Contracting In The Time of COVID-19 – PART III
What to do when the Owner shuts down the project
As mentioned above, review the contract, particularly with regard to the notice and claim deadlines required to preserve compensation rights. Make absolutely sure that the Owner issues the suspension order in writing, and double check that the reasons the Owner gives are accurate. Confirm that you have received the suspension order in writing, and be sure to state that the shutdown will cause additional costs and delays in the project. Contracts may provide for equitable adjustments for suspensions, so it is important that costs associated with the delay are carefully and accurately noted and that they are kept segregated. Also, even if the next pay application is not yet due, submit one that captures all of the work performed up to the date of suspension. Advise subcontractors and suppliers and the surety.
When the owner stops or suspends the work, a contractor should look to suspension or stop work clauses in the contract. When the project is stopped for other reasons that are beyond the contractor’s control, the contractor should look to the force majeure and delay clauses in the contract.
Contract clauses – Suspension and Stop Work Clauses
AIA Contract Documents
Section 14.3 of the AIA A201 General Conditions to the AIA contracts allows owners to suspend the work for whatever length of time the owner decides, but requires that the suspension be in writing and that the Contract Sum and Contract Time be adjusted for increases in the cost and time caused by the suspension, including profit. Be careful, however, as the AIA contracts are often heavily edited and the relief provided under §14.3 may have been edited out.
ConsensusDocs also permits an owner to suspend the project for the owner’s convenience. Section 11.1.1 of ConsensusDocs 200 provides that the suspension must be in writing and that the contractor is entitled to an equitable adjustment in the contract price and the contract time. The subsection does not impose time limitations on claims for the equitable adjustment, but a contractor would be well advised to make such claims sooner rather than later.
Federal contracts contain two types of project suspension clauses, FAR 52.242-14 (suspension) and FAR 52.242-15 (stop work). Although similar in purpose, there are some differences between them that contractors should be aware of. Suspension may last indefinitely, but stop work orders are for 90 days, extendable upon agreement of the