Construction Law Client Alert: COVID-19

As we complete the second full week under Governor Wolf’s March 19, 2020 Order, which closed all “non-life sustaining” businesses in the Commonwealth, including public and private construction firms, the lawyers in our Construction Group continue to monitor the rapidly changing situation as it relates to the construction industry. While legal challenges have been filed to include construction services on the list of life-sustaining businesses, the Governor’s Order remains in effect.
Currently, there is only a limited amount of construction work permitted under the Governor’s Order in Pennsylvania:
  1. Emergency repair work;
  2. Work on healthcare facilities; or
  3. Work pursuant to which a Waiver has been obtained through the Pennsylvania Department of Community and Economic Development (“DCED”).
In addition, the Governor has issued a clarification that residential construction projects that are “substantially complete” may continue to completion. Substantially completed projects are those which have been issued a final occupancy permit.


To date, we have been advised that a total of over 32,000 Waiver requests have been submitted by businesses that do not fall within the category listed as “life sustaining” in the Governor’s Order. Generally, businesses requesting a Waiver provide goods or services necessary to maintain operations that a business on the life sustaining list needs or fall within the critical infrastructure categories outlined in the advisory issued by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (“CISA Advisory”). The CISA Advisory authorizes in-person activity by businesses and workers necessary for the production, operation and maintenance of supply chains critical to infrastructure categories such as essential transportation, energy, operations of dams, water and wastewater treatment facilities, among others. If you believe that your firm is entitled to a Waiver, the request must be made no later than 5:00 p.m. this Friday April 3, 2020. The easiest and quickest way to submit a Waiver request is to use the online portal on the DCED website link.

The Governor’s Order was effective March 19, 2020 and remains in effect until further notice. Penalties for non-compliance can include citations, fines, and suspensions. Construction industry lobbyists have been pressing for legislation to exempt the construction industry and to have it classified as a life-sustaining business which would allow public and private construction projects to resume. Although several bills have been circulated in the Pennsylvania House and Senate, none have passed to date. Contractors wishing to resume their construction projects should apply for a Waiver.

With the Coronavirus pandemic halting most of the construction work in the Commonwealth, now is an opportune time to review your existing contracts carefully to determine what type of relief you may be entitled to under the language of your contract, whether it be an AIA, Consensus Docs, EJCDC, or a contract tailored specifically for your project. Depending upon the contract language, you may be able to rely upon a force majeure (“superior force”) provision, frustration of purpose, impossibility of performance, or material adverse change clauses to compensate you for the damages as a result of the shutdown. Review these clauses to see if they provide protection from the imposition of delay or liquidated damages by the owner. You may also have statutory remedies, as well as UCC remedies, available to you depending upon the nature of your business.


You also need to carefully review your contract for any notice requirements which may be a condition precedent to obtain relief from delays. You should look at the contract to see if the requirements for giving notice are triggered when the government’s shut down order was entered or whether there is some other date set forth in the contract. Does a pandemic give one or both parties a right to terminate the contract? If you are performing work for the federal government, be careful to review the FARs to determine what provisions are applicable to provide relief for delays caused by epidemics.

If you are in the process of negotiating new contracts, be sure to have provisions in those contracts shifting the risk to the owner for anticipated increases in material and equipment costs and to equitably adjust the completion date when such costs or delays are attributable to the pandemic.

During the shutdown, you should also be documenting project shutdown delay costs as they occur, especially given the uncertainty over when you may be allowed back on the jobsite to resume work. You should establish a separate account code to track the Coronavirus costs and document your damages as they occur, which will come in handy in the event that a claim is filed in the future. You should also be reviewing your insurance policies to determine if there are policies that may provide coverage for the COVID-19 outbreak, including property business/interruption, worker’s compensation, and environmental insurance policies.

Finally, you need to be aware of the recently enacted loan programs which may provide needed financial relief to your firm while it is unable to perform work. The Federal CARES Act, a $2 trillion package recently signed into law, which, among many other benefits, provides loans of up to $2 million to small businesses (with less than 500 employees), portions of which may not have to be repaid if used for payroll costs. The Governor of Pennsylvania also signed a $60 million loan program to assist small businesses that are impacted by the closure and other disruptions caused by the COVID-19 pandemic. It will offer $100,000 in loans to for-profit businesses with less than 100 full time employees. You should take immediate steps to apply for any loans to which you feel you are entitled to receive, as it is anticipated that many businesses will take advantage of these programs. The sooner that your application is processed, the sooner you will receive the funds.

Should you have any questions on anything referenced in this Alert or other impacts to your business as a result of the COVID-19 pandemic, please do not hesitate to contact any of our Construction Group attorneys or any other Meyer, Unkovic & Scott attorney with whom you have worked


This material is for informational purposes only. It is not and should not be solely relied on as legal advice in dealing with any specific situation. 
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