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Active Construction
One of the immediate effects of COVID-19 has been the impact of state orders for businesses to implement social distancing or otherwise shut down operations. Most states with ordered business closures have designated construction activity as being “essential,” which has allowed a number of active charter school construction projects to continue during the past couple months. However, some states initially did not classify construction activities related to charter schools as being essential, with one example being New York.
As a number of states’ business closure orders have expired or are set to expire this month, and construction has been able to continue, there may be a sense that construction will not be impeded in the future by state action. The reality is most health experts are expecting a resurgence of COVID-19 over the next 12 months. Depending on the incidence and severity of infection in the future and the development of effective therapeutic treatments, social distancing and business shuttering may become more extensive as a prophylaxis. There could also be a drop-off in construction workforce due to illness, though as of now, COVID-19 has not created an observed construction workforce shortage.
As you work with your project manager, general contractor, and other relevant parties, making sure your construction activities are adhering to your planned timeline is perhaps more critical than ever. There is just no way to know if minor slippage could come at the wrong time and delay your project at the most inopportune time. Part of preventing timeline slippage may also be taking a proactive approach towards identifying opportunities to surge resources and get ahead on the timeline to build additional buffer.
Most construction firms are also noting some disruption of supply chains over the last couple of months. With a large amount of construction materials coming from international manufacturers and suppliers, general contractors and subcontractors are expecting to see those disruptions persist over the next few months. Whereas value engineering is a common industry practice as a way to drive construction costs down without sacrificing function or safety, I expect that we will see a new value engineering of sorts not based on cost, but rather the availability of materials or their domestic origin. If you start to make decisions based on material availability, you will need to closely consider whether the availability of replacement material comes at an additional cost and the extent to which your project budget can tolerate it. This analysis is similar to the analysis you would do, for example, if you were evaluating the budget impact of having construction crews working overtime the last month of the project to keep it on track.
This is also a good time for you to make sure you understand what’s spelled out in your construction agreements and insurance policies. In the case of your construction agreements, you should take a closer look at the force majeure clause. According to the American Bar Association, “Black’s Law Dictionary explains that a force majeure clause is meant to protect the parties in the event that a contract cannot be performed due to causes which are outside the control of the parties and could not be avoided by exercise of due care. Force majeure clauses allocate risk between the parties when an unanticipated event makes performance impossible or impracticable.”[1] Depending on the listed triggering events in your existing construction agreement, COVID-19 may be a triggering event as a pandemic or it may fall under a broad catch-all of events out of the control of both parties.
Either way, this is something worth a phone call to your legal counsel to understand your rights under the contract and discuss next steps. Your legal counsel may recommend invoking your rights under force majeure and otherwise making an effort to engage with your general contractor in anticipation of his or her invocation of their rights under force majeure. Because in practice force majeure is less about a cancellation of a contract and more about navigating a delay in performance, this is something that should be approached collaboratively with the other party.
In the case of your insurance policies, you should take a closer look at whether any benefit is conferred to you based on the current events and an associated delay of your facility, keeping in mind that the qualifying event or claim may be more downstream and triggered at a later time, such as a delay in occupancy. If you required a performance bond, you should familiarize yourself with what claims trigger coverage and surrounding considerations. Looking forward, if you haven’t signed a construction agreement with a general contractor or commenced construction, you should look into requiring a performance bond to provide yourself some additional financial protection.
Sometimes despite working with your project team to proactively manage your timeline, there may still be events out of your team’s control like COVID-19, that will significantly delay your charter school facility project. The recent pandemic and its impact are the best argument for why, as part of your facility planning, you should have some credible backup facility options in case your facility is not ready when you need to move in. Part of that backup plan can be actual timeline wiggle room. For some schools, that might mean working with their current landlord to negotiate an extension option. For others, that might mean identifying temporary shared space with another school. This might also mean taking note of the lessons learned during this time about remote education and implementing a remote education program until you can move into your permanent facility. Whatever the backup options are, keep in mind that you will need to establish key deadlines when you have to start activating those options. With COVID-19 and state and local governments not telegraphing their future moves and decisions with as much warning as we might like, you really need to think about how you establish those key deadlines. Your backup plan may require permission from your authorizer like in New York where at least one authorizer requires an acceptable certificate of occupancy regardless of whether the space is temporary or not. There may be other occupancy requirements you need to meet prior to implementing your backup plan that you are not aware of.
Depending on how significant a delay you encounter, you might realize none of your backup plans are adequate enough to accommodate the delay. In this case, it might require you to rethink the scope of your facility and exploring a phased approach. For example, your construction plan will likely call for a number of other spaces besides instructional spaces. Your timeline situation could be such that you cannot complete your entire facility in time for your move-in date, but you are able to complete the instructional spaces in time and either choose to continue the rest of the work after move-in or the following summer. This might be a preferable alternative to a more significant delay. Keep in mind that your facility design will affect your ability to take a phased approach. Construction, when done in phases, tends to be more expensive. Any incomplete construction or ongoing construction with students on campus will also bring pretty rigorous safety standards and considerations, which will likely come at additional costs.
SchoolPrint is a free service to charter schools who need assistance in identifying and working with quality construction service providers, or general assistance in navigating the facilities process. We provide the blueprint schools need to successfully complete their facility projects. If your current facility situation has been further exacerbated by COVID-19 and you need expert advice, please feel free to email us at SchoolPrint@lisc.org.
[1] The American Bar Association (2020, March 19). Is the Coronavirus a Force Majeure that Excuses Performance of a Contract?
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