Filing system

Preparing for Construction Claims Arising from COVID-19

by Jeff Christy, Colliers Project Leaders & Kevin O’Neill, Driver Trett Canada | April 23 2020

The COVID-19 pandemic has impacted every sector in our economy, and the construction industry is no exception. In April, most construction sites in Quebec and Ontario were shut down, and every site that remained open experienced delays due to material and/or labour shortages and challenges around physical distancing requirements.

When the dust eventually clears, owners will be faced with delay claims they will need to resolve quickly. Here are three steps owners can take immediately to prepare themselves for those inevitable claims and ensure better outcomes.

1. Keep detailed records

Maintaining accurate and detailed records will arm you with the information needed to address construction claims effectively. Record daily on-site activity including the number of workers on site, the state of work areas and progress, and any key directions given to the contractor. Take weekly photos. Record the dates you receive notices and claims, and the status of your project at those times. Other key documents you may want to gather include bi-weekly baseline and detailed progress schedules, site or project meeting minutes, monthly progress reports augmented with photos and video, existing health and safety measures, and any actions taken to mitigate issues identified in delay notices.

It is one thing to record this information, and another to organize it properly. Defining an appropriate file taxonomy that’s easy to follow and perhaps even aligns with how the contractor organizes their own records will make it much easier to engage in dialogue and validate claims. You may need to dedicate a resource with the sole responsibility of filing this information correctly to facilitate easy retrieval.

If your records aren’t currently up to snuff, it’s never too late to initiate these actions. Now is an opportune time to get your records in order. To accomplish this, you may need to go back to interview stakeholders, gather documents or even rebuild records detailing the state of your project prior to the onset of the pandemic. Assigning resources to do this now, however, will save you considerable effort later when it’s time to respond to a claim you’ve received. In addition, if your organization engages with a third-party provider like Driver Trett for claims management support, assembling your documentation in advance will ensure that the process flows much more efficiently.

2. Maintain an ongoing dialogue

Politicians at all levels are emphasizing that while we need to isolate and distance, this does not mean that we should stop communicating. This is particularly true for construction projects. Claims can result in standoffish behavior where communication only occurs through legal notice and contributes to contentious negotiations. That’s why communicating regularly with your contractor, and evidencing compassion for how this pandemic is impacting work on site, can have a positive effect on downstream negotiations.

An ongoing dialogue will also help you understand how COVID-19 is impacting your contractor to support more robust claims forecasting. At the same time, it enables a collaborative approach to claims mitigation that could measurably reduce the impact of potential claims. For example, new COVID-19 protocols may require the contractor to add more portable washrooms and handwash stations to a construction site. Perhaps arrangements could be made with a closed, adjacent business to use its washrooms as a means of providing more sanitary conditions and reducing the cost impact. If nothing else, demonstrating your willingness to engage with site contractors will ensure better alignment and could result in more mutually agreeable resolutions.

3. Know your contract

Before you take any action, it is important to know what your contract says. How you communicate in the event of a delay is prescribed in the contract. In Canada, we are fortunate to have broadly accepted industry-standard contracts, such as Canadian Construction Documents Committee (CCDC) contracts, but this does not mean that all terms are the same. Many contracts include supplementary conditions that amend standard contract terms. All too often, we see instances where parties think they know the ins and outs of their contract, only to be surprised when they actually read the relevant sections. This is common, as most of us working in the industry see many contracts. Naturally, it’s difficult to remember which projects have amended what clauses, so now is a good time to review your contracts in detail. Knowing the prescribed time and format for Notices will undoubtedly be useful when you are faced with a delay. If you see that a contractor has not submit a proper Notice in the prescribed timeframe and format, it may mitigate some impact. That isn’t to say that the claim will be nullified, but knowing the contract terms thoroughly will better prepare you for how to engage.

In recent weeks, for example, I have heard a number of people mention force majeure in discussions about construction delays. While force majeure is a well-known term, it does not exist by default in all contracts. Before assuming that a force majeure provision will protect you, make sure it actually exists in your contract and is applicable in the current context.

Similarly, you should review language in CCDC contracts related to delays not caused by an Owner or Contractor. GC 6.5.2 provides for reimbursement by the Owner for reasonable costs, while GC 6.5.3 provides only for additional time to complete the work, but no additional compensation to the Contractor. Which clause applies in our current COVID-19 situation will likely be the subject of considerable debate in the coming months. While it is important for you to know your contract terms well, the best advice remains to seek legal counsel for guidance specific to your project, your contract and the impact of potential claims.

For now, owners should prepare for future claims management by keeping detailed records, maintaining an open dialogue with stakeholders, and reviewing their contracts thoroughly. Applying these three steps is more important than ever to help navigate projects through to completion in these unusual circumstances.

Download the article summary

Read our Client Advisory Bulletin: Legal & Strategic Construction Considerations in Ontario

Read more from Driver Trett on COVID-19 impacts