it is reasonable to expect to complete commitments both on-time and on-budget. Naturally, contract documents are the primary source for understanding such obligations and rights. Carefully review those documents – including pending and approved changes – and assess whether promises made can still realistically be delivered, and what the process is if they cannot.
Revisiting project requirements and specifications is a must. With supply chain disruptions affecting the construction industry in significant and unpredictable ways, it’s best to do what you can to anticipate shortages in materials, communicate with your team and client, and plan accordingly. If problems are encountered, being open-minded about potential solutions can help keep a project on track. One strategy is to be flexible about materials and replace custom products for more widely available substitutes. And be creative: Can cosmetic features that are not mission critical be filled with placeholders to be replaced with the intended design elements at a later date, in order to keep a project on-track? Talk to your client; collaborate; document agreements to compromise. Now is a great opportunity to identify possible areas for value engineering opportunities.
Managing Your Team
It is also critical to check in with your team, including subcontractors and suppliers, as they are likely facing many of the same challenges you are. Here again, failures in infrastructure and shortages of commodities have led to delays and price volatility. Orders are taking longer to fill—assuming you can even get the materials. (Does your contract allow for adjustments to pricing under such circumstances?) If you and your team don’t get on top of sourcing now, you may find yourselves scrambling later. Pay special attention to the sequencing of work, as one team member’s inability to perform (for whatever reason) will often disrupt the project timeline, especially if a lack of effective communication hinders the project.
Similarly, don’t overlook any licensing, permitting, or inspection issues that need to be processed by city or county officials or the utility companies. Passing milestone inspections are critical to keeping a project on schedule, so it’s best practice to review any scheduled plan checks or site visits and make sure you’re on target to meet them. Missing any of these threshold events may cause significant delays, holding up your project for weeks or even months, subjecting you to liability for delays. Governmental agencies are also facing challenges as the pandemic relents.
Dealing With Challenges
It’s not a pleasant thought, but the harsh reality is that delays are likely to be a more significant component of projects going forward than they were before the pandemic. If you foresee significant challenges down the line, it’s important to communicate with team members and third parties and make accommodations where necessary. As an example, typical contract language includes limited relief provisions in the event of non-performance, such as force majeure clauses. But these clauses have varying qualifications and provide only limited windows of time to file notice. Courts strictly enforce the timing of such notices.
Generally, these notices should explain the conditions behind the delays. Staffing issues and unavailability of raw materials are common. You should emphasize that conditions that were unforeseeable or outside of your control. Notices should provide detail on the time and cost impacts that are anticipated. Finally, indicate the type of relief desired, whether it’s an extension of time or increase in the contract price.
It’s essential to preserve your rights because being on the hook for budget overruns or project delays can be very costly. Litigation alone can cost hundreds of thousands or even millions of dollars, depending on the size and scale of the project and the complexity of the issues involved. Taking these steps will help you transition out of the pandemic and thrive in the new normal. Contact your legal counsel to discuss how your ongoing or upcoming projects are being affected – or will be affected – by materials or labor supply challenges outside your control, and how to process change requests related to the same.
Dunn DeSantis Walt & Kendrick provides a broad spectrum of legal services to businesses of all sizes, from small, local start-ups and non-profits to large, national companies. DDWK’s real estate development and construction practice includes representing all segments of the development and construction industries on both private and public projects.
You can find additional information and resources on the DDWK website.