increased costs due to the pandemic.¹¹⁵ This could include compensation for increased material prices (e.g., due to supply chain disruptions) or additional labor expenses (e.g., due to staggered workload protocols). It could also include time-related costs, such as prolonged equipment rental and home office overhead costs,¹¹⁶ to the extent there is compensable pandemic-related delay (e.g., due to suspension, extra work, or “significant changes in the character of the work”).

3. Termination for Convenience

The contractual remedies discussed above (providing for a time extension and/or price adjustment) operate in favor of the contractor impacted by a force majeure occurrence such as a pandemic. Most construction contracts do not contain a similar provision specifically related to force majeure circumstances that operates in favor of the project owner. Rather, the construction project owner typically has the express right to terminate the project for the owner’s own convenience. In other words, the construction project owner typically has the ability to be excused from further performance in the event of a force majeure occurrence, or for any other reason (including a financial decision made by the owner to discontinue the project for its own reasons). Viewed in this light, the project owner is much more likely than the contractor to be able to be excused from further contract performance (which is the typical common law remedy for force majeure circumstances). By invoking termination for convenience, the owner can stop the contractor from performing contract work, which allows the owner to avoid making payment for the work not performed. However, the owner is obligated to pay the contractor for work completed. The owner could also be liable to the contractor for monetary damages in order to give the contractor the benefit of its bargain (e.g., lost profits on the portion of the work not performed), due to the owner’s “efficient breach” of the contract. However, most state DOT contracts significantly limit such relief to the contractor in the event of a state DOT’s termination for convenience. This is discussed in greater detail in Section III.B.1.

III. APPLICATION OF FORCE MAJEURE TO TRANSPORTATION CONTRACTS

A. Contractor Requests for Relief to Transportation Agency

1. Time Extensions

The first priority for a state DOT contractor delayed due to a pandemic will be to seek a time extension, in order to avoid liquidated damages (or other delay damages assessed by the state DOT) associated with late completion. An extension of time excuses the contractor’s failure to complete the contract work within the deadline provided in the contract, or excuses the contractor’s failure to complete part of the contract work within an intermediate deadline provided in the contract. If the delay is excused (resulting in a time extension), the contractor may seek to have its own monetary costs associated with the delay reimbursed by the state DOT. Whether a delay warrants a time extension and/or additional compensation often depends on a fact-intensive time impact analysis of multiple delaying events, some of which could be the responsibility of either the state DOT or its contractor, and some of which are outside the control of either party.¹¹⁷ This section discusses the principles of both excusable delay and compensable delay in the context of pandemics.

a. Excusable Delays

A time extension will be the primary relief sought by and granted to construction contractors arising out of pandemics or pandemic-related circumstances (such as quarantines and material delivery delays). Without a time extension, on a project delayed by a pandemic, the contractor could be in default of its contract obligations for failure to complete the work (or portion thereof ) that was contractually required to be completed by a specific date or within a specific time period. A contractor in default could be subject to termination for default (and thus potentially liable for monetary damages for the owner’s excess costs of completion). More likely, a contractor to a state DOT in default for failure to complete work on time would be liable for the owner’s monetary damages due to delay. In state DOT construction contracts, delay damages are often expressed as liquidated damages, meaning that the owner is entitled to assess a specific dollar amount for each day that the work remains incomplete after the contractual deadline. An extension of time provides a defense for the contractor against liability to the state DOT for such economic damages. With an extension of time, the contractor is not deemed in default for late completion as long as the work is completed within the contractual deadline, as modified by the time extension.

As discussed in Section II.C.1, most construction industry standard form contracts including state DOT construction

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¹¹⁵ See, e.g., Missouri Std. Spec. § 109.4.3 (“[T]he engineer will make an equitable adjustment to or determination of the affected contract prices for the work, based on the contractor›s actual costs to perform the work.”); New Jersey Std. Spec. § 104.03.03 (“For changes in the character of work, the Department will base the modification on the difference between what the actual cost to perform the work of the Item or portion thereof involved would have been if there were no change, and the actual cost of performing the work or portion of work as changed.”).

¹¹⁶ See, e.g., South Carolina Std. Spec. § 105.16.5 (outlining costs recoverable in the event of compensable delays).

¹¹⁷ See, e.g., Gust K. Newberg, Inc. v. Illinois State Toll Highway Auth., 153 Ill. App. 3d 918, 924–25, 506 N.E.2d 658, 663 (1987) (finding that project was variously delayed by the Illinois State Toll Highway Authority, its contractor, and shortages in materials and labor).

contracts contain a force majeure or excusable delay provision, entitling the contractor to a time extension if the contractor is delayed by unforeseeable causes,¹¹⁸ beyond the contractor’s control,¹¹⁹ and without the fault or negligence of the contractor.¹²⁰ The provision often recites a nonexclusive list of specific circumstances that may qualify the contractor for a time extension.¹²¹ The nonexclusive list recited in the contract will often expressly include “epidemics” or other pandemic-related causes of delay (including quarantine restrictions or unusual delays in material deliveries). In state DOT construction contracts, more than half of the Standard Specifications (twenty-eight out of fifty) specifically include epidemics as circumstances that may warrant a time extension, and roughly one-third of the Standard Specifications (seventeen out of fifty) specifically include quarantines as circumstances that may warrant a time extension.

The requirement that the cause of delay be unforeseeable in order to qualify for a time extension is because contractors are expected to have accounted for reasonably foreseeable difficulties in their bids, and planned the work accordingly in order to complete the work within any contract deadlines notwithstanding such difficulties.¹²² In order to qualify as an excusable delay, most state DOT contracts expressly require the cause of delay to be “unforeseeable”¹²³ or “not reasonably anticipated or foreseeable,”¹²⁴ suggesting a higher bar for the contractor to obtain a time extension than an event that was merely unforeseen or unanticipated. Even if the force majeure or excusable delay provision in the contract does not contain language regarding foreseeability, it is likely implied under the common law that the contractor is not entitled to a time extension for causes of delay that the contractor should have foreseen.¹²⁵

Query whether a cause of delay is truly unforeseeable when the cause is specifically identified in the contract in the nonexclusive list of causes of delay (e.g., “epidemic”) that may qualify the contractor for a time extension. If the contract contains such a list, it might be construed as a list of circumstances that the contractor is not to factor into its bid. On the other hand, the project specifications may identify potential difficulties or other conditions for which the contractor is specifically directed to account in its bid, and delays arising out of such conditions will not entitle the contractor to a time extension because they are not unforeseeable. It is generally understood that the COVID-19 pandemic was unforeseeable for contracts executed prior to the onset of the pandemic,¹²⁶ regardless of whether the contract specifically identified “epidemics” or other pandemic-related causes of delay as circumstances that may qualify the contractor for a time extension.¹²⁷ For contracts executed after the onset of the pandemic, it is questionable whether a contractor can truly claim that pandemic-related delays were unforeseeable. In that case, the delay may be excusable only if the contract specifically identifies “epidemics” or other pandemic-related circumstances as causes that may qualify the contractor for a time extension,¹²⁸ because that could suggest that the contractor was not to factor pandemic-related delays into its bid.

In order to qualify for a time extension as an excusable delay, the delay-causing circumstance must not just be unforeseeable, it generally must also be beyond the control of the contractor and without the fault or negligence of the contractor. Delays within the contractor’s control include delays caused by its own subcontractors or suppliers,¹²⁹ unless those delays satisfy the contractual requirements for an excusable delay¹³⁰ (e.g., if the contract expressly excuses abnormal material delivery delays).

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¹¹⁸ Wright, Force Majeure Delays, supra note 28, at 33 (“To constitute force majeure and excuse performance or justify nonperformance, the event must have been unforeseeable at the time of contracting.”).

¹¹⁹ See, e.g., Commonwealth v. AMEC Civil, LLC, 677 S.E.2d 633, 647, 54 Va. App. 240, 267 (2009) (“Normally, if the delay was caused by events beyond the contractor’s control, the contractor will be excused for the delay in performance (under the contract’s “Default” clause) but is responsible for the additional costs caused by the delay.”); State Highway Dept. v. Hewitt Contracting Co., 155 S.E.2d 422, 425, 115 Ga. App. 606, 609 (1967) (Under the applicable edition of the Georgia Std. Spec., “the department will grant an extension of time where it finds the work was delayed on account of unusual conditions beyond the control of the contractor.”).

¹²⁰ Robert M. D’Onofrio & Anthony L. Meagher, What is a Schedule Good For? A Study of Issues Posed by Schedules on Complex Projects, 33 CONSTRUCTION LAWYER, 1, at 6, 14 (Winter 2013) (“Force majeure events are typically unforeseeable and absent the control, fault, or negligence of the contractor.”).

¹²¹ See, e.g., Noetzel, supra note 1, at 1365 (“The excusable delay [in the FAR] provision provides a non-exhaustive list of occurrences that may qualify as an excusable delay.”); Osman & Ataei, supra note 7, at 06521004-2 (observing that the Illinois Std. Spec. “provides a list of conditions that the department accepts as valid reasons for the contractor to request extension of time”).

¹²² O’Connor, supra note 43, at 9.

¹²³ See, e.g., Alaska Std. Spec. § 108-1.06 (“The Department . . . may extend Contract time only, if there are delays in the completion of controlling items of work from unforeseeable causes . . ..”).

¹²⁴ See, e.g., Florida Std. Spec. § 8-7.3.1 (“The Department may grant an extension of Contract Time when a controlling item of work is delayed by factors not reasonably anticipated or foreseeable at the time of bid.”).

¹²⁵ O’Connor, supra note 43, at 9.

¹²⁶ Herrmann, supra note 6, at 04523008-4 (“COVID-19 would not have been a circumstance the parties contemplated at the time the contract was formed” for “contracts that were entered into prior to the beginning of COVID-19 in early 2020”).

¹²⁷ See, e.g., Merritt-Chapman & Scott Corp. v. United States, 439 F.2d 185, 194 (Ct. Cl. 1971) (“The right of the Contractor to proceed shall not be terminated . . . nor the Contractor charged with liquidated or actual damages . . . because of any delays in the completion of the work due to causes beyond the control and without the fault of negligence of the Contractor, including . . . epidemics, quarantine restrictions, . . . or delays of subcontractors or suppliers due to such causes.” (emphasis supplied)).

¹²⁸ Hennings et al., supra note 22, at 04521048-7 (“Case law indicates that events listed that are beyond the control of the parties but which were known at contract execution may still excuse performance.”).

¹²⁹ Silberman, supra note 20, at 18 (“A delay is generally not excusable where it is caused by one of the contractor’s subcontractors or suppliers. This is so because the prime contractor is generally responsible to the agency for the conduct of its subcontractors and suppliers.”).

¹³⁰ Id. (“The court ruled that the contractor was responsible to the city for its supplier’s delays when those delays were not themselves excused by a force majeure.” (citing Hutton Contracting Co., Inc. v. City of Coffeyville, 487 F.3d 772 (10th Cir. 2007))).

A pandemic, of course, is typically not the fault of the contractor nor within the contractor’s control, and would typically qualify for a time extension if the pandemic delayed the contractor’s work. However, the typical contract language likely imposes on the contractor an obligation to take whatever steps are within its control to mitigate the delay (such as resequencing work if there are activities that could be performed without quarantine restrictions, or seeking alternate sources of materials if a supplier is experiencing pandemic-related delays). Also, the requirement that delays be “without the fault of negligence of the contractor” indicates that the pandemic is not a blanket excuse for all project delays. To the extent that the project is concurrently delayed due to the contractors’ fault or negligence (e.g., if the contractor was already in schedule recovery mode at the onset of the pandemic), the delay may not be excused even in the event of a pandemic or other occurrence that is typically recognized as grounds for an excusable delay.¹³¹

Although delays in the performance of subcontractors and suppliers are generally not deemed to be outside the contractor’s control, there may be exceptions specifically identified in the contract. Many force majeure or excusable delay provisions will specifically identify circumstances such as labor strikes or abnormal material delivery delays as warranting a time extension.¹³² This has the potential to provide relief to contractors facing major supply chain disruptions, such as those experienced in the wake of the COVID-19 pandemic. However, although abnormal material delivery delays are typically excusable,¹³³ the contractor is typically not entitled to a time extension merely because material prices rise sharply as a result of supply chain disruptions.¹³⁴ Circumstances only warrant a time extension if they actually cause performance to be delayed.

A noncompensable time extension was the only remedy available to most construction contractors for project impacts associated with COVID-19.¹³⁵ For an occurrence such as a pandemic, that is beyond the control of and not the fault of either contracting party, the contractor’s remedy is typically limited to an extension of time to the extent its work was delayed,¹³⁶ and the contractor is typically not entitled to additional compensation for its increased costs arising out of the delay¹³⁷ (such as the costs of paying for employee salaries, equipment rental, and project site facilities during the extended period of delay). In some state DOT contracts, the force majeure or excusable delay provision may provide a nonexclusive list of such causes of delay for which the contractor’s only remedy is a time extension, and not monetary compensation.¹³⁸ In other state DOT contracts, this may be accomplished via a separate provision that an excusable delay is not compensable if the delay was not the state DOT’s fault or responsibility.¹³⁹ In either formulation, the general idea is that delays not controlled or caused by either contracting party leave both parties to absorb their own costs caused by the occurrence without recourse against the other.¹⁴⁰ This is not a true no-damages-for-delay provision, as discussed further in Section III.A.4.b.ii, because it does not foreclose compensation to the contractor for delays or disruptions caused by

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¹³¹ Noetzel, supra note 1, at 1367 (“Even upon the showing of an unforeseeable occurrence, the contractor must also show that it did not contribute to or independently cause the delay.”).

¹³² See, e.g., American Institute of Architects, General Conditions of the Contract for Construction, AIA Document A201–2017, § 8.3.1 (2017) (providing a time extension for delays due to “labor disputes,” “unusual delay in deliveries,” and “other causes beyond the Contractor’s control”); see also Armco Steel Corp. v. Isaacson Structural Steel Co., 611 P.2d 507, 519 (Alaska 1980) (“[T]o the extent that [supplier]’s delivery was delayed due to the strike at its plant, the failure to perform is excused.”).

¹³³ See, e.g., Brezina Const. Co. v. S. Dakota Dep’t of Transp., 297 N.W.2d 168, 171 (S.D. 1980) (“Extension of contract time will be made when unanticipated delays (beyond the control of the Contractor) in delivery of critical materials results in a delay of the work. The Contractor shall notify the Engineer immediately when it becomes evident that there will be a delay in obtaining critical materials.”); Carter Steel & Fabricating Co. v. Ohio Dep’t of Transp., 721 N.E.2d 1115, 102 Ohio Misc. 2d 1 (1999) (excusing subcontractor for delay outside its control due to steel fabricator who was “the sole domestic supplier for the compliant steel”); see also J. D. Hedin Const. Co. v. U. S., 187 Ct. Cl. 45, 408 F.2d 424, 428 (1969) (holding that the government imposed too high a standard of foresight in concluding that a contractor could have foreseen a cement shortage, and should have excused the contractor’s resulting delay).

