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What are the cost associated with Force Majeure from contractor's perspective ?

ArizonaConstruction Contract Coronavirus

Sir i am college student so i would like to understand the various factors which a contractor would face during Covid-19 and how he can try reducing cost which would affect him as the construction site is closed due to lock down, and what are the different cost consideration in it when Force Majeure is applied in such situation.

1 reply

May 20, 2020

The direct costs resulting from COVID-19 should be pretty easy to calculate - generally, that will be the cost of mitigation factors like improved sanitation, additional and/or improved bathrooms set up on-site, signage reinforcing distancing and sanitation procedures, etc. What's much harder to calculate is the costs that will be indirectly incurred. Pricing the following items will often be crucial, but not as straight forward: - Delays - Rescheduling work - Resequencing work - Hiring new contractors, subs, and vendors as needed (some may be unavailable to work or may even go out of business) - Disruptions in the supply chain - Increased material costs Certainly, there are additional considerations - but these are some of the first that come to mind.

Costs of invoking a force majeure provision

It's hard to nail down specific costs associated with invoking a force majeure provision. Every contract is different, every project is different, and in fact - every force majeure provision is different. And, the terms of your specific force majeure provision as well as its context within the larger contract will dictate what costs should be shouldered by everyone involved. The clause may allow for delays, it may allow for termination, and in either case - it may even provide some insight into who's responsible for the costs (though, generally - the party raising the force majeure issue will likely need to shoulder much of the load). So, for the full gambit of costs associated, it'd be wise to consult with an Arizona construction attorney to have them review the contract and circumstances, then advise on how to move forward. With that being said, negotiating contracts with certain vendors can help keep the costs down. If you're paying regular monthly fees for things like on-site bathrooms, equipment or material storage, security, etc. - it'd probably be a good idea to try and renegotiate those agreements to reduce the fees.

Coronavirus resources for construction businesses

I hope that was at least somewhat helpful. Below are some additional resources that I think will be useful. - Coronavirus & Construction Cash Flow Hub | FAQs and Guide - Coronavirus & Force Majeure: Are Construction Delays An Act of God? - How Contractors Can Survive Coronavirus: Get Paid, Not Burned

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