Coronavirus Delay and Disruption Claims

• Author: By Patrick A. McGeehin and John I. Spangler III
• Pages: 18-25

THE CONSTRUCTION LAWYER18 Spring 2021

Published in

The Construction Lawyer

, Volume 41, Number 2, Season 2021. © 2021 American Bar Association. Reproduced with permission. All rights reserved. This information or any portion

thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

CONSTRUCTION IN THE TIME OF COVID

Coronavirus Delay and

Disruption Claims

By Patrick A. McGeehin and John I. Spangler III

Impact of COVID-19 on

Construction Projects

In March 2020, when the coro-

navirus pandemic (COVID-19)

was declared to be a national

emergency in the United States,

1

the impact on the construction

industry was immediate and sig-

nicant. Many states shut down

construction projects,2 and even

in those states that designated

construction as an essential

business, the use of personal

protection equipment, social

distancing, and delays to the

supply chain caused signicant

project delays and disruptions.

3

While the stop work orders

were eventually lifted, and

much of the construction industry returned to work, the

industry remains impacted by the pandemic. Jones Lang

LaSalle’s 2021 Construction Outlook Report predicts non-

residential construction to actually shrink in 2021, a result

of fewer new starts and delayed starts in 2020. It also sees

a wide disparity between various market segments, with

the distribution, healthcare, and manufacturing segments

showing some strength, and the ofce, education, retail,

entertainment, and hotel segments remaining challenged.

Disrupted supply chains also continue to cause equipment

shortages and delivery delays, and the cost of materials,

particularly lumber, copper, and brass, continue to rise.4

For the foreseeable future, jobsites will continue to

operate with additional safety protocols in place, creating

added layers of complexity, reduced efciency, increased

project risks, and higher costs. These factors are causing

projects to take longer to build and be more costly to

construct. Contractors incurring added costs as a con-

sequence of COVID-19 face signicant challenges in

seeking to recover some of their added costs from proj-

ect owners.

In this article, we explore the types of problems con-

tractors are encountering and the related costs that they

are incurring due to COVID-19, along with potential ave-

nues that can be explored for submittal of claims, relief

from liquidated damages, and reimbursement of certain

costs under relevant contract terms. In addition, we will

discuss the issue of specic government relief efforts (e.g.,

Payroll Protection Program loans (and forgiven amounts))

and how those efforts potentially impact the amount that

a contractor might recover in those instances where its

contracts allow for compensation.

COVID-19 as a Basis for Delay

and Disruption Claims

COVID-19-related delays and disruptions may well lead

to delay and disruption claims. In construction parlance,

delay and disruption claims have distinct technical deni-

tions. A delay extends the planned duration of a project,

and a delay claim seeks added contract time due to the

delayed period of performance. The contractor may also

seek to recover some or all of the added costs incurred

due to the prolonged period of performance, but its enti-

tlement to compensation is dependent upon whether the

delay is compensable or noncompensable.5

Disruption claims often run hand in glove with delay

claims, but differ from delay claims and delayed time peri-

ods, and focus instead on lost efciency or productivity.

The fundamental distinction is that a delay claim seeks

compensation for a prolonged period of performance,

while a disruption claim seeks compensation for damages

suffered as the result of impacts to productivity making

the contractor’s work more difcult or less efcient to

perform. Disruption or inefciency can occur even if the

project was completed on time if the disruption reduced

the contractor’s planned or expected productivity. In the

COVID-19 context, lost productivity or efciency may

arise from COVID-19 social distancing requirements or

other safety precautions requiring changes to the con

-

tractor’s planned means or methods of performance that

result in diminished productivity.

In making a delay or disruption claim due to COVID-19

impacts, the contractor has the burden of proof and must

show that COVID-19 caused the alleged delay or disrup-

tion and that the owner is obligated to provide the added

time or nancial relief requested, and the contractor also

must prove the amount or quantum of time and damages

it is entitled to recover.6 A contractor cannot merely rely on

its allegations, but must point to facts and evidence in the

record that prove the three essential elements of its case:

liability, causation, and resultant injury.

7

If the contractor

cannot make this showing, the owner may be entitled to

summary dismissal of the contractor’s claim.8

Patrick A. McGeehin

John I. Spangler III