¹³⁴ See, e.g., Seaboard Lumber Co. v. United States, 41 Fed. Cl. 401, 416 (1998) (“Parties cannot invoke force majeure clause protection merely because they are experiencing financial difficulties that are arguably caused by general government policies.”).

¹³⁵ Daniel D. McMillan, Richard Putrré & James Pickavance, Construction Projects and Disputes in the COVID-19 World: A Look Beyond the Lockdown, 37 PRACTICAL REAL ESTATE LAWYER, 1, at 27, 45 (“[T]he contractor may find the protection afforded by the force majeure provisions for COVID-19–related claims limited to an extension of time (with no compensation) . . ..”); McGeehin & Spangler, supra note 4, at 23 (“Contractors claiming delays due to COVID-19 are likely to be successful in obtaining additional time, but because excusable delays are generally noncompensable, most delay claims stemming from COVID-19 will not entitle the contractor to additional compensation.”).

¹³⁶ Hennings et al., supra note 22, at 04521048-2 (Under a force majeure provision, “the contractor’s only relief may be a time extension, which merely delays the performance of contract obligations rather than fully excusing them.”).

¹³⁷ Wright, Force Majeure Delays, supra note 28, at 33 (“Though a force majeure event may allow an extension to a completion date, it normally does not permit a contractor to recover losses or damages resulting from the delay.”).

¹³⁸ See, e.g., Unicon Management Corp. v. City of Chicago, 404 F.2d 627, 629 (7th Cir. 1968) (“It is further expressly understood and agreed that the Contractor shall not be entitled to any damages or compensation from the City, or be reimbursed for any losses, on account of any delay or delays resulting from any of the causes aforesaid.”).

¹³⁹ See, e.g., Osman & Ataei, supra note 7, at 06521004-3 (observing that in the Illinois Std. Spec., “extensions of time granted for reasons or events beyond the reasonable . . . control of the Department shall be the exclusive relief provided, and no additional compensation or claim for damages will be paid or awarded”).

¹⁴⁰ 5 PHILIP L. BRUNER & PATRICK J. O’CONNOR, JR., BRUNER AND O’CONNER ON CONSTRUCTION LAW § 15:22 (2002) (“Time-impacting events not controllable by either party leave both parties to absorb their own losses caused by those events without recourse against the other party.”).

the state DOT. Compensable delays are discussed in the following section.

In the survey of state DOTs conducted as part of this research, nineteen of the twenty-eight survey respondents (68%) reported receiving time extension requests from contractors due to the COVID-19 pandemic. Typical reasons offered for the time extensions included quarantining due to infection or exposure and material delivery delays associated with supply chain disruptions. Survey respondents reported that the time extensions were generally granted, with multiple state DOTs citing the reference to “epidemics” in their force majeure provision as the basis for the extension. With one exception (discussed in the following Section III.A.1.b), the survey respondents uniformly reported that the delays were deemed excusable, not compensable, meaning that the contractor was not provided additional compensation for the extra time (although the contractor would be entitled to remission of liquidated damages for the extension period). Survey respondents generally reported time extensions for COVID-19 ranged from days to a couple of months.

If a project is delayed due to a pandemic or other pandemic-related circumstances (such as quarantine restrictions or abnormal material delivery delays), an extension of time may not automatically be granted to the contractor. If the state DOT does not act unilaterally to suspend the project (as discussed in Section III.B.2), the contractor will have to formally request an extension of time. The force majeure or excusable delay provision typically requires the contractor to provide timely notice to the state DOT of an occurrence of excusable delay. As discussed in greater detail in Section III.A.4.b.i, a typical state DOT contract requires the contractor to provide written notice of delay within a short time (typically five days to fifteen days) after the onset of the delay, with subsequent written notice requirements regarding the requested time extension, or otherwise the contractor risks waiving its entitlement to the time extension.

After providing timely notice of excusable delay, the contractor will typically have another contractual period of time within which to demonstrate its entitlement to an extension of time. If the state DOT does not act on its own to suspend the project or issue an extension of time, or if the contractor does not agree with the extension provided, the contractor bears the burden of quantifying the time extension to which it is entitled. This is typically accomplished by the contractor performing a time impact analysis,¹⁴¹ typically using the critical path method,¹⁴² demonstrating both that the contract work was delayed due to an excusable occurrence, and the duration of such delay.¹⁴³ The mere occurrence of a pandemic such as COVID-19 will not entitle the contractor to a time extension absent such a time impact analysis.¹⁴⁴ There are a number of reasons why the amount of excusable delay could be shorter than the duration of the pandemic-related delay, such as if the activities delayed by the pandemic are not on the critical path, or if there are concurrent delays to the critical path caused by the contractor.¹⁴⁵ “For example, if a project was already behind schedule prior to COVID-19, then any potential relief under a delay claim would be limited to the portion of the delay the contractor can prove was caused by COVID-19.”¹⁴⁶

b. Compensable Delays

While construction delays arising from pandemics are likely excusable (relieving the contractor of liability for delay damages), it is questionable whether the contractor is entitled to additional compensation for pandemic-related delays.¹⁴⁷ A compensable delay is a type of excusable delay, in which the contractor is entitled not just to a time extension, but also additional compensation for the extended performance period.¹⁴⁸

Although a few state DOT construction contracts expressly provide that the contractor may be compensated for delays arising out of force majeure circumstances such as pandemics and quarantines, most only provide that the contractor is entitled to a time extension,¹⁴⁹ as discussed in the previous section. In fact, the force majeure provisions in many state DOT contracts expressly provide that the contractor is not entitled to additional compensation for delays caused by circumstances such as pandemics that are outside the control of both contracting parties, as discussed in greater detail in Section III.A.4.b.ii. On the other hand, most standard construction industry contract forms do not expressly provide that the contractor is entitled to additional

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¹⁴¹ See, e.g., Massachusetts Std. Spec. § 8.10.B.4 (“[A] time extension will be granted only if entitlement to a time extension has been clearly demonstrated by a documented time entitlement analysis.”).

¹⁴² Noetzel, supra note 1, at 1368-69 (“The standard rule is that the unforeseeable occurrence must affect the ‘critical path’ of the contract, delaying ‘interim’ milestones’ or ‘overall project completion.’” (internal citations omitted)).

¹⁴³ McGeehin & Spangler, supra note 4, at 20 (“If COVID-19 excuses contractual performance, the contractor must show how and in what way performance was adversely affected and how and in what way COVID-19 caused delays to the project’s critical path. To be entitled to a time extension due to a delay caused by COVID-19, the contractor must prove how COVID-19 cause an impact to a construction activity on the critical path, how that impact caused a delay to critical activities on the critical path, and the duration of the delay.”).

¹⁴⁴ Hansen et al., supra note 67, at 03722003-2 (“While it may be true that most projects suffer from delays due to direct and indirect impacts of the COVID-19 pandemic, a project delay analysis needs to be carried out carefully because not all delays are cause for time extension.”).

¹⁴⁵ McGeehin & Spangler, supra note 4, at 20 (“To be entitled to a time extension due to a delay caused by COVID-19, the contractor must prove how COVID-19 caused an impact to a construction activity on the critical path, how that impact caused a delay to critical activities on the critical path, and the duration of the delay.”).

¹⁴⁶ Herrmann, supra note 6, at 04523008-4.

¹⁴⁷ Osman & Ataei, supra note 7, at 3 (“Is contractor also entitled to be compensated for delay damages [for COVID-19]?”); McGeehin & Spangler, supra note 4, at 18 (“COVID-19-related delays and disruptions may well lead to delay and disruption claims.”).

¹⁴⁸ See, e.g., Arizona Std. Spec. § 101.02 (“Compensable Delay. An excusable delay for which the contractor may be entitled to additional compensation in addition to any extension of time granted.”).

¹⁴⁹ McGeehin & Spangler, supra note 4, at 23 (“Contractors claiming delays due to COVID-19 are likely to be successful in obtaining additional time, but because excusable delays are generally noncompensable, most delay claims stemming from COVID-19 will not entitle the contractor to additional compensation.”).

compensation for delays due to force majeure events, but also do not foreclose the possibility of such monetary relief.¹⁵⁰

In most state DOT construction contracts, an excusable delay only becomes compensable in the event of a delay caused by the state DOT, or a delay for which the state DOT is otherwise contractually responsible.¹⁵¹ Representative language in many state DOT contracts provides, “Excusable, compensable delays are delays that are not the Contractor’s fault or responsibility but are the Department’s fault or responsibility.”¹⁵² Some state DOT contracts require there to be “acts or omissions” ¹⁵³ on the part of the state DOT causing the delay in order to transform the delay from an excusable one into a compensable one. The state DOT need not be at “fault” for a compensable delay to arise; actions of the state DOT giving rise to a compensable delay for which the state DOT is financially responsible can include changes or suspensions ordered by the state DOT for entirely justifiable reasons, particularly in response to a force majeure event such as a pandemic. A written order from the state DOT documenting such change is often critical to the contractor attempting to prove entitlement to compensation.¹⁵⁴ In the absence of written direction from the state DOT regarding a force majeure occurrence, the contractor might characterize the state DOT’s inaction as an omission or constructive suspension of its work, in an effort to obtain compensation for the delay.

In the context of a pandemic, examples of owner-directed changes entitling the contractor to compensable delay might include requirements to use restrictive work protocols such as work crew reductions, social distancing, sanitation requirements, and mandates for masks or other protective equipment.¹⁵⁵ Likewise, suspensions of work ordered by the state DOT (or other government agency) could constitute an act entitling the contractor to compensation for delay, as discussed in greater detail in Section III.B.2. In order to avoid becoming liable for additional compensation, the state DOT might avoid issuing such an order, putting the burden on the contractor to request a (noncompensable) time extension under the force majeure or excusable delay provision. However, after a time extension has been properly requested, the state DOT’s failure to act in a timely manner to issue such a time extension could constitute an “omission” entitling the contractor to additional compensation, either for delay or for acceleration.¹⁵⁶

If it is determined that the delay is compensable, the contractor is generally entitled to recover its actual increased costs of performance arising from the compensable delay. This may include the costs of idled equipment or personnel that cannot be deployed elsewhere.¹⁵⁷ The contractor may also be entitled to compensation for escalated prices of materials and labor (e.g., due to inflation, or performing the work later in time than originally anticipated) when the work is delayed. The contractor may also be entitled to increased cost of performance such as “costs of personal protection equipment and other protective measures incurred to mitigate a virus,”¹⁵⁸ and the cost of main-

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¹⁵⁰ Wright, Force Majeure Delays, supra note 28, at 36-37.

¹⁵¹ D’Onofrio & Meagher, supra note 120, at 13 (“The [compensable] delay must also be caused by the owner or someone for whom the owner is responsible.”); see also M.J. Lee Const. Co. v. Oklahoma Transp. Authority, 125 P.3d 1205, 1211 (Okla. 2005) (“However, a highway construction contractor may be entitled to additional compensation, over and above the contract price, for costs incurred due to delay not caused by the contractor, for extra work authorized by the public entity, or for work necessitated by changed conditions.”); Gilchrist Const. Co., LLC v. State, Dept. of Transp. and Dev., 166 So.3d 1045, 1052 (2015) (“[T]o the extent Gilchrist established that it incurred damages due to a delay in performing the project, caused in whole or in part by the DOTD, Gilchrist is entitled to recover those damages, irrespective of any contractual provisions to the contrary.”).

¹⁵² See, e.g., New Hampshire Std. Spec. § 108.07.C; North Dakota Std. Spec. § 108.06.B.5; see also Indiana Std. Spec. § 108.08(b) (“Excusable, compensable delays are delays that are not the fault or responsibility of the Contractor and are the fault or responsibility of the Department.”); Louisiana Std. Spec. § 108.07(d) (“Excusable, compensable delays are delays that are not the contractor’s fault or responsibility, but are the Department’s fault or responsibility or determined by judicial proceeding to be the Department’s sole responsibility or are the fault and responsibility of a local government.”); Minnesota Std. Spec. § 1806.2.B (“Excusable, compensable delays are delays that are not the Contractor’s fault or responsibility, and are the Department’s fault or responsibility, or are determined by judicial proceeding to be the Department’s sole responsibility.”); New Jersey Std. Spec. § 108.11.01.B.3 (“Excusable, compensable delays are delays that are the Department’s fault or responsibility.”); Ohio Std. Spec. § 108.06.D (“Excusable, compensable delays are delays that are not the Contractor’s fault or responsibility, and are the Department’s fault or responsibility or are determined by judicial proceeding to be the Department’s sole responsibility or are the fault and responsibility of a local government.”).

¹⁵³ See, e.g., Alabama Std. Spec. § 110.05(b); Georgia Std. Spec. § 105.13.B.2; Pennsylvania Std. Spec. § 111.01; see also Kentucky Std. Spec. § 105.13.03.D (“Compensable delays are excusable delays caused by actions or inactions of the Department, to which the Contractor is allowed to receive cost recovery.”); Utah Std. Spec. § 00777, pt. 1.4.F.1 (“Compensable delay – An excusable delay caused by the Department’s action or inaction, or under the Department’s control . . ..”); Wisconsin Std. Spec. § 108.10.3 (“Compensable delays are excusable delays due to the department’s actions or lack of actions, or determined by judicial proceedings to be the department’s sole responsibility.”).

¹⁵⁴ Mino Han & J.B. Kim, Recovery of Additional Time and Money Arising from Covid-19 by Way of Variation Clauses: A Contractor’s Perspective, 16 CONSTRUCTION L. INT’L, 2, at 51, 56-57 (Jun. 2021).

¹⁵⁵ Id. at 58 (suggesting that construction contractors may recover “additional time and cost resulting from new work procedures, methods and sequences due to Covid-19”); McGeehin & Spangler, supra note 4, at 18 (“In the COVID-19 context, lost productivity or efficiency may arise from COVID-19 social distancing requirements or other safety precautions requiring changes to the contractor’s planned means or methods of performance that result in diminished productivity.”).

¹⁵⁶ See, e.g., Cape & Sons Co. v. State of Illinois, 52 Ill. Ct. Cl. 322, 334 (2000) (“$496,213.19 is due as a result of acceleration and delay costs necessitated by the foregoing described significant extra work, abnormal Act of God weather, and IDOT’s continued refusal to grant Claimant extensions of the liquidated damages deadline.”); Farina Bros. Co. v. Com., 257 N.E.2d 450, 456, 357 Mass. 131, 140 (1970) (“In sum, we hold that the Commonwealth cannot hide behind the specifications of its contract dealing with delay and, in the circumstances of this case, deny recovery to a contractor who has been put upon to the extent here shown.”).

