From my experience

Business uncertainty caused by the pandemic affects the financing of construction projects. Some investors in Poland cancel projects and wait for further developments. Can construction be managed painlessly during such a crisis? Here are the first three necessary steps and detailed instructions for projects suspended in Poland.

Management of construction projects suspended due to COVID-19

• We suspend construction in a way that enables it to be restarted quickly.
• We agree on settlements, to prevent the deterioration of the completed works.
• We provide compensation through an insurance policy.

How can we efficiently carry out these activities?

Open and honest dialogue

It is the investor who should initiate and conduct the dialogue with partners. It’s worth inviting the general contractor, designer, supervision inspector, and other key persons in the investment process (e.g. landlord) to the talks.

I suggest that you don’t immediately invite lawyers to these conversations. They should be given another task, which I will write about later. Dialogue should be dynamic (daily conversations) because construction projects generate high daily costs, and stopping them is unlikely to happen overnight.

Contracts and policies, i.e. protective shields

In contracts and a policy, we analyse the provisions related to the so-called force majeure, and the possibility of stopping/suspending ongoing design and construction projects. It’s important that the investor carefully performs all activities to which they are obliged by contracts and policies, and creates a record and archive of these activities.

A trusted lawyer and investment manager can help secure the investor in this respect. The initial result of the analysis will be a list of formalities to be fulfilled, and categories or estimated costs of suspension of projects. If the contracts don’t specify the conduct of the parties in this case, I suggest signing relevant agreements concerning this.

A win for all parties

The suspension of construction and design projects is a stressful situation for all parties to the investment and, contrary to appearances, a time of intensive analytical work and communication. In a pandemic situation (force majeure), I advise investors to assume from the beginning that all parties are aware of the seriousness of the situation. This approach leads to openness when analysing the problems faced by investment participants. This is the key to efficient and safe suspension of projects.

Every construction investment should be based on the “win-win” principle. If it was like that so far, all parties will hope to complete the construction after lockdown. Let’s remember that the investor, designer, and contractor have many convergent interests, including in the event of suspension due to the force majeure. This should be emphasised during negotiations. What counts is the ability to compromise and act quickly, especially since a contract will rarely clearly define the obligations and rights of the parties in such event. .

Formalities above all

The decision has been made: we are suspending construction! Its implementation consists of an entry in the construction log, which describes about the cessation of construction projects. This is best done after the site manager has secured the materials, and equipment at the construction site.

This action should be coordinated with letters about the suspension of construction, which we will send to contractors, designers, and inspectors. Such a letter must also be delivered to the construction insurer.

After the suspension of construction, the investor is not obliged to employ a construction manager and investor’s supervision inspector, but takes over obligations in the field of safety on the investment site. I usually recommend that the investor, despite everything, incurs the cost of the site manager during the time in which construction projects are suspended. It would be best if it were the same manager the whole time. This will, of course, be an additional investment cost, but profitable in the long run. If the investor dismisses or changes the construction manager or supervision inspector, he must notify the construction supervision.

If the investor decides to continue cooperation with the construction manager, he should make sure that he has secured not only the construction site and project, but also the construction documentation for the time of the suspension of the project. In turn, if the investor dismisses the construction manager as soon as the projects are suspended, he should take over the full construction documentation from him, before settling for the agreed progress of works.

Fundamental determination: work progress

The progress of the projects, agreed upon by the parties, will be the basic parameter determining the remuneration due on the date of suspension. Determining this progress (in percentages and amounts) will be the foundation for the efficient restart of construction. Therefore, there must first be a decision to suspend, followed by setting a date, and then determining the progress at the date of suspension.

The contractor (or designer for design work) submits the estimation of progress to the investor for verification. The contention is always the inclusion of advance payments for equipment and materials paid by the contractor to suppliers. As a rule, I believe that these advances should not be included in the progress of the work performed. This issue should be considered separately and shouldn’t block the progress agreement. Agreed progress does not mean acceptance of works, and especially does not release the contractor from liability for them.

Keep an eye on construction works, equipment and materials

It is in the interest not only of the investor, but also of the contractor, to carefully secure the work performed, as well as materials and equipment supplied. It’s important to consider the impact of factors such as humidity (corrosion, fungus, mold), wind (gusts can destroy unfinished structures), erosion, and groundwater (e.g. earthworks).

The contractor’s equipment should, as far as possible, be removed from the construction site. It would be good if the investor monitored the removal of anything from the construction site. Safety measures in the field of H&S should be checked, corrected, and fixed by the site manager. Construction project management to a large extent means preventing losses.

The construction must be categorically secured against access by third parties. Securing materials and equipment, demobilisation, or renting equipment during suspension will constitute an additional investment cost, which the investor will unfortunately have to incur. Meticulous documentation of these costs will be a gateway to possible compensation, provided the investor is insured against such circumstances.

Photographic documentation

In the event of a decision to suspend construction projects, it is in the interest of all parties to create extensive photographic documentation of the state of construction. You should photograph the structure, earthworks, stored materials, finished works, temporary works, etc.

We should start photographing with what will be covered for protection for the duration of suspension, before making an entry in the construction log. Photos should be collected, thoroughly described, and safely archived on a secure server. It’s worth considering taking photos/videos from above, with the help of a drone, especially for large investments.

Construction project management in a pandemic situation, suspension of construction projects: a checklist.

• holding discussions with the participation of the team
• making a decision to suspend projects
• setting the date of suspension
• determining the progress of projects for the time of construction
• preparing thorough photographic documentation
• entering the decision to suspend the projects in the construction log
• writing letters to interested parties (including the insurer)
• securing materials for the time of the suspension of projects

International investors seeking support in the matter of efficient suspension of construction are welcome to contact me.

Piotr Mike