Delay

U.S. SBA Corrects Rulemaking on Paycheck Protection Program Loans for Construction Businesses

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In a whirlwind of legislation, rulemaking,  guidance, and answers to FAQs on the CARES Act, inevitably confusion arose related to business eligibility for the Paycheck Protection Program’s (PPP).   Under the PPP, $349 Billion in loan funding is available for businesses impacted by COVID-19.  Eligible businesses can borrow up to 2.5 times their average monthly payroll to cover costs such as payroll (mostly), as well as rent, mortgage interest, and utilities.  And if certain requirements are met by the business, all or almost all of the PPP loan will be forgiven.  Even putting aside the potential forgiveness benefit, the PPP loans offer favorable terms for businesses – low interest, no collateral, and no personal guarantees. Construction businesses clearly have a need for these PPP loans in an effort to blunt the immediate economic impacts of delayed, slowed, or stopped projects.

However, in a seeming contradiction to the CARES Act statutory language, which allowed businesses with 500 or fewer employees to apply for the PPP loans, the U.S.

Massachusetts Issues New Guidance on “Essential” “Construction-Related Activities” — Appears More Narrow

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On March 31, 2020, Massachusetts Governor Baker replaced its prior list of “Essential Services” with a new list available online.

Missing from the new listing of “Essential Services” was the prior bullet point that stated construction workers who support the construction of projects was essential. That language from the March 23, 2020 Order is below:

While construction is mentioned a number of times as supporting other essential services, a new section titled “Construction-Related Activities” was added.  This appears to be more narrow than the bullet-point above in that it refers to specific industries as opposed to a blanket “construction project.” The new section is below.

While guidance/explanation is not currently available as to the scope of this change from the Governor, the new policy of “Essential Services” appears to be more narrow than the Exhibit A list of “Essential Services” issued on March 23, 2020.  Those industries that fall

Mass Governor’s Legal Office’s Letter to Municipalities: Withdraw Conflicting City/Town Policies Suspending Essential Construction Services

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On March 25, 2020, the Massachusetts Governor’s Legal Office issued a letter to Municipal Chief Executive Officers in the Commonwealth that “provides guidance regarding the effect of the Governor’s March 23, 2020 Order ‘Assuring Continued Operation of Essential Services in the Commonwealth, Closing Certain Workplaces, and Prohibiting Gatherings of More than 10 People’ insofar as the Order intersects with municipal efforts to address the COVID-19 crisis.”

The Governor’s order deemed construction services as essential services, but some Cities/Towns have issued temporary suspensions of construction projects in their locale.  The letter emphasizes the importance that “public officials avoid conflicting directives and duplication of efforts.”  The Chief Legal Counsel stated:

Then, the letter confirms that the Governor’s March 23, 2020 Order included such a superseding provision “to ensure unitary management of this crisis.”  The letter concludes, after reciting that constructions services were included as “essential services” in the list of essential services of the March 23 Order,

Accordingly,

Rhode Island Issues Work from Home Order “If You Can”

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On March 22, 2020, Governor Raimondo issued the Seventh Supplemental Emergency Declaration that ordered “[a]ll business service personnel that can work from home are required to do so.”  The order was effective immediately and operates through March 30, 2020.

At the time of preparing this post, Rhode Island has not suspended business activities for “essential businesses.”  Based upon this policy, field construction services cannot be performed remotely so they can continue provided the following practices are in place:

Gatherings of ten (10) or more people in public or private spaces in Rhode Island are prohibited.  In addition, businesses that remain open must post notices of these policies as noted in paragraph 5 below.

For Rhode Island news and updates about COVID-19, visit https://health.ri.gov/diseases/ncov2019/.

 

Massachusetts Closes In-Person Non-Essential Businesses Effective March 24 — Construction Designated Essential

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Effective March 24th at 12:00 noon, Massachusetts is closing all non-essential businesses “physical workplaces and facilities (“brick-and-mortar premises”) through April 7, 2020.   See COVID-19 Order No. 13.