¹⁵⁷ See, e.g., Ford Contracting, Inc. v. Kentucky Transp. Cabinet, 429 S.W.3d 397, 409-12 (Kan. Ct. App. 2014) (allowing contractor to recover costs of idle equipment when state DOT suspended project improperly).

¹⁵⁸ McGeehin & Spangler, supra note 4, at 21.

taining the partially completed work or protecting the work from deterioration during the delay period. The contractor is also typically entitled to reasonable overhead, but not profit, on its increased costs of construction resulting from the compensable delay. With respect to COVID-19, the contractor’s increased costs of performance may have been offset in part by federal PPP loans (which were typically forgiven), in which case the state DOT might not be responsible for those costs (on the theory that compensation from the state DOT would constitute a double recovery).¹⁵⁹

The contractor seeking compensation for delay bears a relatively high burden.¹⁶⁰ In the context of a pandemic, it would be the contractor’s responsibility to prove both that the delay resulted from the pandemic, and that there was an action or omission of the state DOT making the state DOT financially responsible for compensation for the delay.¹⁶¹ The contractor is also responsible for documenting and quantifying its increased costs arising from the pandemic-related delay, in addition to the amount of additional time to which the contractor is entitled. Because a pandemic-related delay is usually not caused by an action or omission of the state DOT, the contractor will usually not be able to satisfy its burden and transform the delay from excusable to compensable.¹⁶²

In the survey of state DOTs conducted as part of this research, survey respondents almost uniformly reported that time extensions granted as a result of the COVID-19 pandemic were deemed excusable, not compensable. One exception was the Pennsylvania Department of Transportation (PennDOT), which reported that it temporarily suspended work on all 758 active construction projects on March 16, 2020, in order to reduce the spread of COVID-19, resulting in 214 requests for additional compensation as a result of the suspension. PennDOT reported that almost all of those requests were “settled” without litigation, which presumably involved additional compensation to many of those contractors. Similarly, Washington State Department of Transportation (WSDOT) reported providing additional compensation on fifty projects due to COVID-related suspensions and shutdowns, or other COVID-related impacts such as additional safety protocols. No other state DOT responding to the survey reported suspending projects, and thus all other survey respondents indicated that they considered COVID-19 delays to be excusable, not compensable.

2. Price Adjustments

Similar to the concept of a compensable delay, the contractor to a state DOT may seek a contract price adjustment for its increased costs of performing the contract work due to a pandemic. Such a price adjustment to a state DOT contract is often called an “equitable adjustment,”¹⁶³ which is the terminology used in federal contracts. Generally speaking, a request for price adjustment or equitable adjustment seeks compensation to the contractor for conditions which significantly differ from those indicated to exist in the contract.¹⁶⁴

A claim for compensable delay may be considered one type of request for price adjustment, where the contractor seeks to have the contract price adjusted to reflect the contractor’s cost associated with the delay period. Where a state DOT has granted a time extension under a force majeure provision, courts may view the time extension as acknowledgment by the state DOT of a changed condition that could entitle the contractor to additional compensation.¹⁶⁵ In fact, contractors may seek to characterize claims for delay damages as requests for an equitable adjustment, or assert a request for equitable adjustment in the alternative to a claim for delay damages, understanding that compensable delay claims are often rejected. ¹⁶⁶

However, a request for price adjustment or equitable adjustment typically seeks compensation for the contractor’s increased costs of performance beyond mere delay damages. The request for a price adjustment could seek compensation for the contractor’s increased performance costs arising out of the same force majeure circumstances that resulted in a project delay, as distinguished from delay damages for the time-related costs associated with the delay period itself.¹⁶⁷ For example, as dis-

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¹⁵⁹ Id. at 23 (“Claims arising out of the pandemic also can be complicated by the government’s forgiveness of PPP loans and the tax-free treatment that forgiven loans are provided. This may reduce the contractor’s compensable damages in both government and private contracting.”).

¹⁶⁰ Noetzel, supra note 1, at 1376 (“The ability of contractors to be compensated for such delays is increasingly difficult as contractors must not only document the occurrence of the event in detail but also how it affected the contractor’s performance.”).

¹⁶¹ McGeehin & Spangler, supra note 4, at 18 (“In making a delay or disruption claim due to COVID-19 impacts, the contractor has the burden of proof and must show that COVID-19 caused the alleged delay or disruption and that the owner is obligated to provide the added time or financial relief requested . . .,”); Herrmann, supra note 6, at 04523008-2 (“In the context of COVID-19, the contractor has the burden to prove that COVID-19 was the cause of the delay or disruption[ and] that the owner is obligated to provide the time and/or compensation requested . . ..”).

¹⁶² McGeehin & Spangler, supra note 4, at 23 (“Contractors claiming delays due to COVID-19 are likely to be successful in obtaining additional time, but because excusable delays are generally noncompensable, most delay claims stemming from COVID-19 will not entitle the contractor to additional compensation.”).

¹⁶³ See, e.g., Arizona Std. Spec. § 101.02 (defining “Equitable Adjustment” as “An increase or decrease in the contract price or time made by Supplemental Agreement in accordance with . . . the specifications”).

¹⁶⁴ See, e.g., S. Seeding Serv., Inc. v. W.C. Eng., Inc., 719 S.E.2d 211, 215, 217 N.C. App. 300, 305 (2011) (quoting S.J. Groves & Sons & Co. v. State, 273 S.E.2d 465, 495, 50 N.C. App. 1, 59 (1980)).

¹⁶⁵ See, e.g., Fru-Con Corp. v. State, 50 Ill. Ct. Cl. 50, 88-89 (1996) (concluding that Illinois DOT recognized a differing site condition (for which the contractor was entitled to compensation) where Illinois DOT issued a time extension).

¹⁶⁶ See, e.g., J. F. Edwards Const. Co. v. Illinois State Toll Highway Authority, 340 N.E.2d 572, 578, 34 Ill. App. 3d 929, 937 (1975) (affirming judgment in favor of Illinois State Tollway Authority, where contractor sought to characterize noncompensable delay damages as the costs of “extra work”).

¹⁶⁷ See, e.g., S. Seeding Serv., Inc. v. W.C. Eng., Inc., 719 S.E.2d 211, 215, 217 N.C. App. 300, 305 (2011) (distinguishing between equitable adjustment and delay damages).

cussed in greater detail in Section I, the COVID-19 pandemic was associated with increased costs of construction work, including significantly increased costs of materials and supplies.¹⁶⁸

As a general rule, the contractor in a fixed-price or unit price contract has accepted the risk that its costs of performing the work may increase, and the contractor is therefore not entitled to a price adjustment merely due to increased costs.¹⁶⁹ Even in the event of unforeseen circumstances such as a pandemic, as discussed in Section II.C.1 above, the force majeure or excusable delay provision in the contract typically does not provide compensation to the contractor for higher than anticipated costs associated with performing the contract scope of work.¹⁷⁰ Further, as a general rule, the increased cost of performing the work does not in-and-of-itself qualify as a force majeure event that would excuse performance, nor even entitle the contractor to an extension of time.¹⁷¹ If the work can be performed, albeit at a higher cost to the contractor than originally anticipated, then performance is typically not commercially impracticable, and the force majeure or excusable delay provision has no application to the increased cost of performance.

The contractor’s request for a price adjustment from a state DOT is often a request on behalf of its subcontractors or suppliers, commonly referenced as a “pass-through” claim.¹⁷² However, the subcontractor or supplier may have a stronger claim for a price adjustment under the language of its subcontract or supply contract with the prime contractor, than the prime contractor has under its contract with the state DOT. For example, the supplier’s contract may entitle it to a price adjustment due to increased costs of materials arising from supply chain disruptions, even though the prime contractor is not contractually entitled to such a price adjustment from the state DOT. Generally speaking, absent entitlement to a price adjustment in the prime contract, the state DOT is not obligated to provide additional compensation to its contractor merely because the contractor is required to provide additional compensation to its subcontractor or supplier. On the other hand, if the prime contractor is not obligated to provide additional compensation to its subcontractors or suppliers under the language of the subcontract or supply contract, the state DOT may assert the language of the subcontract or supply contract as a defense to the pass-through claim.¹⁷³

With the force majeure or excusable delay provision inapplicable to requests for price adjustment, this section will consider other remedies available to the contractor for the increased cost of performance due to unforeseen circumstances such as pandemics.¹⁷⁴ Available remedies range from express price escalation provisions to more general equitable adjustment provisions in the contract. Despite the “equitable adjustment” terminology frequently employed, these are not truly equitable remedies but rather application of the contract language.

In the survey of state DOTs conducted as part of this research effort, sixteen of the twenty-eight survey respondents (57%) reported receiving requests from contractors for significant price adjustments as a result of the COVID-19 pandemic. However, state DOTs almost uniformly reported that they did not grant contract price adjustments as a result of COVID-19, with a very few exceptions discussed herein.

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¹⁶⁸ Krishna P. Kisi & Tulio Sulbaran, Construction Cost and Schedule Impacts Due to COVID-19, 14 J. LEGAL AFF. & DISP. RESOL. ENGINEERING & CONSTRUCTION, 4, at 04522024-5 (Nov. 2022) (providing evidence of increased costs of construction projects resulting from COVID-19); Olanrewaju et al., supra note 8, at 04522024-6 (“[T]he cost of overruns is the main cause of disputes during the pandemic. It is not unexpected that cost overruns will lead to disputes during the pandemic.”).

¹⁶⁹ See, e.g., Seaboard Lumber Co. v. United States, 308 F.3d 1283, 1293 (Fed. Cir. 2002) (“A force majeure clause is not intended to buffer a party against the normal risks of a contract. The normal risk of a fixed-price contract is that the market price will change.” (citing N. Indiana Pub. Serv. Co. v. Carbon Cnty. Coal Co., 799 F.2d 265, 275 (7th Cir. 1986))); see also 5 PHILIP L. BRUNER & PATRICK J. O’CONNOR, JR., BRUNER AND O’CONNER ON CONSTRUCTION LAW § 15:28, n.8 (2002) (“Unexpected significant price increases, unless truly exorbitant, typically are treated as ‘hardship’ rather than impracticability cases.”).

¹⁷⁰ See, e.g., Koch Industries, Inc. and Subsidiaries v. United States, 564 F. Supp. 2d 1276, 1282 (D. Kan. 2008) (observing that highway contractor to New Mexico DOT is not entitled to a price adjustment for increased costs due to force majeure event).

¹⁷¹ Hennings et al., supra note 22, at 04521048-6 (“Generally, worsening economic conditions will not be construed to be covered by a catch-all phrase unless explicitly included in the specific list of events” in a force majeure provision.); Herrmann, supra note 6, at 04523008-2 (citing Seaboard Lumber Co. v. United States, 308 F.3d 1283, 1293 (Fed. Cir. 2002)); see also J. Lee Milligan, Inc. v. CIC Frontier, Inc., 289 F. App’x 786, 788 (5th Cir.), judgment entered, 291 F. App’x 655 (5th Cir. 2008) (affirming judgment against asphalt supplier for breach, where supplier terminated subcontract to supply asphalt to highway contractor, citing force majeure provision in subcontract, due to rapidly rising prices in asphalt, and awarding contractor damages calculated as the increase price to procure asphalt elsewhere).

¹⁷² See, e.g., Kansas Std. Spec. § 104.8.f (“Contract adjustment requests shall include pass-through claims of subcontractors and suppliers, if any, associated with Contract Changes.”); see also Schiavone Const. Co., Inc. v. Triborough Bridge & Tunnel Authority, 209 A.D.2d 598, 619 N.Y.S.2d 117 (2d Dep’t 1994); Tyger Const. Co., Inc. v. Com., Dept. of Highways and Transp., 17 Va. App. 166, 435 S.E.2d 659 (1993); U. S. Industries, Inc. v. Blake Const. Co., Inc., 671 F.2d 539, 550 (D.C. Cir. 1982) (“[I]t is common practice for a contractor to present claims of its subcontractors in a suit against the other party to the prime contract.”); Walter Kidde Constructors, Inc. v. State, 37 Conn. Supp. 50, 434 A.2d 962, 971-974 (Super. Ct. 1981) (upholding a subcontractor’s claim asserted by the contractor against the owner pursuant to a valid “liquidating agreement”); U.S. v. Blair, 321 U.S. 730, 64 S. Ct. 820, 88 L. Ed. 1039 (1944).

¹⁷³ See, e.g., Pearson, Dickerson, Inc. v. U.S., 115 Ct. Cl. 236, 264 (1950) (“The delay for which damages are claimed related entirely to work performed by plaintiffs’ subcontractor for which, under the terms of the subcontract, plaintiffs were not liable to the subcontractor. . . . The plaintiffs were not damaged and have suffered no loss.”).

¹⁷⁴ Hennings et al., supra note 22, at 04521048-8 (“In the absence of a force majeure clause, other contract provisions may provide relief.”); McMillan et al., supra note 135, at 45 (Because “the contractor may find the protection afforded by the force majeure provisions for COVID-19related claims limited to an extension of time (with no compensation), . . . contractors will seek redress to obtain . . . additional compensation under other provisions of the contract.”).

a. Express Price Escalation Provisions

As a general rule, the contractor under a fixed-price or unit price contract with a state DOT is not entitled to a price adjustment when its costs of materials, equipment, or labor increase.¹⁷⁵ The contractor is typically expected to have factored potential market price increases into its bid price to the state DOT, and there is no general entitlement to a contract price adjustment for increased prices even in the event of force majeure circumstances such as a pandemic.¹⁷⁶ However, there are limited exceptions in most state DOT standard specifications, in which the contract expressly provides that the contractor is entitled to a price adjustment to cover its actual increased cost of materials, equipment, or labor. These are often described as “price escalation” provisions.

Under one form of an express price escalation provision, the contractor may be entitled to price escalation where, due to delays beyond the contractor’s control, the contractor is required to perform the work later in time than originally anticipated. In that case, due to inflation, the contractor’s cost of materials, equipment, or labor would be expected to be higher than anticipated at the time of bidding. This form of price escalation is typically limited to instances where the delay itself is compensable.¹⁷⁷ As discussed previously in Section III.A.1.b, compensable delays are typically limited to delays that are the fault or responsibility of the state DOT or its agents, or where the state DOT or its agent has suspended the work for its own convenience, for a reason other than the fault of the contractor.

Assuming the contract contains such an express price escalation provision, the contractor could be entitled to compensation for the increased cost of performing at a later time. The contractor is typically required to demonstrate its actual increased cost, by providing proof of both its actual costs for material, labor, and equipment at the time the work was to be performed and also the same actual costs at the time the work was actually performed. The contractor is typically entitled to a price adjustment to reflect its increased actual costs, without additional profit, over the bid price.¹⁷⁸ This price adjustment would be in addition to any compensation for time-relation costs incurred during the period of delay, as discussed in Section III.A.1.b. However, as discussed in Section III.A.1.a, pandemic-related circumstances such as “epidemics” and “quarantine restrictions” are often specifically enumerated as excusable (not compensable) delay events. Due to the general precondition that the state DOT have some responsibility for the delay in order for the delay to become compensable, this express price escalation provision might not apply to most pandemic-related delays in the absence of a state DOT order suspending the work or imposing disruptive protocols.

