Once a remote health issue in China, the rapidly spreading coronavirus (COVID-19) has become not only a global health concern but also a global economic disruptor that could impact nearly every industry.
For owners and contractors, the virus presents significant risks to critical aspects of the project, including the health of project personnel, potential supply chain disruptions and the increased potential of cost impacts and schedule delays, regardless of the contractual responsibility for infectious diseases. However, prepared and proactive owners and contractors can, with some forethought and groundwork, take simple yet effective measures to mitigate—or even prevent—these potential health, cost and schedule risks.
Take Care of the Team
Ensure that personnel are safe and able to successfully execute their respective roles on the project. This includes setting up the proper procedural infrastructure to minimize the risk of infection and to keep all personnel healthy and working—no matter the site.
Developing and implementing a basic, multi-faceted COVID‑19 risk management plan is a good starting point. One aspect of the plan should be to manage personnel travel to reduce the risk of infection, eliminating all non-essential travel. As an initial step, an employer might set up (and continually update) a list of countries to and from which its personnel should consider not traveling without company approval or, if travel is necessary, establish conditions and precautions under which such travel is taken. If someone has already traveled to a restricted country without necessary precautions or otherwise becomes infected, a next step would be to evaluate the impact, including potentially implementing a mandatory quarantine period for such persons.
Proactively identify preventative steps and potential cases of coronavirus. For example, personnel should be aware of the list of COVID‑19 symptoms (e.g., post COVID‑19 signage in offices and other jobsites), and all personnel should be required to immediately report any such symptoms. Employers should also consider encouraging personnel experiencing symptoms of illness to stay home or otherwise refrain from reporting to the workplace, and provide paid sick time under appropriate circumstances.
In addition to health mitigation techniques, plan in advance for potential economic disruptions. This includes making necessary preparations so that owner personnel can work remotely in the event that such personnel exhibit COVID‑19 symptoms, as well as establishing protocols to temporarily close non‑essential offices.
Such preparations might include providing laptops to additional employees to increase remote work capabilities, installing necessary programs and software on all work laptop computers (e.g., CAD software or scheduling software), setting up filesharing sites, implementing WebEx or other tele‑meeting capabilities and permitting personnel to login to the owner’s systems by remote access VPN. With such measures in place, infected or quarantined personnel may continue progressing the project remotely, even during a quarantine scenario.
Manage Potential materials and equipment Impacts
Contractors should take proactive steps to prevent and manage potential impacts on the project. This means reviewing the engineering, procurement and construction agreement (EPC) or construction agreement to identify provisions requiring the contractor or supplier to mitigate impacts related to the coronavirus, assessing whether the contractor has established adequate mitigation measures, and reporting to the owner any additional steps it is taking.
The parties should consider taking these steps regardless of who bears the responsibility for impacts that may be caused by coronavirus. A good starting point would be to consider how certain contractual issues—such as equipment and material procurement; health, safety, security and environmental (HSSE) practices; as well as notice and mitigation requirements—may apply to potential coronavirus impacts.
Under the EPC or construction contract, the contractor will generally be responsible for supplying equipment and materials necessary for the project. Disruption of global supply chains due to coronavirus, however, may cause delays. To prevent supply issues, an owner should consider contacting the contractor to make sure that it has an alternative sourcing plan.
HSSE Measures
The contractor must perform the work in accordance with its HSSE policies, the owner’s HSSE policies or both (as applicable).
Most HSSE plans require the contractor to establish HSSE measures that are specific to the project and the site. Accordingly, contractors should establish site‑specific best practices to prevent the spread of coronavirus to the project. Such practices may include:
- updating the contractor’s emergency operations plan to include COVID-19 planning;
- screening personnel for signs of a coronavirus infection;
- identifying and allocating space on the project site that can be used to evaluate sick personnel;
- developing an emergency communications plan for distributing timely and accurate information to onsite personnel;
- promoting the practice of everyday preventative actions among onsite personnel (e.g., frequent hand washing with soap and water);
- providing COVID-19 prevention supplies on the project site (e.g., disposable gloves, hand sanitizers that contains at least 60% alcohol and tissues) and setting up sanitation stations on the site; and
- planning for personnel absences by developing flexible attendance and sick-leave policies, implementing a plan for alternative labor to make up for any such absences and tracking COVID-19 related personnel absences.
Compliance with Notice and Mitigation Requirements
The EPC or construction contract may include provisions requiring the contractor to mitigate against or provide notice of potential project impacts due to coronavirus. The contractor may be asked to provide both regular updates and immediate notice of any potential coronavirus impacts to the project, as well as to describe backup plans for such impacts.
For example, if the rapid spread of the virus decreases the availability of healthy laborers, the contractor should be prepared to turn to alternative labor sources. Knowing these “Plan B” options upfront will benefit both the owner and the contractor, head off claims of force majeure (if allowed under the applicable contract) and ultimately reduce the risk of cost and schedule overruns.
Just as importantly, the project team will need to comply with any recent COVID‑19-related laws and regulations applicable to the project. This could include, for example, describing how the contractor will update its HSSE practices to account for any local, state, or federal regulations imposing on-site COVID 19 prevention measures.
Consider Contacting Lenders and Insurance Brokers
The owner and the contractor should consider contacting their lenders (if any) and insurance brokers to get ahead of any potential COVID‑19 impacts.
The parties should promptly and proactively evaluate potential insurance coverage for project impacts caused by coronavirus and should take steps to ensure compliance with any policy conditions, such as providing notice to and cooperating with potentially responsive insurers. Personal injury claims arising from the sickness of an individual may be covered by workers’ compensation, employer’s liability and/or general liability policies.
Project delays and associated loss of business income may be covered by the owner’s property, business interruption, delay in start-up and/or contingent business interruption coverages. For example, many such policies cover losses sustained when a “civil authority” limits or prohibits access to the project premises and/or to a supplier’s premises.
In addition, actual or perceived exposure of the premises to an individual who has contracted COVID-19 may fall within the policies’ grants of coverage for “physical loss of or damage to insured property.” Work with insurance brokers to avoid missing any deadlines and to avoid any missteps on compliance with policy requirements. Experienced coverage counsel is critical to evaluating potential sources of insurance coverage and maximizing recovery.
Disrupting the Disruptor
As exemplified by the current crisis, project teams in today’s environment should take a more wholistic and proactive approach to safety planning that includes the risk of disruption due to infectious diseases. Owners should work collaboratively with contractors (and others, such as lenders and brokers) to develop a multi‑faceted, front‑end approach to handling such risk.
With some preparation and planning, project teams can disrupt the potential disruption of coronavirus and other infectious diseases on their projects.
