Business and Legal Insights

As the Novel-Coronavirus (“COVID-19”) continues to cause disruption to every aspect of society, the business world and the economy-at-large, nearly every country, state and county has issued unique lockdown, “shelter-in-place,” and similar types of orders restricting the way all of us interact with each other and perform work. As a result, some construction project owners have begun issuing Stop Work Orders and closing projects down during an uncertain time period. Inconsistencies in treatment and messaging, however, are leaving many people and businesses confused about how to respond.

The attorneys at Shutts & Bowen continue to closely monitor the rapid developments taking place in connection to the current crisis. Our attorneys offer guidance to clients in these uncertain times on all areas impacted by the COVID-19 global pandemic, from construction and development related issues, such as force majeure, to nuanced issues involving government, government contracting and loan programs; federal and state tax-related questions; significant labor and employment questions and concerns; all aspects of financial services and real estate matters; and health care. This blogpost is part two in a series of two, focusing specifically on time-sensitive construction industry issues related to Stop Work Orders, Construction Project Site Abandonment, and what you – whether you are an owner, contractor, designer, trade, insurer or finance-provider – need to do to protect yourself and others.

Construction Project Site Abandonment: What is it? Abandonment of a construction project occurs when a contractor is no longer able to perform the work on a project – or when a project site has been shut down for an extended period of time without clear direction as to when the work may resume. This can happen for many reasons, including the prolonged existence of a Stop Work Order (please see part one of this series for more information on Stop Work Orders – link). Given the current pandemic and the uncertainty surrounding decisions to safely resume normal business activities, many projects that were ordered to “stop work” as a result may, at some point in the future, become considered “abandoned.” To prevent project abandonment resulting from prolonged Stop Work Orders largely outside of your control, proactive steps must be taken immediately to keep all parties engaged, prepared, and in regular communication.

If a contractor is not in a position to start, re-mobilize, or complete work on a project – in a reasonable amount of time after the conditions that caused the work to stop have been lifted – this may result in an abandonment that could be considered a breach of the underlying agreement. Abandonment of a construction project without a valid, legal excuse will likely be cause for disciplinary and other legal actions against the contractor.

If my project has been abandoned, what should I do? When facing a potential abandonment situation, the owner of the project – or construction manager or design professional tasked with execution and fulfillment of the work – must take immediate preventative action, as follows:

• First, contact the contractor, both by phone and in writing, to inform them of the suspected abandonment. Document efforts to contact them. Call a construction attorney to get them involved in the effort. Be proactive in determining whether the project has indeed been abandoned.
• If abandoned, or if you cannot otherwise determine definitively that your project is NOT abandoned, then take immediate action to avoid creating an unsafe condition or hazard, such as:

• 1. ensure all power not required is shut down;
  2. ensure all flammable liquids and gas are removed from the site;
  3. turn off water supplies;
  4. ensure the site’s housekeeping facilities are clear and remove or clear all onsite facilities (e.g., shoots, hoppers) used for trash;
  5. remove and empty all trash containers and secure onsite garbage dumpsters;
  6. lock up the site and provide a security patrol, or remote monitoring during the shutdown;
  7. provide a list of emergency numbers posted at the entrance of the site; and,
  8. notify the police and fire departments, and provide a layout plan for the fire department on most current position of hydrants and risers.

• Concurrent with the above (but perhaps not before taking immediate care of the above), contact the pertinent project insurance carrier(s), broker(s), or agent(s) and inform them of the potential abandonment situation.
• Document everything from the condition of the site and equipment thereon, all preventative actions taken to secure the site and to make it safe, and all impacts (financial or otherwise) related to the abandonment. Your construction attorney will be able to help you with appropriate documentation and thinking through all potential issues you may be facing.

If facing a Stop Work Order or Abandonment situation, what should my next steps be?

Review – First, immediately stop work and secure the site and any equipment to prevent an unsafe or hazardous condition.

Be proactive – It is also important to be proactive in seeking information and communications from the party issuing the Stop Work Order or the owner of an abandoned project site regarding the impact of the order and intended next steps for securing and closing down the site, and to plan for when activities might resume.

Seek legal advice – If you, your project team, subcontractors or other contracted relationships are dealing with a Stop Work Order or abandonment situation, contact a construction attorney with significant experience in contract delay litigation, insurance coverage disputes, and bonding issues – both performance and payment related challenges. If you believe the Stop Work Order was issued improperly, contact an attorney immediately to ensure preservation of your claims and defenses. Construction attorneys at Shutts & Bowen have substantial experience in proactively and practically handling the challenges and potential hazards related to the stoppage of work or abandonment of a project. Our attorneys can help avoid potential harm or injury to you or others, and possible disruption to existing business and long-term relationships, while keeping cost-efficiencies top of mind.