There is a second form of price escalation provision, where the state DOT (and not the contractor) bears the risk of price increases in some limited circumstances, without regard to whether the project has been delayed and without regard to fault or responsibility. It is common for state DOT contracts to expressly provide for a price escalation for petroleum-based products such as asphalt,¹⁷⁹ fuel,¹⁸⁰ and oil.¹⁸¹ Some state DOT contracts also include an express price escalation for steel products.¹⁸² By taking on the risk of price increases for specific materials where the prices are expected to fluctuate, sometimes unpredictably, the state DOT seeks to obtain lower bid prices from potential contractors. These price escalation provisions are typically based on market price indexes, so the contractor can base its bid on the index price for such materials. If the actual price (of asphalt, or fuel, or steel) incurred by the contractor during contract performance exceeds the price index by an applicable

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¹⁷⁵ See, e.g., Minnesota Std. Spec. (“The Department will not make adjustments for cost escalation, unless the Contract requires otherwise.”).

¹⁷⁶ See, e.g., Hennings et al., supra note 22, at 04521048-6 (“[A] contractor’s force majeure claim based on the price escalation of materials was rejected because the court did not construe the escalation to be included under the catch-all force majeure clause.” (citing N. Indiana Pub. Serv. Co. v. Carbon Cnty. Coal Co., 799 F.2d 265 (7th Cir. 1986))).

¹⁷⁷ See, e.g., Indiana Std. Spec. § 109.05.2(a)(5) (providing for escalated costs of labor, materials, and equipment due to a compensable delay); Kentucky Std. Spec. § 105.13.03.F (providing for escalated material prices due to a compensable delay); Michigan Std. Spec. § 109.05.E (providing for escalated costs of labor, materials, and equipment due to a compensable delay); Minnesota Std. Spec. § 1904.6.B (providing for escalated costs of labor and materials due to a compensable delay); New Hampshire Std. Spec. § 109.04.6.2 (providing for escalated costs of labor and materials due to a compensable delay); New Jersey Std. Spec. § 104.03.09 (providing for escalated costs of labor and materials due to a compensable delay); North Dakota Std. Spec. § 109.02.F (providing for escalated costs of labor and materials due to a compensable delay); Ohio Std. Spec. § 109.05.D.2 (providing for escalated costs of labor and materials due to a compensable delay); Tennessee Std. Spec. § 109.06 (providing for escalated costs of labor and materials due to a compensable delay); Virginia Std. Spec. § 109.05(e)4 (providing for escalated costs of labor and materials due to a compensable delay); Wisconsin Std. Spec. § 109.4.7.2.3 (providing for escalated costs of labor and materials due to a compensable delay).

¹⁷⁸ M.J. Lee Const. Co. v. Oklahoma Transp. Authority, 125 P.3d 1205, 1211 n.12 (2005) (“Items that may be included in any equitable adjustment of costs for delays are direct labor costs, material and equipment costs, and overhead costs. . . . Items that may not be included in any equitable adjustment of costs for delay are loss of profits, consequential damages, indirect costs, and attorney fees.” (quoting 1999 edition of Oklahoma Std. Spec.)).

¹⁷⁹ See, e.g., Georgia Std. Spec. § 109.11.A (“Asphalt Cement Price Adjustments”); Nevada Std. Spec. § 109.04 (“Asphalt Escalation”).

¹⁸⁰ See, e.g., Nevada Std. Spec. § 109.05 (“Fuel Escalation”); New Jersey Std. Spec. § 160.03.01 (“Fuel Price Adjustment”); see also Idaho Std. Spec. § 109.02.B (providing price adjustments for asphalt and fuel based on deviation from market indices); Arcon Const. Co. v. S. Dakota Dep’t of Transp., 365 N.W.2d 866, 868 (S.D. 1985) (“The contract between Department and Arcon contained a provision for reimbursement to Arcon of increased costs, including freight rates and fuel costs, which were unexpected at the time of bidding.”).

¹⁸¹ See, e.g., California Std. Spec. § 9-1.07A (“The Engineer adjusts payment whenever the California statewide crude oil price index for the month the material is placed is more than 5% higher or lower than the price index at the time of bid.”).

¹⁸² See, e.g., Oregon Std. Spec. § 00195.12 (“Steel Material Price Escalation/De-Escalation Clause”); Pennsylvania Std. Spec. § 110.14 (providing a price adjustment for steel price fluctuations).

percentage provided in the contract, then the contractor can obtain a price adjustment to cover that price increase. Conversely, if the actual price to the contractor is less than the price index, the state DOT could adjust the contract price in favor of the state DOT.

Because these index-based price escalation provisions are not conditioned on the responsibility of either party, they could be invoked by contractors for relief from pandemic-related price increases. However, index-based price escalation provisions in state DOT contracts typically have very narrow applicability and are often limited to petroleum-based products or (less frequently) steel. These provisions would not extend to many of the construction materials that increased in price so dramatically during the COVID-19 pandemic.

The survey of state DOTs conducted as part of this research effort revealed that index-based price escalation provisions were practically the only avenue for state DOT contractors to obtain contract price adjustments for the supply chain disruptions and material price inflation associated with COVID-19. Survey respondents generally reported that the only price adjustment granted to contractors was in accordance with the express price escalation provisions in the contract for specifically identified materials, with some minor exceptions. For example, Virginia Department of Transportation (VDOT) reported, “VDOT has a standard contract specification that provides price adjustments for steel and petroleum products. In response to the recent price spikes in the wake of COVID, VDOT relaxed some requirements in the specification and granted some price adjustments for steel products where it was appropriate to do so.” South Carolina Department of Transportation (SCDOT) reported that it developed a price escalation program, where SCDOT unilaterally escalated prices for specific steel, concrete, geotextile, and stormwater products, but did not otherwise grant price escalation in response to contractor requests. Otherwise, although several state DOTs reported receiving general requests for material price escalation as a result of COVID-19, the only price escalation reported by any survey respondents was in accordance with the existing contract price escalation provisions for materials such as petroleum-based products, steel, and cement.

A third, more generally applicable, form of price escalation provision contained in most state DOT construction contracts is one that allows for a price adjustment when the actual quantities of a specific construction material that a contractor is required to furnish differs significantly from the quantities on which the contractor’s bid was based. This change in quantities may be the result of changes to the work ordered by the state DOT or its agent, or it may simply be due to an inaccurate estimate of the quantities by the state DOT or its designer at bid time. A typical price escalation provision would allow the contractor to obtain a price adjustment based on the increased cost of these materials only if the actual quantities differed from the bid quantities by 25% (i.e., only if the actual quantities were less than 75% of the bid quantities or more than 125% of the bid quantities).¹⁸³ Even then, the price escalation provision is often only permitted for materials that are specifically identified in the project specifications as a “major item of work.”¹⁸⁴ Some state DOT contracts will also provide a price escalation for other, “minor” bid items, but only if the actual quantities differ from the bid quantities by a larger amount than the 25% threshold for “major” bid items.¹⁸⁵

The price escalation for significant changes in bid quantities may provide contractors some relief for cost increases associated with the COVID-19 pandemic, but only where the actual quantities of a bid item significantly deviated from the estimated quantities on which the contractor based its bid. A significant change in quantities could occur, for example, if the state DOT elected to terminate a partially completed project as a result of a pandemic, as discussed further in Section III.B.1. This version of price escalation, for significant changes in bid quantities, is often contained in the state DOT contract as a subset of the “significant changes in the character of the work”¹⁸⁶ clause of the price adjustment provision described in the following section.

b. Equitable Adjustments

In the absence of an express price escalation provision that applies to the contractor’s circumstances, the contractor’s remedy for pandemic-related cost increases may be limited to a request for an equitable adjustment.¹⁸⁷ Under most state DOT construction contracts, the contractor has broad rights to assert a claim for additional compensation or request for equitable adjustment¹⁸⁸ (even if the “equitable adjustment” terminology is

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¹⁸³ See, e.g., Washington Std. Spec. §§ 1-04.4.B, 1-04.6 (providing escalation for a 25% variation in any “item of Work”).

¹⁸⁴ 23 C.F.R. § 635.109(a)(3)(iv)(B) (2023); see also Alaska Std. Spec. § 109-1.04 (providing escalation for a “Major Contract Item”); Wisconsin Std. Spec. § 104.2.2.4.3 (providing escalation for a “major bid item”).

¹⁸⁵ See, e.g., North Carolina Std. Spec. § 104-5(b) (“If . . . the actual quantity of any minor contract item overruns the original bid quantity by more than 100% of such original bid quantity an increase to the contract unit price, excluding loss of anticipated profits, may be authorized by the Engineer”); Wisconsin Std. Spec. § 104.2.2.4.3 (providing escalation for a 50% variation in a “minor bid item that is part of an approved subcontract and that exceeds 10% of the original value of that subcontract”).

¹⁸⁶ 23 C.F.R. § 635.109(a)(3) (2023); see also California Std. Spec. § 9-1.15 (“The Department adjusts payment for only the work portion that changed in character.”).

¹⁸⁷ See, e.g., Maine Std. Spec. § 109.7.1 (“Equitable Adjustment means an adjustment to compensation due to a change in the nature or scope of Work . . ..”).

¹⁸⁸ See, e.g., Maryland Std. Spec. § GP-4.06(d) (“[I]f any change under this clause causes an increase or decrease in the Contractor›s cost of, or the time required for, the performance of any part of the work under this Contract, whether or not changed by any order, an equitable adjustment shall be made and the Contract modified in writing accordingly.”); see also Gilchrist Const. Co., LLC v. State, Dept. of Transp. and Development, 166 So.3d 1045, 1052 (La. App. 2015) (“Any provision contained in a public contract which purports to waive, release, or extinguish the rights of a contractor to recover cost damages, or obtain equitable adjustment, for delays in performing such contract, if such delay is caused in whole, or in part, by acts or omissions within the control of the contracting public entity or persons acting on behalf thereof, is against public policy and is void or unenforceable.” (quoting LA. REV. STAT. § 38:2216(H))).

not contained in the state DOT contract).¹⁸⁹ However, unless the contract expressly provides for additional compensation under the contractor’s specific circumstances (i.e., pandemic-related circumstances),¹⁹⁰ the contractor’s entitlement to a price adjustment will be questionable.¹⁹¹ Although the contractor has the right to request an equitable adjustment, the state DOT is generally not obligated to increase the contractor’s compensation unless the contractor’s increased costs arise from a change for which the state DOT is contractually responsible.¹⁹²

The contract language most likely to be asserted by contractors seeking a pandemic-related equitable adjustment is probably the “significant change” clause of the “changed circumstances” provision. Almost all state DOT construction contracts provide for a contract price adjustment due to circumstances that “significantly change the character of the work.”¹⁹³ The term “significant change” is often defined to include when “the character of the work as altered differs materially in kind or nature from that involved or included in the original proposed construction.”¹⁹⁴ As discussed in the previous section, the price escalation provision for significant changes in quantities of bid items is one form of this “significant change” price adjustment.¹⁹⁵ However, the language entitling the contractor to a price adjustment for material changes in the character of the work has potentially much broader application than quantity discrepancies. Contractors could readily characterize the impact of the COVID-19 pandemic as a material change in the character of the work, and then seek a “significant change” contract price adjustment for all pandemic-related increased costs. The contractor would bear the burden of demonstrating that its increased costs arose from the material change in the character of the work (i.e., from the pandemic). The contractor would also have to demonstrate that the contractor was not itself responsible for its increased costs, and that the contractor made efforts to mitigate its increased costs arising from the pandemic. Depending on the language of the “significant change” clause, the contractor might also have to overcome the state DOT’s argument or interpretation that the “significant change” clause only applies to alterations or changes to the work initiated by the state DOT or its agent.¹⁹⁶

Along those lines, a contractor seeking an equitable adjustment will often seek to cast its claim as arising from a change initiated by the state DOT or its agent. In the case of the pandemic, where the state DOT or its agent has issued an order suspending

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¹⁸⁹ See, e.g., Georgia Std. Spec. § 105.13 (“Whenever the Contractor believes that it is or will be entitled to additional compensation, whether due to delay, extra work, breach of contract, or other causes, the Contractor shall follow the procedures set forth in this Sub-Section.”); Kansas Std. Spec. § 104.8 (providing procedures for contractor to request a “contract adjustment (additional time, money, or both)”); New York Std. Spec. § 108-04.A (providing that circumstances not specifically referenced in the contract “and which are not within the contemplation of the parties at the time of entering into the contract” may “form the basis for extra work compensation”); North Carolina Std. Spec. § 104-3 (providing for additional compensation when “the Contractor is required to perform work that is, in his opinion, an alteration in the plans or details of construction that materially changes the character of the work and the cost of performing the work”); Oklahoma Std. Spec. § 105.18 (providing procedure to obtain a “Contract adjustment” if “the Contractor considers additional compensation due for work or material not covered in the Contract”); South Carolina Std. Spec. § 105.16.4 (providing claim procedure in the event that “the Contractor believes that it is entitled to additional compensation for reasons other than delay or acceleration”).

¹⁹⁰ McGeehin & Spangler, supra note 4, at 21 (“Some contracts provide that the contractor is entitled to recover all or part of its costs if there is a delay caused by an event of force majeure. This is not a typical contractual provision . . ..”).

¹⁹¹ Charlson, supra note 3, at 06522002-2 (Nov. 2022) (“The courts have long been reluctant to interpret contracts generously in times of economic suffering.”); Han & Kim, supra note 154, at 51-52 (noting that a force majeure provision typically “would not allow the contractor to recover additional costs incurred as a result of the pandemic”).

¹⁹² See, e.g., Florida Std. Spec. § 4-3.2 (“Notwithstanding that the Contractor shall have no formal right whatsoever to any extra compensation or time extension deemed due by the Contractor for any cause unless and until the Contractor follows the procedures set forth in [the contract], the Contractor may at any time . . . submit to the Department a request for equitable adjustment of compensation or time or other dispute resolution proposal.”).

¹⁹³ See, e.g., 23 C.F.R. § 635.109(a)(3)(II) (2023); Delaware Std. Spec. § 104.2.B.2; Kentucky Std. Spec. § 104.02.01; Montana Std. Spec. § 104.02.3.A; Nevada Std. Spec. § 104.02(b); New Hampshire Std. Spec. § 104.02.C; New York Std. Spec. § 104-04; Ohio Std. Spec. § 104.02.D; Oklahoma Std. Spec. § 104.04; Pennsylvania Std. Spec. § 110.02(d); South Dakota Std. Spec. § 4.3; Texas Std. Spec. Item 4, § 4; Vermont Std. Spec. § 109.04(b); Virginia Std. Spec. § 104.02(b); West Virginia Std. Spec. § 104.11; Wyoming Std. Spec. § 104.2.4.

