Tracking and logging COVID-19 expenses

April 10, 2020

Time is crucial in every construction project. Delay costs, liquidated damages, back charges, and additional labor hours for slow and untimely completion can ruin profit margins and lead to serious problems down the road. COVID-19, if it hasn’t already, will inevitably create costs and delays, none of which could have been negotiated or realized when an original construction contract was formed. Examples of these costs and delays include:

Government mandated shutdown of jobsites
Worker unavailability
Costs for extra personal protection equipment
Health inspection fees
Material expense increases for supply chain disruption and delays in production
Increased equipment requirements to keep workers busy but apart from each other
Technology costs to provide remote meeting capabilities for management, owners, architects, and contractors
Labor expenses after jobsite shutdowns
Delays and increased inspection costs

Understanding the rights and responsibilities in a construction contract is vitally important for successfully recovering these costs and delays. For example, many construction contracts contain force majeure clauses that provide time extensions to contractors for “acts of god” or for “other causes beyond the contractor’s control” but often require timely notices and ongoing reporting and due diligence. Further, change orders can provide a means of recovering losses but regularly the contract requires the costs and delays be contemporaneously identified and quantifiable. Regardless of the tool used to mitigate losses, consistent and contemporaneous tracking and detailing is key.

Here are three techniques contractors can use to track their COVID-19 related costs and delays: (1) create a new general ledger account or job; (2) create new costs codes for tracking COVID-19 related costs on a per job basis; and (3) encourage superintendents and those familiar with the jobsite to keep notes regarding additional, new restrictions implemented to slow the pandemic’s spread.

When creating cost codes for COVID-19, it is also important to break the code out to specifically identify the labor and material attached to the code. By removing ambiguities, the contractor preserves its claim, eases its later burden when proving its delays, and takes away an easy and available argument for would-be challengers.

By implementing a system(s) for tracking the inevitable delays now, contractors put themselves in the best position to recover later. If you need help understanding the forms of recovery, the implications in a contract, or have any other questions related to COVID-19’s effect on the construction industry, contact us so we can help you continue business.

COVID-19 and the Construction Industry

April 1, 2020

Good news for the construction industry in Texas.

On March 31, 2020, Governor Abbott signed Executive Order GA 14 which clarifies what services are considered essential services during the COVID-19 pandemic. A copy of the Executive Order can be found here:

Fortunately, various construction activities are now included in the definition of essential services and companies may continue, as long as they adhere to the requirements for operating an essential service. This Executive Order supersedes any conflicting local orders, which means that we now have a standard definition which governs construction projects throughout the state.

Under the Governor’s Executive Order, Texas will follow the list of “essential services” as defined by the US Department of Homeland Security in its most recent Guidance on Essential Critical Infrastructure Workforce dated March 28, 2020. This updated Guidance adds Commercial Facilities and Residential Facilities to the list of essential services:

Commercial Facilities includes workers who support the supply chain of building materials from production through application/installation, including cabinetry, fixtures, doors, cement, hardware, plumbing, electrical, heating/cooling, refrigeration, appliances, paint/coatings, and employees who provide services that enable repair materials and equipment for essential functions.

Residential Facilities includes workers performing housing construction related activities and workers supporting the construction of housing.

To review the complete March 28, 2020 list of Essential Critical Infrastructure Workforce, follow this link:

Please note that as the country responds to the virus, local and federal regulations continue to change. Contact us if you need guidance on how the latest rules apply to your construction and real estate projects, and how to comply with the rules regarding operating an essential service.