INSIGHT: Construction Industry Outlook—Post-Covid Legal Trends

Posted on June 30, 2020 by Donald Sonn

By: Joanna Horsnail and Casey Williams

June 30, 2020, 1:00 AM

Covid-19 has necessitated a rethinking of safety, supply chain, and technology in the construction industry. Mayer Brown LLP attorneys look at five trends in construction projects in the wake of Covid-19, with suggestions for how attorneys can approach these developments.

Like most economic sectors, the construction industry has been forever impacted by Covid-19 and project owners, contractors, and designers are reimagining future and early-stage construction projects by incorporating design changes and other precautions and innovations in response to lessons from the pandemic.

Covid-19 has necessitated a rethinking of safety, supply chain, and technology. Lawyers should be mindful of these developments as they represent clients in negotiating and drafting design, construction contracts and project development agreements.

Below are five trends in construction projects in the wake of Covid-19, with suggestions for how attorneys can approach these developments.

Force Majeure Provisions Need Bolstering

Most people involved in the construction industry have been impacted by force majeure claims in early 2020. Covid-19 implicated force majeure claims based on government shutdowns, owner shutdowns, changes in law, labor unavailability and supply chain failures.

Going forward, lawyers should be scrutinizing force majeure clauses more than ever, with specific attention being paid to provisions relating to pandemics and government shutdowns. All parties to a construction contract should be focused on risk allocation and procedures to address a potential resurgence of Covid-19 or a similar pandemic.

Construction Will Involve New Safety Options

To better ensure a facility is able to continue operations during the widespread outbreak of a contagion, project owners are considering new safety features.

Safety considerations pre-Covid-19 were largely focused on acute “incident” risks. Now that we have seen facilities all over the world closed due to the inability of workers to safely work without risk of exposure to the coronavirus, project owners, and even contractors, are thinking about implementation of designs that enable social distancing and regular deep-cleaning of facilities.

Project owners are also considering ways in which existing facilities can be retrofitted to address these new safety considerations, which could require significant scope changes to previously executed construction agreements.

Additionally, in contracts for new projects, attorneys should pay close attention to the safety protocols and carefully allocate responsibility for protective measures during the construction period, including PPE, health screenings, staggered shifts, deep-cleaning and similar considerations.

Better Cyber Security as Tech, Automation Decentralize Construction

The construction industry has benefited from improvements in technology in recent years even without the influence of Covid-19. Now, there will be an increased emphasis on tools that allow construction to be remotely performed and monitored, including use of robotics and autonomous vehicles.

Attorneys practicing in this space must be aware of the risks that come with implementing new technology on a construction project, and agreements need to appropriately allocate novel risks. Parties should consider issues such as data breaches and cybersecurity, confidentiality, licensing/intellectual property rights and defects and safety issues in light of technology being used on a particular project.

Demand for Modular Design, Vertical Structuring, Supply Chain Partnerships

Safety during construction is always a paramount consideration. Now many governmental authorities are restricting the number of construction personnel allowed to be on site, or owners or contractors may self-impose such restrictions.

The Occupational Safety and Health Administration recently released guidance on construction best practices, which called for distancing on sites whenever possible. A reduced or staggered workforce could extend construction timelines or make otherwise traditional construction methods either unsafe or not feasible.

Modular design and construction can be a solution to both problems. By shifting production of certain construction components to offsite locations, projects could remain in compliance with new limitations and simultaneously expedite timelines.

Similarly, expect an increase in vertical structuring and new partnerships, both designed to establish additional reliability in supply chains and facilitate off-site production of construction components.

To address these developments, attorneys will need to be attuned in contract negotiations to special considerations of ownership of work in progress, transportation requirements, site security, insurance, risk of loss and similar matters.

Projects May Need to Rapidly Repurpose

Particularly in certain segments, project owners are starting to envision new projects and spaces with greater flexibility of use in mind.

Consider, by way of example, the lessons learned from the mandate that automotive manufacturers halt production and convert assembly lines to produce ventilators. Also, the conversion of public spaces in a number of metropolitan areas to field hospitals.

Less dramatically, many owners are simply thinking of ways to design projects with features like movable walls, flexible spaces and more support for remote working as we try to reimagine what the workplace may look like in the future as a result of lessons learned from the pandemic. Here, too, modular design may begin to rise in prevalence as a viable solution to increasing versatility.

Attorneys will need to ensure that contracts adequately describe the goals of the project and carefully allocate responsibility. If project scope or design may evolve during the construction process, careful attention should be paid to the change order provisions to try and minimize disputes or protracted negotiations when a project needs to pivot.

The Covid-19 pandemic has served as a stark wake-up call that the unexpected can be exceptionally devastating. Attorneys are rethinking some of what may have once been considered boilerplate in contracts to make sure that even unlikely scenarios are considered in risk allocation and options for changes, suspension and termination.

As the construction industry adjusts to this new era of challenges and opportunities, construction attorneys and their clients should anticipate that issues and trends will continue to rapidly evolve—and we must try to expect the unexpected.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.