¹⁹⁴ See, e.g., 23 C.F.R. § 635.109(a)(3)(iv)(A) (2023); Delaware Std. Spec. § 104.2.B.4.a; Florida Std. Spec. § 4-3.1; Iowa Std. Spec. § 1109.14.C.4.a; Louisiana Std. Spec. § 104.02(c)(4)a; Minnesota Std. Spec. § 1402.3; Mississippi Std. Spec. § 104.02.1; Missouri Std. Spec. § 101.2; New Hampshire Std. Spec. § 104.02.C; New York Std. Spec. § 104-04; Wisconsin Std. Spec. § 104.2.2.4.2; see also Alaska Std. Spec. § 104-1.02.1.b (“If the change is materially different in character or unit cost from that specified in the Contract, . . . an equitable adjustment to Contract price and Contract time shall be calculated . . ..”); New Jersey Std. Spec. § 104.03.03.3 (“A change in the character of work is a change that causes the work to substantially differ in kind or nature from the original proposed construction.”); New Mexico Std. Spec. § 104.2.1.1 (defining “significant change” as one that “[m]aterially changes, in kind or nature, the character of the Work including the Critical Path from that which was previously involved or included in the original proposed construction”).

¹⁹⁵ 23 C.F.R. § 635.109(a)(3)(iv)(B) (2023).

¹⁹⁶ See, e.g., 23 C.F.R. § 635.109(a)(3)(ii) (2023) (“If the alterations or changes in quantities [made by the state DOT’s engineer] significantly change the character of the work under the contract, . . . an adjustment, excluding anticipated profit, will be made to the contract.”); Delaware Std. Spec. § 104.2.B.2 (The Department will make a contract adjustment, excluding anticipated profit, for alterations or changes in quantities that significantly change the character of the work or that cause other work to become significantly different in character.”); Wisconsin Std. Spec. § 104.2.2.4.1 (“Under the contract a significant change is defined if either one of two separate and distinct circumstances occur,” such circumstances being “Altered work” or “Changed quantities”).

the work,¹⁹⁷ terminating a portion of the work,¹⁹⁸ or imposing specific work protocols,¹⁹⁹ this order could provide the basis for a claim for additional compensation or request for equitable adjustment sought by the contractor. As discussed in the previous section, some state DOT contracts provide express price escalation provisions for the increased cost of material, equipment, or labor as a result of performing the work later in time due to suspension or delay that is the state DOT’s responsibility. Where the contract does not expressly provide for price escalation, the contractor is typically permitted to seek an equitable adjustment under such circumstances.²⁰⁰ If it is determined that the contractor is entitled to additional compensation, the amount of the equitable adjustment should generally reflect the contractor’s additional cost of performance arising from the change for which the state DOT is contractually responsible.²⁰¹ The amount of the equitable adjustment is often determined by negotiation between the state DOT and its contractor,²⁰² even in the event of a pandemic.²⁰³

In the survey of state DOTs conducted as part of this research, although most survey respondents reported receiving requests for significant price adjustments as a result of COVID-19, the survey respondents almost uniformly reported that no such contract price adjustment was granted, except for price fluctuations in specific materials where the contract expressly provided for a contract price adjustment. Exceptions included PennDOT and WSDOT, which (as discussed in Section III.A.1.b) reported granting price adjustments on numerous projects due to COVID-related suspensions or safety requirements. Also, Maine Department of Transportation reported that a price adjustment was made on “one large bridge contract in a remote location . . . to provide adequate housing for workers to maintain distancing requirements. Any other requests were denied.” Generally speaking, except in the relatively rare occasions where the work was suspended by the state DOT, contract price adjustments were not granted in response to COVID-19.

Other circumstances in which the contractor may seek an equitable adjustment include differing site conditions.²⁰⁴ However, differing site conditions are typically related to physical conditions at the site, often subsurface conditions, that either differ materially from the contract specifications, or differ materially from what the contractor could have reasonably suspected. The differing site conditions for which a price adjust-

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¹⁹⁷ See, e.g., Alaska Std. Spec. § 108-1.06.4.b (specifying under what circumstances “the Contractor will be compensated by equitable adjustment for a suspension, delay, or interruption of the work”); Hawaii Std. Spec. § 108.10(D) (“If the performance of all or part of the work is suspended for reasons beyond the control of the Contractor except an adjustment shall be made for any increase in cost of performance of this contract (excluding profit) necessarily caused by such suspension, and the contract modified in writing accordingly.”); New York Std. Spec. § 108-04.A (“The Department may provide monetary compensation for delays and interference in certain defined instances” including suspension.); Ohio Std. Spec. § 104.02.C (“If the Engineer agrees that the cost or time required for the performance of the Work has increased as a result of such suspension and the suspension was caused by conditions beyond the control of and not the fault of the Contractor, its suppliers, or subcontractors at any approved tier, and not caused by weather, the Engineer will make an equitable adjustment (excluding profit) and modify the contract . . ..”).

¹⁹⁸ See, e.g., West Virginia Std. Spec. § 108.9 (“If termination is partial, the Contractor may file a Proposal with the Division for an equitable adjustment of the price(s) of the continued portion of the Contract.”); Wisconsin Std. Spec. § 104.2.2.5 (“If the project engineer partially eliminates or completely eliminates work, the project engineer will issue a change order for a fair and equitable amount.”).

¹⁹⁹ Han & Kim, supra note 154, at 58 (opining that some construction contracts “may allow contractors to recover, as a variation claim, additional time and cost resulting from new work procedures, methods and sequences due to Covid-19”); McGeehin & Spangler, supra note 4, at 21 (“[C]ontractors may have greater success in recovering the costs of personal protection equipment and other protective measures incurred to mitigate a virus, such as COVID-19, from endangering on-site personnel.”).

²⁰⁰ See, e.g., Georgia Std. Spec. § 105.13 (“Whenever the Contractor believes that it is or will be entitled to additional compensation, whether due to delay, extra work, breach of contract, or other causes, the Contractor shall follow the procedures set forth in this Sub-Section.”).

²⁰¹ See, e.g., Missouri Std. Spec. § 109.4.3 (“[T]he engineer will make an equitable adjustment to or determination of the affected contract prices for the work, based on the contractor›s actual costs to perform the work.”); Nevada Std. Spec. § 104.02(b) (“Any such price adjustment will be determined by documented proof of an increase or decrease in actual costs.”); South Carolina Std. Spec. § 105.16.5 (limiting contractor’s recovery on claims to certain actual costs plus overhead).

²⁰² See, e.g., Montana Std. Spec. § 109.04.3.A (providing for an equitable adjustment based on agreement of the contracting parties); New Mexico Std. Spec. § 104.2.1.1 (“When the character of the Work is materially changed in kind or nature then the Project Manager and the Contractor shall agree upon the adjustment prior to the Contractor’s performance of the Work. If an agreement is reached, the Project Manager will make an adjustment to the Contract which excludes anticipated profit.”); North Dakota Std. Spec. § 104.02.C (“The basis for the adjustment should be agreed upon prior to the performance of the work.”); Washington Std. Spec. § 1-09.4.1 (providing for an equitable adjustment to be computed using “agreed upon prices” if “the parties are able to agree”).

²⁰³ Olanrewaju et al., supra note 8, at 04522054-7 (“It is interesting to find that the respondents measured that negotiation is the predominant means to resolve construction disputes due to the pandemic. . . . [M]any construction disputes were settled through party-to-party negotiations during the pandemic.”).

²⁰⁴ See, e.g., 23 C.F.R. § 635.109(a)(1) (“Differing site conditions.”); Indiana Std. Spec. § 104.02 (“Changed conditions that will be considered as reason for a contract adjustment are differing site conditions, suspensions of work ordered by the Engineer, and significant changes in the character of the work.”); Missouri Std. Spec. § 109.4.1 (“Where contract unit prices exist, the contract unit price will always be applied without deviation, unless the effect of a differing site condition or a significant change in the character of the work requires an equitable adjustment to a contract unit price under the terms of this contract.”); Rhode Island Std. Spec. § 101.06 (defining “adjustment” as a “modification to the Contract Price or Time occasioned by the performance of work beyond that required by the original Contract, including but not limited to Additional Work, Extra Work, Differing Site Conditions, Altered Work or Significant Changes in the Character of Work, and Suspensions of Work”).

ment can be obtained are unlikely to result from a pandemic.²⁰⁵ The “significant change” clause of the “changed circumstances” provision is much more likely to be applicable to a pandemic.

On that note, as discussed in Section II.C.1, state DOT contracts often contain a type of force majeure provision that entitles the contractor to additional compensation for the contractor’s costs to correct damage to the work resulting from an act of God,²⁰⁶ or to mitigate damage to the work resulting from an act of God.²⁰⁷ Typically, this clause would provide relief for the contractor whose work is damaged by hurricanes, earthquakes, etc., and would not provide relief for circumstances such as pandemics that do not cause physical damage to the work. However, the contractor should consider the applicability of the specific contract language to the contractor’s claim for additional compensation. If the contractor’s work was damaged by civil unrest associated with the pandemic (such as the nationwide protests that occurred during the spring and summer of 2020), it is possible that the contractor’s additional costs are expressly covered. More generally, it may not be a stretch in some circumstances for the contractor to cast its increased costs of performance during the pandemic as arising from efforts to mitigate damage to the work resulting from an act of God.

As discussed in more detail in Section III.A.4.b.i, the contractor’s request for a price adjustment or equitable adjustment will be subject to strict notice requirements, and the contractor can waive its claim for additional compensation by failing to provide timely notice of a claim.

3. Termination by Contractor

Under many construction industry standard form contracts, if the work is suspended by the owner for a significant amount of time (e.g., thirty days), then the contractor may be entitled to terminate the contract.²⁰⁸ However, that remedy is rarely available to state DOT contractors. Under most state DOT contracts, if the work is suspended for an unreasonable period of time, the contractor’s remedy is typically an extension of time and possibly a contract price adjustment.²⁰⁹ In almost all state DOT contracts, there is no provision expressly allowing a contractor to terminate.

4. Transportation Agency Defenses and Remedies

a. Inexcusable Delay

Whereas the contractor’s primary remedy for a force majeure event such as a pandemic is a time extension for excusable delay, the state DOT’s primary defense may be that the delay is not excusable.²¹⁰ An inexcusable delay would be one that fails to satisfy the requirements or elements of the force majeure or excusable delay provision in the construction contract.²¹¹ A delay might be deemed inexcusable if the transportation agency determines that the pandemic or other event claimed to be a force majeure event was foreseeable, or that the event did not actually cause the project to be delayed, or that the delay (or part of it) was within the control of the contractor.²¹² The mere occurrence of a pandemic such as COVID-19 does not provide a blanket excuse for a contractor’s failure to timely perform its contract work. A delay deemed to be inexcusable would not entitle the contractor to even a time extension, much less additional compensation.²¹³

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²⁰⁵ But see Utah Std. Spec. § 00777, pt. 1.13.A (providing for additional compensation for “changes due to differing site conditions, unforeseen condition or events (such as force majeure and foreign or domestic tariffs)”). “Force Majeure” is defined to include “Any epidemic or quarantine restrictions occurring within the vicinity of the Project.” Utah Std. Spec. § 00777, pt. 1.4.H.

²⁰⁶ See, e.g., North Carolina Std. Spec. § 107-17 (“The Department will reimburse the Contractor for the repair of the work due to actions of the elements of such exceptional nature as to be contractually classified as Acts of God.”); Rhode Island Std. Spec. § 104.14 (providing for additional compensation for “[r]ebuilding, repairing, and restoring damage to the Work not under the control of the Contractor, including but are not limited to damage caused by Acts of Nature, such as an earthquake, lightning strikes, tidal wave, tornado, hurricane, or other cataclysmic phenomenon of nature or acts of the public enemy or of governmental authorities”); South Dakota Std. Spec. § 7.17 (“Damage to work due to unforeseeable causes beyond the control of and without the fault or negligence of the Contractor, including but not restricted to acts of God, acts of the public enemy, or acts of governmental authorities will be restored by the Contractor at the Department’s expense.”); Texas Std. Spec. Item 7, § 17.1 (defining “Reimbursable Repair” to include “repair of damage caused by . . . Acts of God, such as earthquake, tidal wave, tornado, hurricane, or other cataclysmic phenomena of nature”); Vermont Std. Spec. § 107.17(a) (relieving contractor of financial responsibility for “damage to the work due to unforeseeable causes beyond the control of and without the fault or negligence of the Contractor, including but not restricted to acts of God, of a public enemy, or governmental authorities”).

²⁰⁷ Ezeldin & Helw, supra note 29, at 04518005-8 (providing for contractor to recover additional compensation for its actual costs of “reasonable steps to remedy or abate the force majeure and its effects on the employer”).

²⁰⁸ Hennings et al., supra note 22, at 04521048-3.

²⁰⁹ 23 C.F.R. § 635.109(a)(2) (2023).

²¹⁰ Noetzel, supra note 1, at 1365 (2022) (“Notably, the excusable delay provision provides stringent requirements that contractors must meet in order to receive a time extension on the contract and to eliminate liability to the government for default.”).

²¹¹ Ezeldin & Helw, supra note 29, at 04518005-7 (“The term force majeure event means any exceptional circumstance that demonstrably could not have been reasonably foreseen before the effective date of the agreement and that is beyond the reasonable control of the affected party, but only if and to the extent that . . . such circumstance adversely and materially affects the ability of the party to perform its obligations under this agreement . . ..”).

²¹² See, e.g., Kentucky Std. Spec. § 105.13.03(B) (“Non-excusable delays are delays caused by the Contractor, or that the Contractor could have reasonably foreseen or avoided.”); New Mexico Std. Spec. § 109.11.2.2 (“Inexcusable Delay or Non-excusable Delay: A Delay . . . that was caused by: factors within the Contractor’s control; the fault or responsibility of the Contractor; factors that could or should have reasonably been foreseen by the Contractor . . ..”); Utah Std. Spec. § 00777, pt. 1.4.I (“Non-excusable Delay – A delay that is within the Contractor’s control, is the fault or responsibility of the Contractor, or can be reasonably foreseen by the Contractor . . ..”); Idaho Std. Spec. § 108.07.E (“Nonexcusable delays are noncompensable. Time extensions will not be granted for nonexcusable delays.”).

