Proper Planning for Tracking COVID-19 Related Claims

April 24, 2020

The circumstances presented by the COVID-19 crisis are unprecedented and have left many construction contractors in a state of operational flux. One of the primary challenges has been to re-evaluate work being performed on an on-going basis within the original contract scope of work contrasted with potential change orders that may need to be negotiated in the near term. The health pandemic has and certainly will cause unforeseen costs and delays that were not expected when the original contract was agreed upon.

Over the last few weeks, unforeseen costs have arisen within the construction industry, including:

  • Supply chain disruptions leading to material cost increases and delays
  • Additional costs for personal protection equipment on job sites
  • Costs associated with thorough cleanings to abate contaminated job sites
  • General labor costs incurred by project shutdowns
  • Technology costs associated with remote workforce shifts and/or establishing cloud-based integrated project delivery platforms so key project stakeholders can effectively communicate while practicing physical/social distancing

In order to provide proper change order documentation to refute claims, those costs need to be managed and tracked appropriately. Companies can track applicable costs in various ways, one recommendable solution being to create separate general ledger accounts and/or sub-accounts to track costs depending on the current structure each individual company has in place to track expenses paid. Specific time charge codes should also be established to track labor hours against jobs where impacts are being felt as a result of COVID-19. In addition, companies should be tracking time for coronavirus-related paid sick leave and/or sick leave related to childcare and care for family members. It is imperative to track added costs and schedule impacts in “real time,” as it will both expedite the process later and mitigate potential challenges to your claims in the future.

Lasting effects of the current pandemic may change the way job sites operate going forward. Information is power. Even if some contractors don’t believe some of these costs may be reimbursed, at a minimum, the information garnered can pay dividends down the road as “lessons learned” on future jobs in the post-pandemic construction environment.

If you have additional questions or concerns, please contact our Construction and Real Estate Team. For help guiding your business through the coronavirus outbreak, visit our COVID-19 resource hub.