As an update to my post from Friday on Non-Essential Businesses, Massachusetts did not adopt the CISA Guidelines, but appears to have followed the structure of them.

The essential services list for Massachusetts can be found HERE.   Construction services is included as “essential” servcies as follows:

All indication is that MassDOT, MBTA, and MassPort projects are continuing (as noted by the above-referenced public works inclusion as an essential service.  During a board meeting of MassDOT, the Commissioner stated that the work is continuing but each project will be reviewed on a case-by-case basis.  Below is a letter Construction Industries of Massachusetts received from MassDOT on March 23, 2020 stating

Construction Projects Suspended in Cambridge MA Until Further Notice

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On March 18, 2020, the City of Cambridge announced a Temporary Emergency Construction Moratorium “Moratorium”) “on all construction activity on both public and private property until further notice”  The City explained that it was done to mitigate the impact of COVID-19 and protect the health of the construction workers and members of the public.

All construction activities are prohibited after Saturday March 21, 2020.  By March 26, 2020, all make-safe measures must be in place and sites must be safe and secure.

“Essential Construction Work” may continue as determined exclusively by the Commissioner of Inspectional Services or the Commissioner of Public Works.  Exceptions will be granted only if they are essential for public safety and comply with the following guidelines on a case-by-case basis:

 

There is a carve-out to permit the public authorities to deem certain work as essential even if not listed above.  In addition, construction of 1-3 family residential structures already permitted by March

Steps to Take if You Receive a Subcontractor’s COVID-19 Work Suspension Notice

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There are increasing reports that some subcontractors have decided to suspend operations during the COVID-19 outbreak.  The subcontractors made this difficult decision even though the construction projects for which the general contractor has a continuing performance obligation remain ongoing with CDC health and safety measures in place.

What should a general contractor do if it receives such a notice (assuming the project is still moving forward)?  My thoughts are below recognizing that our present environment changes from day to day based upon news reports and governmental orders.

1. Reply to the subcontractor.  Confirm receipt of the notice and inquire about the subcontractor’s reasons for suspension and corporate policies regarding COVID-19 if not clear from the notice letter.  If not already established, provide a contact person for the subcontractor to provide updates as to the subcontractor’s policies and work plan schedule. Include a reservation of rights so that it is clear that you are preserving claims arising from the suspension and state that

Contractors: Its Time to Send Your COVID-19 Notice

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The day-to-day professional and personal impact of the COVID-19 pandemic is substantial.  The global event will have dozens of common legal implications that we will address in this blog over the coming days, but for now I wanted to start with the basic starting point for any event of delay and/or additional cost on a construction project — THE NOTICE! 

The time is now to send your notice.  

This is not an adversarial notice.  Your contracting party will understand the impacts experienced and should appreciate the proactive approach in communicating the COVID-19 impacts.  If discussions have occurred between with your contracting party, I would still send a formal notice as to avoid further legal defenses down the line.  Also, providing the formal notice creates a structure that is helpful in creating a productive communication pathway regarding the delays/costs incurred and ways to mitigate them.

No matter what the legal theory, the COVID-19

City of Boston’s Press Release on Suspending Construction in Boston Effective March 17th

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Below is the City of Boston’s Press Release suspending all regular activity at construction sites in Boston as of today – March 17, 2020.  Sites need to be made safe by March 23, 2020.  Policy will be revisited in two weeks.

CONSTRUCTION SITES

Effective tomorrow, Tuesday, March 17, 2020, the City is suspending all regular activity at construction sites in Boston. Employers should maintain the necessary crews to keep their sites safe and secure, keep any materials from blowing away, and prevent trespassing. This work needs to be completed in the next week, by Monday, March 23, 2020. After sites have been secured, skeleton crews will be permitted for the remainder of this suspension to ensure safety. The only work that will be permitted moving forward will be emergency work, which will need to be approved by the City of Boston’s Inspectional Services Department.

That essential work includes:

  • emergency utility, road or building work, such as