Hurricane Irma’s unprecedented statewide affects will impact many contractors currently undertaking public works projects for state and local governments in Florida. As the process of damage assessment gives way to the practical challenges of restoration, repair, and re-commencing construction, contractors on public works projects in Florida should carefully review their contract terms. Provisions regarding time extensions for suspensions of work, delay, damage to work in place, and shortages of material and equipment will undoubtedly come into play on public projects following Hurricane Irma and its aftermath.
EXTENSIONS OF TIME: Given the statewide impact of Hurricane Irma, as well as the predicted extended loss of electricity in much of the state, many ongoing construction projects were or will be temporarily suspended by the direction of the government owner. Even in the absence of a government imposed suspension, it may be impracticable for other projects to proceed until power and other infrastructure is restored. Many state and local government contracts provide for time extensions in the event of an owner directed suspension, as well as for the inability to work due to abnormal weather or other force majeure situations. Generally such time extensions are deemed non-compensable; however, under some clauses, additional compensation could be requested for costs that cannot be mitigated, such as demobilization/remobilization and idle or standby equipment and/or labor. Before requesting a time extension, or agreeing to an offered extension, contractors should review contract terms regarding owner suspensions of work, time extensions (particularly time limits to submit preliminary and final requests), and provisions which may provide a basis for compensation.
SHORTAGES: As with any disruption, a natural disaster may cause shortages of not only materials, but also equipment and qualified labor. Many Florida public contracts permit a contractor to seek additional time and, less frequently, additional compensation in the event of documented shortages. Documentation is critical to a successful claim for increased time or costs due to shortages, and should include written substantiation from manufacturers and suppliers that a shortage exists, preexisting supply agreements or proof of prior arrangements, and current pricing data.
DAMAGE TO WORK IN PLACE: Contractors may bear much of the risk of damage to work in place under most state and local contracts. Insurance is generally required on government contracts and may cover certain types of damage, and contractors should contact their agents for notice requirements and preliminary coverage questions. However, there may be some limited recourse under force majeure provisions in the contract. Government contracts that provide reimbursement of force majeure damages typically are limited to discretionary payments for repair of damage due to unforeseeable causes beyond contractor’s control, but such provisions are worth review to determine potential applicability.
DAMAGES FOR DELAY: A typical state or local government construction contract may contain some type of recourse for damages due to delay in addition to a time extension. These provisions are generally restrictive in scope, but some may be applicable in the instance of a natural disaster. Key considerations when reviewing such provisions are the criteria used for determining if a delay is compensable, how the extent of delay is determined, and any exclusions for delay damages in the contract. Typical damages for delay incurred by a contractor may include: labor/material escalations, increased subcontractor and supervision costs, extended job site overhead (trailers, rent, utilities, support personnel, insurance), and unabsorbed home office overhead.