Asked & Answered: Husch Blackwell's Levy says contractors should prepare for building project disruptions in a volatile construction market.

• Author: Duran, Ethan
• Position: Josh Levy

Byline: WISCONSIN LAW JOURNAL STAFF

By Ethan Duran

eduran@dailyreporter.com

A Milwaukee attorney said stakeholders must be transparent with each other and build contingency in their building plans amid a tightening construction market.

Josh Levy, a partner at Husch Blackwell, said Wisconsin contractors, owners and developers must work contingencies into their plans before they break ground on a project as disruptions from weather, rising prices and other factors become an inevitability.

The start of the pandemic saw the market for building materials turn unstable and made building projects uncertain for both contractors and developers, Levy said. The pandemic and its lingering effects became a force majeure, or an unexpected event in construction contracts.

"When a contractor believes they're experiencing challenges they didn't bargain for they'll ask relief from the project owner and claim force majeure," Levy said. "When COVID-19 came along, it truly was a force majeure event. No one had thought work was going to get interrupted by stay-at-home orders, and the first impact of that force majeure was project delays."

For example, developers who want to build multi-family housing would find themselves behind their timeline or over budget when trying to purchase lumber needed for the wood frame at volatile prices, he added. A project budget can go over by millions of dollars when materials like lumber, concrete and steel prices rise after a contract was arranged.

To prepare for disruptions like rising materials prices, Levy encourages contractors, owners and developers to come up with contingencies in their agreements before sealing the deal. Contingencies can be a line item to keep transparency between the owner and the contractor throughout the project. Parties can share the savings if the contingency isn't used.

Husch Blackwell's Construction Academy website offers a three-part course on contingency in construction contracts, Levy said. The firm will host a second Cream City Construction Conference tentatively scheduled for late January.

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Wisconsin Law Journal: As contractors, developers and owners plan projects, what are some ways they can prepare for the volatile construction market?

Levy: The most important consideration is the parties to the project have available contingency. That they know they're pricing a project for millions of dollars but at each level there's some contingency built into that. The contractors are bidding...