²¹³ Noetzel, supra note 1, at 1364 (“[I]nexcusable delays—delays within the control of the contractor or its subcontractor—do not absolve the contractor of liability for nonperformance and do not allow for any relief.”); see also Indiana Std. Spec. § 108.09(b) (“The Department will not extend the contract time or compensate the Contractor for delay costs due to non-excusable delays.”); Kentucky Std. Spec. § 105.13.03(B) (“The Engineer will not make an extension to contract time for non-excusable delays. All non-excusable delays are noncompensable.”); Maine Std. Spec. § 109.5.2.A (“For an Inexcusable Delay, the Contractor is entitled to neither an extension of time nor additional compensation.”).

As discussed in Section II.C.1, the force majeure or excusable delay provision in most state DOT construction contracts requires a delay-causing circumstance to be unforeseen, or not reasonably foreseeable, in order to warrant a time extension.²¹⁴ The provision typically enumerates examples of such circumstances that could warrant a time extension, and epidemics and quarantine restrictions are often specifically enumerated. Generally speaking, a pandemic that arises after entering into a contract would be considered unforeseeable.²¹⁵ However, for contracts executed after the onset of a pandemic, a state DOT could have a valid defense that the pandemic or pandemic-related circumstances were foreseeable, and thus no time extension is warranted.²¹⁶ For contracts executed after the onset of the COVID-19 pandemic, contractors cannot realistically argue that the pandemic itself was unforeseeable.²¹⁷ The contractor might reasonably be expected to account for special work protocols to prevent infection or transmission (such as reduced and staggered work crews), temporary staffing shortages due to infection, and longer material delivery durations.²¹⁸ Some newer contracts may expressly shift to the contractor the responsibility of accounting for delays due to COVID-19 or other pandemics, eliminating the contractor’s argument that the pandemic was unforeseeable.

As discussed in Section III.A.1.a, in order for a delay to be excusable, it must be outside the contractor’s control.²¹⁹ A pandemic arising after contract execution would almost certainly constitute a circumstance outside of the contractor’s control. However, the mere occurrence of an uncontrollable event such as a pandemic would not entitle the contractor to a time extension.²²⁰ To the extent that the project is delayed due to the fault or negligence of the contractor, the delay would be inexcusable.²²¹ A state DOT may assert that, notwithstanding the onset of a pandemic, concurrent project delays resulted from the fault or negligence of the contractor, and thus the delay is inexcusable.²²² For example, if a contractor’s work was suspended as a result of failing to follow required safety protocols during a pandemic, the state DOT would have a colorable argument that the delay is inexcusable.²²³

Closely related to the concept of control is the contractor’s duty to mitigate project impacts arising from a pandemic or other force majeure event. For example, during the COVID-19 pandemic, contractors were generally expected to continue to make progress to the extent practicable, even if progress was impacted by the pandemic, and not simply wait for the pan-

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²¹⁴ McGeehin & Spangler, supra note 4, at 19 (“Foreseeability is read into any force majeure claim, and force majeure is available only in those situations that are demonstrably unforeseeable at the time of contracting.”); Noetzel, supra note 1, at 1366 (“In addition to proving that the delay was excusable, the contractor must also prove that the event was unforeseeable to both contracting parties at the time the contract award was given.”); Sniffen, supra note 71, at 574 (“In many construction contracts, a force majeure clause will not relieve a contractor of its obligation to perform, unless the event preventing performance was unforeseeable at the time the parties formed the contract.”).

²¹⁵ Herrman, supra note 6, at 04523008-4 (With respect “to contracts that were entered into prior to the beginning of COVID-19 in early 2020 . . ., COVID-19 would not have been a circumstance the parties contemplated at the time the contract was formed.”); see also Salami et al., supra note 5, at 1197 (“Bearing in mind the contractual language, Covid-19 pandemic would fit within the [force majeure] clause if there is a specific mention of events such as ‘disease outbreak’, ‘epidemic’ or ‘pandemic’.”).

²¹⁶ United States v. Brooks-Callaway Co., 318 U.S. 120, 123, 63 S. Ct. 474, 476, 87 L. Ed. 653 (1943) (“Not every fire or quarantine or strike or freight embargo should be an excuse for delay under the proviso. . . .. A quarantine, or freight embargo, may have been in effect for many years as a permanent policy of the controlling government. . . .. In any of these situations there could be no possible reason why the contractor, who of course anticipated these obstacles in his estimate of time and cost, should have his time extended because of them.”); see also Connecticut Std. Spec. § 1.08.08 (“Requests will not be considered if based on delays caused solely by conditions existing at the time the bids were received and of which the Contractor might reasonably be expected to have had full knowledge at the time . . ..”). But see Hennings et al., supra note 22, at 04521048-7 (suggesting that circumstances specifically enumerated in a force majeure provision are excusable even if the occurrence was foreseeable or even actually known at the time of contracting).

²¹⁷ Osman & Ataei, supra note 7, at 06521004-4 (“[A]fter the start of the pandemic, COVID-19 may now be considered foreseen, thus making the contractor ineligible to claim delay and/or compensation.”).

²¹⁸ Ezeldin & Helw, supra note 29, at 04518005-3 (“Tribunals and courts state that failure to protect oneself against a foreseeable event does not excuse from resulting consequences and damages. The party incurring such damages should have assumed the risk of that event.”).

²¹⁹ Wright, Force Majeure Delays, supra note 28, at 34 (Force majeure clauses often exclude events that are ‘reasonably within the control of either party.’”); 5 PHILIP L. BRUNER & PATRICK J. O’CONNOR, JR., BRUNER AND O’CONNER ON CONSTRUCTION LAW § 15:22 (2002) (“Proof that time-impacting events are within the control of one party or the other necessarily will result in liability to the controlling party.”).

²²⁰ Hennings et al., supra note 22, at 04521048-1 (“[A]lthough the occurrence of force majeure event is required to trigger the clause, the focus is on a party’s ability to control and mitigate impacts relative to its contract obligations, not the event itself.”); Ezeldin & Helw, supra note 29, at 04518005-6 (“In some cases, the event is in fact completely beyond a party’s control when it occurs but could be controlled by taking reasonable measures beforehand.”).

²²¹ See, e.g., Florida Std. Spec. § 8-7.3.2 (“The Department will not grant time extensions to the Contract for delays due to the fault or negligence of the Contractor.”).

²²² See, e.g., Wyoming Std. Spec. § 108.6.4 (“When concurrent delays occur, the department will give precedence to nonexcusable over excusable delays in determining extensions to the contract completion date.”).

²²³ See, e.g., Wyoming Std. Spec. § 104.2.3 (“The department will not grant or consider contract amendments based on an engineer-ordered suspension . . . [t]o the extent that the suspension is overlapped by or falls within a suspension or delay due to any other cause, including delays caused by the contractor . . ..”).

demic to end before resuming work.²²⁴ A contractor’s failure to take reasonable efforts to mitigate the impact of a force majeure event to the project could limit the relief available to the contractor.²²⁵ Reasonable mitigation efforts may include resequencing work or reassigning resources to tasks not delayed by the pandemic, particularly where such efforts do not require the contractor to perform extra work or increase the contractor’s overall direct cost of performance.²²⁶ Although failure to mitigate is most often raised as a defense to monetary damages, it is also available as a defense to a requested time extension in the event of force majeure circumstances, where a time extension is a more likely remedy than monetary damages.²²⁷ If there were reasonable steps a contractor could have taken to minimize the pandemic-related delay to the project, its failure to take such steps could be seen as delay within the control of the contractor or delay caused by the fault or negligence of the contractor.²²⁸

Also closely related to the concept of control is the concept of causation. A contractor is only entitled to a time extension to the extent that the delay was actually caused by an unforeseeable, uncontrollable event.²²⁹ On construction projects, the period of excusable delay is typically quantified via a time impact analysis, examining how the uncontrollable event (such as a pandemic) impacted the critical path of the project.²³⁰ To the extent that the pandemic or other force majeure event only impacted events that were not on the critical path, then the event did not cause delays to the project.²³¹ Likewise, to the extent that the project was concurrently delayed due to the fault of the contractor, then the project would have been delayed anyway and the pandemic or other force majeure event did not cause the project to be delayed.²³² Where the contractor is at fault for delays concurrent with a pandemic, the state DOT has a strong argument that the delay is at least partially inexcusable.²³³ Where there are acts of the contractor that contribute to the delay, the state DOT may alternately characterize such acts as delays concurrent with the pandemic, or the contractor’s failure to mitigate pandemic-related delays, or independent delays within the contractor’s control, any of which might negate the contractor’s entitlement to the requested time extension.

Illustrative of the causation issue are material shortages and supply chain disruptions, which were widespread in the wake of the COVID-19 pandemic. Although force majeure and excusable delay provisions frequently provide for time extensions due to abnormal material delivery delays, the material delivery issues must actually delay the project (for reasons outside the contractor’s control) in order to be excusable. General supply shortages, which require a contractor to decide how to allocate its existing stock or pay higher prices than anticipated to acquire additional supplies, do not necessarily cause the work to be delayed.²³⁴ If the work could have been completed on time

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²²⁴ Charlson, supra note 3, at 06522002-2 (“Although it is likely that in many cases the COVID-19 pandemic will constitute an unforeseeable event outside a party’s reasonable control, those affected will often be expected to continue to take reasonable steps to comply with those terms of the agreement they can still perform and to mitigate the effects of any nonperformance as far as possible.”).

²²⁵ Noetzel, supra note 1, at 1370; see also Ezeldin & Helw, supra note 29, at 04518005-7 (“The force majeure clause should expressly contain the duty of the nonperforming party to overcome and mitigate the event effects as much as possible.”); Hennings et al., supra note 22, at 04521048-7 (“A party experiencing a force majeure event should not rely solely on a force majeure clause to relieve it from all performance obligations. Rather, it must make reasonable efforts to mitigate and avoid its losses and impacts associated with the event.”).

²²⁶ 5 PHILIP L. BRUNER & PATRICK J. O’CONNOR, JR., BRUNER AND O’CONNER ON CONSTRUCTION LAW § 15:27 (2002).

²²⁷ See, e.g., United States v. Nevada Department of Transportation, No. 16-CV-00453 (D. Nev. Sep. 14, 2016) (requiring Nevada DOT to use “best efforts to anticipate any potential Force Majeure event and best efforts to address the effects of any potential Force Majeure Event (a) as it is occurring and (b) following the potential Force Majeure, such that the delay and any adverse effects of the delay are minimized.”)

²²⁸ See, e.g., Contracting & Material Co. v. City of Chicago, 64 Ill. 2d 21, 349 N.E.2d 389 (1976) (in which work on a contract for the construction of a highway interchange at Chicago’s McCormick Place was delayed for 46 days by an owner’s suspension order, but contractor also delayed itself by failing to work double shifts as required by contract).

²²⁹ McGeehin & Spangler, supra note 4, at 19 (“The contractor must affirmatively show that contractual nonperformance was proximately caused by the force majeure event and not by some other event or occurrence, and that, in spite of its skill, diligence, and good faith, performance became impossible or impracticable.”); Sniffen, supra note 71, at 560-61 (“A court will likely expect the party seeking excuse to establish that it was actually prevented from performing its obligations and that the event causing nonperformance was not reasonably within its control.”).

²³⁰ McGeehin & Spangler, supra note 4, at 20 (“To be entitled to a time extension due to a delay caused by COVID-19, the contractor must prove how COVID-19 caused an impact to a construction activity on the critical path, how that impact caused a delay to critical activities on the critical path, and the duration of the delay.”).

²³¹ Id.; see also Osman & Ataei, supra note 7, at 06521004-4 (suggesting that stay-at-home orders associated with COVID-19 had the opposite impact of delay on highway construction projects, as “the lower traffic volumes mean faster delivery of material and longer lane closures, which leads to an overall efficient execution of construction projects.” Further, “declaring the construction as an essential service—shielding it from the stay-at-home order—benefited the construction industry.”).

²³² Herrman, supra note 6, at 04523008-4 (“For example, if a project was already behind schedule prior to COVID-19, then any potential relief under a delay claim would be limited to the portion of the delay the contractor can prove was caused by COVID-19.”).

²³³ See, e.g., Pennsylvania Std. Spec. § 110.02(c) (“No contract adjustment will be allowed under this clause to the extent that performance would have been suspended or delayed by any other cause . . ..”); see also Buckley & Co., Inc. v. State, 140 356 A.2d 56, 65, N.J. Super. 289, 305 (1975) (limiting relief to New Jersey DOT contractor due to contractor’s concurrent delay).

²³⁴ See, e.g., J. Lee Milligan, Inc. v. CIC Frontier, Inc., 289 Fed. App’x 786 (2008) (rejecting asphalt supplier’s force majeure claim where Texas DOT contractor was able to obtain asphalt from another source, albeit at higher prices); American Rock Salt Company, LLC v. Wilson, 2017 WL 1243132, No. 15-CV-01848 (D. Conn. Jan. 6, 2017) (rejecting salt supplier’s force majeure claim where Connecticut DOT was able to obtain salt from another source, albeit at higher prices); see also Seaboard Lumber Co. v. United States, 41 Fed. Cl. 401, 416 (1998) (“[G]overnment policies which do not prevent performance but merely make performance unprofitable are not the sort of government policies referred to in a typical force majeure clause. Parties cannot invoke force majeure clause protection merely because they are experiencing financial difficulties that are arguably caused by general government policies.”), aff’d, 308 F.3d 1283 (Fed. Cir. 2002); see also United States v. Nevada Department of Transportation, No. 16-CV-00453 (D. Nev. Sep. 14, 2016) (“‘Force Majeure’ does not include NDOT’s financial inability to perform any obligation under this Consent Decree.”).

notwithstanding the supply chain disruption, but for a decision made by the contractor based on its own economic interests, then the state DOT has a strong defense that the delay is not excusable (especially on a fixed-price construction contract where the contractor bears the risk of price increases).²³⁵

b. Contractual Defenses

(1) Notice provisions. A contractor seeking a time extension or price adjustment for a force majeure event such as a pandemic typically has to comply with multiple notice requirements, and failure to provide the contractually required notices is a defense for the state DOT. Although the multiple notice requirements can seem excessive from the contractor’s perspective, they serve the legitimate purpose of allowing the state DOT to investigate the impact of the force majeure event while it is ongoing.²³⁶ Even where the occurrence otherwise satisfies all contractual requirements for force majeure relief, such relief could be denied due to failure to timely provide all prescribed notices to the state DOT.²³⁷ There is a wide variation in notice provisions in state DOT contracts.

