Covid “Restarts”: Contractors Between a Rock and a HardPlace

By Henry L. Goldberg, Esq., STA General Counsel and Robert J. Fryman, Esq

Henry L. Goldberg
Subcontractors Trade Association
Partner,
Moritt Hock & Hamroff LLP

Robert J. Fryman, Esq
Partner
Moritt Hock & Hamro

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(which permitted both essential and non-essential projects to resume) many public and private improvement construction projects remained suspended. Now, more than five months after implementation of the New York Forward program, many public improvement and private improvement projects are belatedly coming back “online” and with a vengeance!

Many owners and construction managers on these long-suspended projects, anxious to get back on track and to control their own costs, are now ordering the immediateresumption of project activities and demanding “recovery” schedules from their contractors, and in turn, their subcontractors. This is despite the fact that many of these same owners and developers had indicated that they would entertain Covid-related claims to help mitigate project “shutdown” costs arising from the original shutdowns. This has left many contractors and subcontractors in a quandary as to how to 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.

Although New York FORWARD allowed projects to resume in phases throughout the state, many projects remained shutdown, with no legal requirement from the state, due mainly to the economic concerns of the owners.  Many public ownersconcerned about their budgets post-Covid, and private owners concerned about the financing and ultimate economic success of their project, kept their projects shuttered while they considered how best (or whether)to move forward.

In addition, many contractors, began work on projects that were moving forward, despite Covid-19, and now face a labor, equipment and material “squeeze” limiting their ability to immediately restart all work together, Covid or not.

LEGAL “FIRST AID” IN THE COVID-19 ERA

Given the proliferation of notice provisions in public and private construction projects (Note: We have often written about various “COFEDs,” a term we coined years ago to refer to these“Contractor Forfeiture Enhancement Devices”).It is more important than ever to comply with your contract’s notice requirements in order to preserve your rightto laterpursue time-related claims.

As we have often advised, paramount to this effort is to know yourcontract, including the provisions of the prime contract if those are “flowed down” to you pursuant to your subcontract.

All public and most private construction contracts contain notice and damage documentation requirements.  These provisions are not optional and are strictly applied. Compliance nowwith notice provisions is essential to preservefuturepotentialclaims (e.g., delay, extra work and/or disputed work).

NEED TO ACT NOW TO PRESERVE POTENTIAL CLAIMS LATER

The following are some examples of notice and damage documentation requirements in contracts (and by no means an exhaustive list.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: within 15 days of delay causing event.     (Article 11)
• Extra Work: daily and monthly T&M reporting.  (Article 28)
• Dispute/Claim: 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 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. 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 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)

MHH Commentary:

Notwithstanding the current “re-start” pressures being brought to bear by owners and construction managers, contractors and subcontractors are not without important remedies arising from Covid-19 restart demands.

The time to protectlate job-completion claims is now, not later, when you would be risking unintended forfeiture and waiver. It should be a basic reflex. Preserve your claims now, so you can decide whether to pursue them later when your prospective on a delayed job will be clearer. Will promises made (to get you to remobilize) be promises kept?

In these types of situations, in order to determine your rights and how best to proceed, review of your contract documents with experienced construction counsel is critical.Feel free to contact us at (516) 873-2000 with any questions you may have.