Management of Supply Chain Risk: What to Do When Your Switchgear Is Lost in the Mail

• Pages: 29-42
• Date: 01 January 2025
• Author: Jeffrey C. Bright, Esq.
• Subject Matter: Civil Law

Published in The Construction Lawyer Volume 44, Number 1, ©2025 by the 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.

Forum on Construction Law The Construction Lawyer Winter 2025

29

Management of Supply Chain Risk: What to Do When

Your Switchgear Is Lost in the Mail

By Jeffrey C. Bright, Esq.

Jeffrey C. Bright, Esq., is a principal in the construction law group of Offit Kurman and is licensed in

Pennsylvania, Maryland, the District of Columbia, Virginia, and California. He advises the construction

industry on construction contracts, project disputes, claims, and litigation. He has prepared front-end

contract documents for public and private projects and has negotiated on behalf of owners, contractors,

subcontractors, and design professionals on the allocation of risk in construction contracts.

The construction industry depends on the global supply chain for timely delivery of building materials,

equipment, and systems. The COVID-19 pandemic greatly disrupted the supply chain by causing

shutdowns, fabrication disruptions, and delivery backlogs. These supply chain issues led to hardships in

the management of construction projects, notably project delays and increased material costs. Dynamic,

volatile economic events occur from time to time, and it is inevitable that another disruptive event will

have similar impacts on the construction industry at some future point.

This article derives from a panel presentation at the January 2023 AGC Surety Bonding and Construction

Risk Management Conference in Bonita Springs, Florida. The panel consisted of engineers, insurance

experts, a contractor, and an attorney and covered strategies to mitigate supply chain issues to keep

projects on time and on budget. The panel addressed, among other things, contract clauses to mitigate

supply chain risk, including material escalation, force majeure, substitution of materials, notice, and

termination. This article digs even deeper than the panel discussion and provides updates on the lessons

learned from the COVID-19 supply chain disruption and its impacts on legal risk allocations for

construction projects.1

Part I of this article provides a brief background of the economic hardships suffered by the construction

industry arising from supply chain disruptions. Part II examines the different types of applicable legal

doctrines and theories that might apply to a supply chain issue, including (a) common law theories, (b)

contract clauses for price escalations, (c) contract clauses for force majeure, (d) contract clauses for change

orders, and (e) common law doctrine of commercial impracticability. Part III identifies special items for

consideration: notice, proof, and schedule. Part IV discusses various approaches in contract negotiations

to address supply chain issues. Lastly, Part V presents various approaches in project management to

address supply chain issues.

I. Background Facts of Supply Chain Volatility During the COVID-19 Period

The volatility in the supply chain resulting from COVID-19 caused signicant challenges for obtaining

materials on a timely basis and pricing of materials. Due to these supply chain issues, the construction

industry (and the global economy) suffered ripple effects caused by these issues, including:

• Construction rms were burdened with a 21 percent rise in material and labor prices between

March 2021 and March 2022.2

• From a construction industry survey, 89 percent of respondents experienced project delays, with the

major source of said delays being materials shortages.3