A force majeure or excusable delay provision typically requires the contractor to provide written notice to the state DOT within a short time (typically five days to fifteen days) after the onset of the force majeure occurrence, or after the contractor becomes aware (or should become aware) that the occurrence will delay the project.²³⁸

The initial notice of delay is not the only notice that the contractor must provide. Often the contractor is also required to provide another notice within a short time after the delay has concluded.²³⁹ If the contractor intends to request a time extension, the contractor may also be required to provide a preliminary time extension request within a short time after the initial notice of delay (which may be prior to the conclusion of the delay).²⁴⁰ The contractor will also be required to provide a comprehensive time extension request within a fixed time after conclusion of the delay.²⁴¹ Similarly, if the work is suspended by

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²³⁵ See, e.g., Delaware Std. Spec. § 108.7.D (“Non-excusable delays include: . . . Slow material delivery when the material was available in warehouse stock or when delivery was delayed for reasons of late ordering, or financial considerations.”); Minnesota Std. Spec. § 1806.2.C (“Non-excusable delays include . . . Delays due to slow delivery of Materials from the supplier or fabricator when the Material was available in warehouse stock, or when delivery was delayed for reasons of priority, late ordering, financial considerations, or other causes.”).

²³⁶ Han & Kim, supra note 154, at 57; Salami et al., supra note 5, at 1201 (“Recognizing the impacts of Covid-19 on construction projects require exchange of information and discussion with all project partners to monitor, mitigate and review risks–both the unfolding ones and the foreseeable ones.”); see also Texas Std. Spec. Item 4, § 6 (“The intent of the written notice requirement is to provide the Engineer an opportunity to evaluate the request and to keep an accurate account of the actual costs that may arise.”).

²³⁷ Herrman, supra note 6, at 04523008-4 (“As with other types of claims, COVID-related delay and/or disruption claims not asserted within the requisite time frame will likely be deemed waived.”); Salami et al., supra note 5, at 1201 (“In the case of a lawsuit, the court uses the notice as a condition precedent, one that must be met before the claim by the contractor can be valid, even though it depends on the type of claim and the language of the notice clauses. Without giving notices in the intended circumstances, it may defeat the contractor’s claim to, for instance, either completion date extension or additional money.”).

²³⁸ Phelps, supra note 21, at 655 (“Finally, a well-drafted force majeure clause typically has a notice requirement with which the parties must comply when invoking force majeure. For example, the force majeure clause may require that the party provides notice of the force majeure event to a specific individual, within a specific amount of time after the event occurs.”); Sniffen, supra note 71, at 566 (“Sometimes, when stated in a contract, in order to successfully invoke a force majeure clause, the party seeking to be excused from contract obligations must give notice to the other party to the contract that the force majeure clause is being used as a defense to its nonperformance.”); see also Maryland Std. Spec. § GP-8.08(d)(2) (“The Contractor, within 10 days from the beginning of any such delay (unless the procurement officer grants a further period of time before the date of final payment under the Contract), notifies the procurement officer in writing of the causes of delay.”); Massachusetts Std. Spec. § 8.10.C.1 (“No time extension will be granted if a request for a time extension is not filed within 15 calendar days after the start of the delay.”); Oklahoma Std. Spec. § 108.07.D(3) (“Within 7 calendar days of the occurrence of a delay, provide written notification to the Resident Engineer of such a delay, and show that a request for delay consideration will be filed with the Department.”); Utah Std. Spec. § 00777, pt. 1.12.D (“Provide written notification to the Engineer within ten calendar days of the occurrence of an event justifying the request for a time extension, as applicable.”).

²³⁹ Ezeldin & Helw, supra note 29, at 04518005-1 (“Force majeure clauses often require counterparty notification at the beginning of force majeure events and upon their expiration.”); see also Hawaii Std. Spec. § 108.05(B)(3)(b) (“The Contractor shall notify the Engineer in writing when the delay ends.”).

²⁴⁰ See, e.g., Georgia Std. Spec. § 108.07.E (“If the normal progress of the work is delayed for reasons beyond his control, the Contractor shall, within 15 days after the start of such delay, file a written request to the Engineer for an extension of time setting forth therein the reasons and providing complete documentation for the delay which he believes will justify the granting of his request.”); Massachusetts Std. Spec. § 8.10.C.1 (“A documented preliminary TEA supporting the request for a time extension . . . shall be submitted to the Engineer no later than 30 calendar days after the start of the delay.”).

²⁴¹ See, e.g., Florida Std. Spec. § 5-12.2.1 (“[I]f seeking a time extension, the Contractor shall also submit a preliminary request for time extension . . . within ten calendar days after commencement of a delay and a request for Contract Time extension . . . within thirty calendar days after the elimination of the delay.”); Illinois Std. Spec. § 108.08(b) (“Contractor shall not be entitled to any extension of time unless the Contractor notifies the Department in writing within 21 calendar days of the commencement of each such delay; requests an adjustment within 21 calendar days of the conclusion of such delay . . ..”); Massachusetts Std. Spec. § 8.10.C.1 (“A documented final TEA shall be submitted to the Engineer no later than 15 calendar days after the end of the delay.”); Michigan Std. Spec. § 108.09.A (“The Contractor must submit requests for extensions of time for all other delays within 14 days after the last day of the delay.”).

the state DOT (e.g., to prevent disease transmission during a pandemic), the contractor will be required to provide a comprehensive time extension request within a short time after being notified to resume work.²⁴²

As discussed in Section III.A.1.a, the contractor’s primary contractual remedy for a force majeure event is typically a time extension, not monetary compensation. In an effort to be compensated for extra costs arising from a force majeure event, a contractor may seek to characterize the occurrence as a change that would warrant a price adjustment, such as suspension, extra work, or significant change in character of the work. These changes often have different notice requirements than those in the force majeure or excusable delay provision.

As discussed in Section III.A.1.b, if the state DOT has issued an order suspending the work as a result of a pandemic or other force majeure event, then the contractor may be entitled to a price adjustment. However, the contractor may consider its work suspended due to pandemic-related disruptions even if there is no suspension order as provided in the contract, or where there is a stop-work order issued by a government agency not authorized by the contract to suspend the work. In such case, the contractor typically has to provide a notice of suspension within a short period of time (typically five to fifteen days) after the onset of the suspension.²⁴³ Likewise, if the contractor contends that due to the pandemic, the contractor is being required to perform extra work or that there has been a significant change in the character of the work, but there is no written order from the state DOT warranting a change under the terms of the contract, the contractor typically has to provide notice of the change within a short period of time after the contractor knows or should know of the change.²⁴⁴ A state DOT contract may contain different notice periods depending on whether the contractor characterizes the pandemic-related occurrence as a suspension, as extra work, or a significant change to the work.²⁴⁵ It is not uncommon for contractors preoccupied with the onset of a force majeure event such as a pandemic to fail to provide timely written notice of a change.²⁴⁶ Failure to strictly adhere to the notice requirements could be asserted by the state DOT as a waiver of the contractor’s entitlement to a remedy.

Typically, if the contractor contends that the change (however characterized) will result in extra work for which the contractor seeks compensation, the contractor is required to provide notice of the change prior to beginning to perform the extra work.²⁴⁷ Where the contract provides that the contractor is required to provide notice within a fixed period of time after the onset of a change, the contractor’s failure to provide timely notice may limit the contractor’s entitlement to additional compensation for costs incurred more than that fixed period of time prior to the notice.²⁴⁸

In addition to providing early notice of the change, the contractor may be required to provide additional notice of intent

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²⁴² See, e.g., 23 C.F.R. § 635.109(a)(2)(i) (2023) (“If the performance of all or any portion of the work is suspended or delayed by the engineer in writing for an unreasonable period of time . . ., the contractor shall submit to the engineer in writing a request for adjustment within 7 calendar days of receipt of the notice to resume work.”).

²⁴³ See, e.g., Delaware Std. Spec. § 104.2.D.3 (“The Department will make no contract adjustment unless the contractor submitted notice of the suspension . . ..”); North Carolina Std. Spec. § 104-4(A) (“When the Engineer suspends in writing the performance of all or any portion of the work . . . and the Contractor believes that additional compensation for idle equipment or labor is justifiably due as a result of such suspension, the Contractor shall notify the Engineer in writing of his intent to file a claim for additional compensation within 7 calendar days after the Engineer suspends the performance of the work . . ..”).

²⁴⁴ See, e.g., Kansas Std. Spec. § 104.8.a (“After encountering a Contract Change, notify the Field Engineer of the Contract Change verbally without delay and in writing within 10 business days.”); New York Std. Spec. § 104-04 (“Such notice shall be given within 15 calendar days of the time at which the party had knowledge, or should have had knowledge of an event, matter or occasion which results in a significant change in the character of work.”).

²⁴⁵ See, e.g., M.J. Lee Const. Co. v. Oklahoma Transp. Authority, 125 P.3d 1205, 1216 (Okla. 2005) (“The contractor must have given written notice of claim to the engineer as required by the specification allowing additional compensation for 1) delay in work, 2) unreasonable suspension of work, 3) altered or extra work, or 4) change in character of work. A separate notice must have been given within the time allowed in the applicable specification for each basis of the claim, and the claim must explicitly state each basis upon which additional compensation is sought.”).

²⁴⁶ Han & Kim, supra note 154, at 57 (“In the case of a variation claim based on Covid-19, it may not be clear when the works have been varied or when the implementation of a variation (i.e., works requiring a new work method or sequence) resulted in additional time and cost. That is particularly so because, unlike typical variations, it may not be clear to a contractor when a work instruction by the employer or engineer has been made to proceed with the works under the contract by applying a new work method or sequence to it.”).

²⁴⁷ See, e.g., Arkansas Std. Spec. § 105.18(a) (“If, in any case, the Contractor deems that additional compensation is due for work or material not clearly covered in the Contract or not ordered by the Engineer as extra work, . . . the Contractor shall notify the Engineer in writing of intention to make claim for such additional compensation before beginning the work on which the claim is based.”); Florida Std. Spec. § 5-12.2.1 (“Where the Contractor deems that additional compensation or a time extension is due for work or materials not expressly provided for in the Contract or which is by written directive expressly ordered by the Engineer . . ., the Contractor shall submit written notification to the Engineer of the intention to make a claim for additional compensation before beginning the work on which the claim is based . . ..”).

²⁴⁸ See, e.g., Massachusetts Std. Spec. § 8.05 (“No claims shall be allowed . . . for any cost incurred more than two weeks before the Contractor shall have notified the Department in writing of their claim due to the Department›s failure to act.”); New York Std. Spec. § 104-04 (“The Department will have no liability and no adjustment will be made for any damages which accrued more than 15 calendar days prior to the filing of such a notice with the Engineer.”); South Carolina Std. Spec. § 105.16.2 (“The Department has no liability for any delay damages that accrued more than 15 days before the filing of such notice.”); Utah Std. Spec. § 00777, pt. 1.14.D (“Failure to provide notification within ten calendar days of when the change, condition, or event is noticed may limit any contract adjustment, when warranted, to those costs or impacts incurred after notification is received by the Engineer.”).

to make a claim (for time and/or compensation) within a fixed period of time after the onset of the change (or after the initial notice of the change).²⁴⁹ After providing the notice of intent to make a claim, the contractor will have to provide a detailed claim (or notice of claim) within a fixed period of time after the conclusion of the change,²⁵⁰ providing a detailed itemization of both the additional time and compensation to which the contractor is entitled.

If the state DOT or its engineer denies a request for time and/or compensation (or approves a time extension or price adjustment that is less than requested), the contractor is typically required to provide another notice within a fixed period of time after the denial, to notify the state DOT that the contractor wants to appeal the official decision, or pursue a claim in a more formal manner. The contractor will also have a fixed period of time within which to assert a claim for additional compensation if the state DOT elects to terminate the contract for its convenience.²⁵¹

Sometimes a contractor may believe that it has provided notice, but the notice provided does not comply with the contract requirements, allowing the state DOT to maintain its notice defense. The contract may identify an individual who is authorized to receive notices on behalf of the state DOT,²⁵² and may prescribe a manner or method for such notice (e.g., certified mail). In the absence of such detailed prescriptions, the notice still typically must be in writing, and must provide enough specificity (e.g., actually provide notice of delay or change) to satisfy the contractor’s contractual notice requirement.²⁵³

Failure to provide all required notices can constitute a waiver of the contractor’s claim for a time extension and/or extra compensation.²⁵⁴ Even if the contractor would otherwise be entitled to a time extension or extra compensation, failure to provide timely notice per the contract requirements provides a strong defense to the state DOT.

However, the waiver may not be absolute. There is an implied duty of good faith and fair dealing that extends to all contracting parties, including the state DOT. If the contractor failed to strictly comply with all notice requirements, but substantially complied with multiple notice requirements such that the state DOT was not prejudiced by the late notice, then it could be bad faith for the state DOT to deny an otherwise good claim on the basis of notice.²⁵⁵ However, it can be difficult for a contractor to prove that the state DOT was not acting in good faith when all notice requirements are not satisfied.²⁵⁶ In the absence of bad faith, some jurisdictions will not allow a state DOT to maintain

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²⁴⁹ See, e.g., Alaska Std. Spec. § 108-1.06.4.d (The Contractor must give written notice of intent to claim no later than 20 days after the event giving rise to the delay, suspension, or interruption . . ..); Oklahoma Std. Spec. § 104.06.A (“Immediately notify the Resident Engineer verbally of the alleged differing site condition, change, or extra work and submit the following information to the Resident Engineer in a written Notice of Intent to File Claim within 7 calendar days of encountering the alleged change or action . . ..”); Utah Std. Spec. § 00777, pt. 1.13.C.1 (“Provide the [request for change order] within ten calendar days of when the change, condition, or event resulting in the request for a change order for additional compensation and time is discovered.”).

²⁵⁰ See, e.g., Hawaii Std. Spec. § 108.10(E) (“Any claims for such compensation shall be filed in writing with the Engineer within 30 days after the date of the order to resume work or the claim will not be considered.”); Massachusetts Std. Spec. § 8.05 (“The contractor shall submit in writing not later than 30 days after the termination of such suspension, delay or interruption the amount of the claim and breakdown of how the amount was computed . . ..”); North Carolina Std. Spec. § 104-8(B) (“If the Contractor chooses to pursue the claim after the disputed work is complete, he shall submit a written claim to the Engineer for an adjustment in compensation based upon his cost records within 120 calendar days after completion of the disputed work.”); Oklahoma Std. Spec. § 105.18 (“Within 90 days after completion of the work for which extra compensation or time has been requested, submit to the Resident Engineer specific cost information justifying the request for additional compensation.”).

²⁵¹ See, e.g., Michigan Std. Spec. § 108.12 (“The Contractor must submit any claim for additional compensation within 60 days after the effective termination date or as otherwise authorized by the Department.”); South Carolina Std. Spec. § 105.14 (“After receipt of Notice of Termination for Convenience from the Department, submit, within 60 days of the effective termination date, a claim for additional damages or costs not covered above or elsewhere in these specifications.”); Washington Std. Spec. § 1-08.10(3) (“The request shall be submitted promptly but in no event later than 90 calendar days from the effective date of termination.”); Wisconsin Std. Spec. § 108.13 (“Within 60 calendar days of the effective termination date, submit claims for additional costs actually incurred.”).

