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Practical Advice: COVID-19's Impact on the Construction Industry

As a member of the American Bar Association, Forum on the Construction Industry, BMD participated in a COVID-19 Construction Leadership Roundtable discussion with over 450 other construction attorneys representing nearly every voice in the industry. Here is the top practical advice and key takeaways: 

  1. Safety. Safety is the overriding imperative on all construction projects. Employers should designate and empower a COVID-19 Compliance Coordinator and post on site the CDC guidelines in English and other appropriate languages. The six-foot social distancing requirement, portable handwashing, wearing gloves, prohibiting carpooling to the jobsite, and closing jobsites to the public are now considered best practices and mandatory expectations for all employers. In some states, governmental agencies are spot checking jobsites and removing individuals who are not in compliance with the CDC guidelines. The Occupational Safety and Health Administration has issued guidance for protecting employees against workplace exposures to COVID-19. Employers should also be aware of OSHA standards which may apply to workplace exposures and when a case of COVID-19 is OSHA recordable. Learn more here from BMD’s March 20, 2020 OSHA and COVID-19: Workplace Exposures, Citations and Recording Client Advisory. 
  1. Notice. Give notice early and often! After providing notice, follow up with timely reports, cost information and detailed schedule impact data. Maintain detailed records if you want to preserve any chance of recovering for delay impacts. It is not enough to generally argue that your work has been delayed by COVID-19. It must be written in a way to prevent or discourage escalation, including litigation. Be prepared to demonstrate how and when delay impacts occurred, such as utilization of a measured mile analysis to prove loss of efficiency and productivity. Helping the owner or general contractor understand the unique circumstances which caused the delay will increase your chances to cooperatively resolve the problem. 
  1. Suspension or Termination of Work. Suspension or termination of work remains an option on a case-by-case basis. Work is generally proceeding but is being impacted by CDC guidelines. Each project is unique and requires the owner’s willingness to work with prime contractors, subcontractors, suppliers, and design professionals. It has been rare for attorneys to counsel clients to stop work. There have been some suspensions of work, but often work resumes if employers and workers take appropriate CDC precautions. For example, work is proceeding at the City of Tampa, Florida airport where virtual inspections are being conducted by using affidavits, video or digital images, or in-person inspections per CDC guidelines. Some third-party inspections have been allowed and some government agencies are deferring inspections. Materials onsite are being sanitized. By contrast, due to the large number of coronavirus cases in New York and New Jersey, most private and public construction projects in those areas have been shut down. 
  1. Collaboration. Because the phrase “unchartered waters” does not begin to describe the impact that COVID-19 is having on construction projects, the best advice for prime contractors and subcontractors is to try to row in the same direction. This is no time for battles or disputes between general contractors and subcontractors. Prime contractors should ascertain the cash flow status of their subcontractors to determine whether they will be able to perform under the current revenue-starved environment. A key element for project success is that all parties need to work together to identify risks, loss of productivity, schedule impacts, supply chain issues, safety issues, etc. In fact, it has been perceived that many owners are being more forgiving on product substitutions and developing creative solutions to deal with impacts resulting from coronavirus delays – so take advantage of it while you can by being collaborative! 
  1. Liquidated Damages, Force Majeure, and Excusable Delays. How courts will interpret construction contract delay clauses, force majeure clauses and common law rights with respect to the delay impacts associated with COVID-19 remains to be seen, and it will likely be determined on a case-by-case basis. Because many courts are holding civil disputes in abeyance, immediate relief from the judicial system is unlikely. For this reason, as well as solid business judgment, it makes good sense for the parties to cooperatively engage in direct and timely discussions regarding how to proceed with construction and manage delay impacts in a mutually beneficial way. Issuance of change orders or schedule extensions may relieve some of the time and cost impacts. Prudent owners welcome timely notice because they can attempt to manage these issues and risks. Excellent communication is the key to identify problems. Deliver timely written notice and detailed substantive documentation, offer creative solutions, and try to manage the difficult circumstances together. Rather than pulling the trigger on default clauses, it is generally advisable to push across the project finish line and properly document all cost and time impacts. As we advised in the BMD Client Advisory on March 17th, the extent to which COVID-19 excuses or extends contractual obligation(s) is a fact-specific determination that will depend on the nature of the obligations and the specific language of the contract. 
  1. Project Financing. “Cash is king,” and if the availability of private and public funding is impaired, work may cease and sureties may be required to take over on payment and performance bonded projects. Conduct adequate due diligence before committing to business relationships. On an ongoing basis, be sure to request and receive adequate assurances of financial ability to pay whenever possible. 

Please feel free to reach out to Bob Hager, Justin Alaburda, David Scott, Jeff Miller, Steve Matasich or Brandon Pauley if you have any questions or comments on these issues. This is intended as general advice and should not be interpreted as legal advice. Each situation is unique and requires specific analysis of relevant contracts, facts and legal obligations.

Investment Training for the Second and Third Generations

Consider this scenario. Mom and Dad started the business from the ground up. Over the decades it has expanded into a money-making machine. They are able to sell the business and it results in a multimillion-dollar payday for their labors. The excess money has allowed Mom and Dad to invest with various financial advising firms, several fund management groups, and directly with new startups and joint ventures. Their experience has made them savvy investors, with a detailed understanding of how much to invest, when, and where. They cannot justify formation of a full family office with dedicated investors to manage the funds, but Mom and Dad have set up a trust fund for the children to allow these investments to continue to grow over the years. Eventually, Mom and Dad pass. Their children enjoy the fruits of their labors, and, by the time the grandchildren are adults, Mom and Dad's savvy investments are gone.

Provider Relief Funds – Continued Confusion Regarding Reporting Requirements and Lost Revenues

In Fall 2020, HHS issued multiple rounds of guidance and FAQs regarding the reporting requirements for the Provider Relief Funds, the most recently published notice being November 2, 2020 and December 11, 2020. Specifically, the reporting portal for the use of the funds in 2020 was scheduled to open on January 15, 2021. Although there was much speculation as to whether this would occur. And, as of the date of this article, the portal was not opened.

Ohio S.B. 310 Loosens Practice Barrier for Advanced Practice Providers

S.B. 310, signed by Ohio Governor DeWine and effective from December 29, 2020 until May 1, 2021, provides flexibility regarding the regulatorily mandated supervision and collaboration agreements for physician assistants, certified nurse-midwives, clinical nurse specialists and certified nurse practitioners working in a hospital or other health care facility. Originally drafted as a bill to distribute federal COVID funding to local subdivisions, the healthcare related provisions were added to help relieve some of the stresses hospitals and other healthcare facilities are facing during the COVID-19 pandemic.

HHS Issues Opinion Regarding Illegal Attempts by Drug Manufacturers to Deny 340B Discounts under Contract Pharmacy Arrangements

The federal 340B discount drug program is a safety net for many federally qualified health centers, disproportionate share hospitals, and other covered entities. This program allows these providers to obtain discount pricing on drugs which in turn allows the providers to better serve their patient populations and provide their patients with access to vital health care services. Over the years, the 340B program has undergone intense scrutiny, particularly by drug manufacturers who are required by federal law to provide the discounted pricing.

S.B. 263 Protects 340B Covered Entities from Predatory Practices in Ohio

Just before the end of calendar year 2020 and at the end of its two-year legislative session, the Ohio General Assembly passed Senate Bill 263, which prohibits insurance companies and pharmacy benefit managers (“PBMs”) from imposing on 340B Covered Entities discriminatory pricing and other contract terms. This is a win for safety net providers and the people they serve, as 340B savings are crucial to their ability to provide high quality, affordable programs and services to patients.