²⁵² Kelli E. Goss, L. Tyrone Holt & James F. Butler III, Claims and Disputes Against a State or Local Government Owner: What Construction Attorneys Should Know, 40 CONSTRUCTION LAWYER, 1, at 15, 16 (Winter 2020) (“The contractor should also ensure that the claim is sent to the appropriate person listed in the contract, statute, or regulation.”).

²⁵³ See, e.g., Cape & Sons Co. v. State of Illinois, 52 Ill. Ct. Cl. 322 (2000) (“As far as a written request for an extension of time is concerned, none were made by Claimant during the most severe periods of the claimed weather impacts which now form the basis of this count of the claim. Several times the contractor indicates that it believed it had justification for an extension to the completion date, but it did not present a written request until . . . five days prior to completion of all work subject to the incentive.”).

²⁵⁴ See, e.g., 23 C.F.R. § 635.109(a)(2)(iii) (2023) (“No contract adjustment will be allowed unless the contractor has submitted the request for adjustment within the time prescribed.”).

²⁵⁵ Goss et al., supra note 252, at 16 (“In a number of jurisdictions—following the lead of the U.S. government—courts have found sufficient notice despite a lack of strict adherence to the notice requirements. . . . [T]he key consideration where there is a lack of strict adherence to notice requirements is often whether the government owner was prejudiced by the lack of strict adherence.”).

²⁵⁶ See, e.g., Department of Transp. v. Fru-Con Const. Corp., 426 S.E.2d 905, 908, 206 Ga. App. 821, 824 (1992) (“DOT’s mere knowledge that the graders had not timely completed their work is certainly not evidence that DOT waived the requirement that appellee, in turn, apply for an extension because it would need extra time to complete its own work. Indeed, in the absence of such a request by appellee, DOT was entitled to presume that appellee did not consider the delay in the grading work to be a ground for extending the time for completion of the bridges. If DOT’s mere knowledge were sufficient, the provision requiring timely written request for an extension of time would be meaningless and superfluous.”).

its notice defense where the state DOT had actual notice of the force majeure circumstances giving rise to the claim.²⁵⁷

(2) No-damages-for-delay provisions. It is often said that construction contractors, including state DOT contractors, are barred from recovering additional monetary compensation for project delays, by “no-damages-for-delay” provisions in the construction contract.²⁵⁸ Such provisions are often inserted in construction contracts by the party with superior bargaining power. Historically, state DOT contracts often contained no-damages-for-delay provisions that barred the contractor from seeking compensation for duration-related expenses due to delays caused by the state DOT, such as when the state DOT suspended the work for its own reasons (e.g., inadequate funding) that were not the contractor’s fault.²⁵⁹

However, over time, courts declined to strictly enforce the no-damages-for-delay provision in favor of the state DOT when the state DOT was the cause of the delay, often treating the state DOT’s delay as a contract breach that made it inequitable to strictly enforce the contract language in favor of the state DOT.²⁶⁰ State legislatures also recognized the inherent unfairness of a true no-damages-for-delay clause, and enacted legislation barring them in public contracts including state DOT contracts.²⁶¹ As a result, state DOT contracts today rarely contain true no-damages-for-delay clauses that would prohibit a contractor from recovering compensation for delays within the state DOT’s control.

Instead, the force majeure or excusable delay provision in many state DOT contracts will recite that a time extension is the contractor’s sole or exclusive remedy for delays due to a force majeure event such as a pandemic. State DOTs will primarily rely on this language to deny additional monetary compensation in response to a contractor’s request for a contract adjustment due to unforeseeable delays outside the contractor’s control.²⁶² This is not a true no-damages-for-delay provision, because it does not bar monetary recovery for delays within the control of the state DOT. Further, the state DOT should be aware that under other language in the contract, actions taken by the state DOT could transform the excusable delay into a compensable delay. For example, if the state DOT elects to suspend the project work as a result of force majeure circumstances, the contract typically provides that the contractor could be entitled to monetary compensation for that delay.²⁶³ Likewise, intentional conduct by the state DOT that delays the contractor (such as requiring the contractor to adhere so special pandemic-related work protocols) could defeat the state DOT’s defense that the contractor’s remedy is limited to a time extension under the force majeure or excusable delay provision.²⁶⁴

Unforeseeable delays caused by third parties acting outside the control of both the contractor and the state DOT (such as utility companies) will generally entitle the contractor to only a time extension, and not additional compensation, under the force majeure or excusable delay provision. However, where the “third party” is actually an agent of the state DOT (such as its engineering consultant or a separate contractor performing part of the project work), the excusable delay could transform into a compensable one.²⁶⁵ Thus, if the prime contractor’s work is delayed because the state DOT’s engineering consultant or separate contractor stops working due to a pandemic, the prime contractor could be entitled to additional monetary compensation from the state DOT for the pandemic-related delay.

(3) Waiver of Consequential Damages. If the contractor is entitled to additional compensation for delays or extra work arising out of a pandemic or other force majeure circumstance (e.g., due to an action taken by the state DOT such as suspending or terminating the work due to the pandemic), the state DOT may be able to limit the compensation based on a waiver of consequential damages contained within most state DOT construction contracts.

A contractor’s consequential damages are those expenses that do not result directly and immediately from the action of the project owner, but from the consequences or results of such action.²⁶⁶ Absent the waiver, the contractor would generally be

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²⁵⁷ See, e.g., APAC-Georgia, Inc. v. Department of Transp., 472 S.E.2d 97, 99-100, 221 Ga. App. 604, 606 (1996) (“Notice requirements must be reasonably construed. The key issue is whether DOT had actual notice of the delays for which APAC seeks damages.” (internal citations omitted)).

²⁵⁸ See, e.g., Osman & Ataei, supra note 7, at 06521004-3 (characterizing provisions in the Illinois Std. Spec. as no-damages-for-delay provisions).

²⁵⁹ See, e.g., State Highway Admin. v. Greiner Engineering Sciences, Inc., 577 A.2d 363, 83 Md. App. 621 (1990) (denying recovery to highway contractor on project suspended by state DOT, due to no-damages-for-delay provision); Wes-Julian Const. Corp. v. Com., 223 N.E.2d 72, 351 Mass. 588 (1967) (denying recovery to highway contractor on project suspended by state DOT, due to no-damages-for-delay provision).

²⁶⁰ See, e.g., In re Roberts Const. Co., 111 N.W.2d 767, 172 Neb. 819 (1961) (awarding damages to highway contractor notwithstanding state DOT’s reliance on a no-damages-for-delay provision).

²⁶¹ See, e.g., ARIZ. REV. STAT. § 34-221.F (2023); COLO. REV. STAT. § 24-91-103.5 (2023); LA. STAT. ANN. § 38:2216.H (2023); MO. REV. STAT. § 8.962 (2023); N.C. GEN. STAT. § 143-134.3 (2023).

²⁶² See, e.g., Department of Transp. v. Fru-Con Const. Corp., 426 S.E.2d 905, 907, 206 Ga. App. 821, 823 (1992) (holding that Georgia DOT was not responsible for delay damages even if a time extension was warranted under force majeure provision).

²⁶³ 23 C.F.R. § 635.109(a)(2)(i) (2023).

²⁶⁴ Mississippi Transp. Com’n v. Ronald Adams Contractor, Inc., 753 So.2d 1077 (Miss. 2000) (affirming denial of summary judgment for Mississippi highway department on basis of no-damages-for-delay provisions where contractor alleged delays caused by department); see also Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98, 103 (Tex. 2014) (“[A] no-delay-damages provision could not be enforced if the Port’s intentional misconduct caused the delay.”).

²⁶⁵ See, e.g., Department of Transp. v. APAC-Georgia, Inc., 456 S.E.2d 668, 670, 217 Ga. App. 103, 105 (1995) (holding that Georgia DOT can be responsible for delay damages to its prime contractor due to failure to coordinate other prime contractors); Eastern Contracting v. United States, 97 Ct. Cl. 341, 355 (1942) (suggesting that highway contractor could be compensated for delays due to the government’s other prime contractor, notwithstanding no-damages-for-delay provision).

²⁶⁶ BLACK’S LAW DICTIONARY (11th ed. 2019); see also Greenway Equip., Inc. v. Johnson, 602 S.W.3d 142, 150 (Ark. App. 2020).

entitled to monetary damages that would place the contractor in the same position as if the contract had not been breached by the project owner. That could include lost profits, such as lost profit on the work not performed where a project is terminated, or lost profit on other opportunities where a project is suspended.

Typically, the state DOT contract will expressly provide that the contractor is not entitled to consequential damages. The contract will often identify categories of consequential damages to which the contractor is not entitled, including lost profits, interest payments, decreased bonding capacity, attorneys’ fees, and other indirect expenses.²⁶⁷ Unlike a no-damages-for-delay provision, a waiver of consequential damages is generally enforceable, and is effective at limiting the liability of a state DOT to its contractor for extra costs arising out of a pandemic or other force majeure circumstance.

B. Transportation Agency Use of Force Majeure

Well prior to the COVID-19 pandemic, construction contracts have long included administrative tools and procedures for the benefit of the project owner in the event of a force majeure occurrence,²⁶⁸ although there is very little record of such provisions being invoked by state DOTs as a result of a pandemic.

1. Contract Termination

As discussed in Section II.A, the basic common law remedy for an act of God or force majeure occurrence is that both contracting parties are excused from further performance.²⁶⁹ Effectively, this is a termination of the contract, not due to the fault of either party. However, the force majeure (or excusable delay) provision in most construction contracts typically provides a remedy only to the contractor. It rarely expressly provides that the project owner can terminate the contract in the event of an act of God or force majeure occurrence.²⁷⁰ In fact, the force majeure provision often provides protection for the contractor against being terminated for default by the project owner,²⁷¹ as it is not the contractor’s fault if the contractor cannot perform due to circumstances such as a pandemic.

Instead, public construction contracts typically provide a broad right of the public owner to terminate the contract, without the fault of the contractor, and without the need for a force majeure occurrence.²⁷² This is often described as termination for convenience (as opposed to termination for default).²⁷³ Consistent with that terminology, the right of a government agency to terminate a contract for its convenience is broader than and not limited to circumstances constituting acts of God and force majeure, such as pandemics. Stated differently, a public owner has a broader right to terminate a construction contract than would typically be available under common law doctrines such as impossibility, commercial impracticability, or frustration of purpose.

In federal contracts, the federal government has an absolute right to terminate a contract, in whole or in part, any time that the government determines that termination is in the federal government’s interest.²⁷⁴ This right to terminate for convenience arises from the federal government’s sovereign immunity.²⁷⁵ Whereas a contracting party would ordinarily be in breach of contract if it terminated performance without the fault of the other party, the federal government is generally immune from suit for breach of contract.

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²⁶⁷ See, e.g., Illinois Std. Spec. § 109.09(f ) (“Adjustments in costs will not be made for interest charges, loss of anticipated profit, undocumented loss of efficiency, prorata home office overhead, unabsorbed overhead and lost opportunity, preparation of claim expenses and other consequential indirect costs regardless of method of calculation.”).

²⁶⁸ Osman & Ataei, supra note 7, at 06521004-1 (“The outbreak of COVID-19 has touched almost every facet of the construction industry: specifically issues such as contract administration and in particular the project notices for delay, scheduling and schedule recovery; project suspension, termination, and reinstatement; workplace safety compliance; work force management; material, subcontractor, and supply chain delays and impacts; risk management and insurance; claims avoidance and/or claims management; and the disputes resolution practice . . ..”)

²⁶⁹ Ezeldin & Helw, supra note 29, at 04518005-10 (“A force majeure event may result in either partial or total work suspension. It may also result in contract termination if it is clear that fulfilling the contractual obligations becomes impossible or if the duration of the event extends for a long period. Neither party should be held responsible or liable for delay or failure to perform or fulfill any of its obligations under the contract.”).

²⁷⁰ Hennings et al., supra note 22, at 04521048-2 (“A key difference between a force majeure clause and common law principles is that a force majeure clause typically allows for temporary suspension of contractual obligations, while the common law principles allow for permanent termination.”).

²⁷¹ Noetzel, supra note 1, at 1354 (“The standard excusable delay provision . . . keeps the government from terminating the contract for default or from asserting a breach of contract claim”).

²⁷² O’Connor, supra note 43, at 11 (“As a general rule, owners seek to deal with these contingencies [terrorism and pandemics] through termination for convenience clauses.”); Ezeldin & Helw, supra note 29, at 04518005-7 (“The employer has the right to terminate the contract for convenience upon the occurrence of a force majeure event that causes the project to incur additional costs.”); Silberman, supra note 20, at 16 (“State and local agency construction contracts typically include termination provisions. . . . Many also provide that the agency may terminate without cause (often referred to as a ‘termination for convenience’).”).

²⁷³ See, e.g., New Jersey Std. Spec. § 108.15.01 (“The Department has the right to, by written order, terminate the Contract for convenience.”); Ohio Std. Spec. § 108.09 (“Termination of the Contract for Convenience of the Department. The Director may terminate the Contract at any time for the convenience of the Department.”); Tennessee Std. Spec. § 108.10.C (“The Department may terminate the Contract for convenience at any time after the Department has made a determination to award a contract.”).

²⁷⁴ 48 C.F.R. § 52.249-2(a) (2023) (“The Government may terminate performance of work under this contract in whole or, from time to time, in part if the Contracting Officer determines that a termination is in the Government’s interest.”).

²⁷⁵ Noetzel, supra note 1, at 1376 (“‘[I]ncidental to its sovereign immunity,’ the U.S. federal government enjoys a broad unilateral termination right for convenience under the FAR.” (quoting Lauren Olmsted, The Amazon-Ization of Federal Procurement: Using the Uniform Commercial Code to Moderate an Inevitable Innovation, 48 PUB. CONT. L.J. 101, 119 (2018))).

Likewise, state DOT construction contracts typically enunciate a broad right of the state DOT to terminate the contract for any reason deemed to be in the best interests of either the state DOT²⁷⁶ or the general public.²⁷⁷ In addition to the broad general right to terminate the contract for the state DOT’s convenience, state DOT construction contracts also typically enumerate specific circumstances under which the state DOT can terminate the contract for convenience. One such specific circumstance is a governmental order, such as an executive order²⁷⁸ or a court order²⁷⁹ stopping the work (which may very well result from a

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²⁷⁶ See, e.g., Alaska Std. Spec. § 108-1.09.1 (“The Contracting Officer may terminate the Contract in whole or in part due to: . . . Any reason determined by the Contracting Officer to be in the best interest of the Department.”); Colorado Std. Spec. § 108.11(a) (“The Department may terminate work under the Contract in whole or in part if the Engineer determines that termination is in the Department’s best interest.”); Florida Std. Spec. § 8-9.2 (“The Department may terminate the entire Contract or any portion thereof, if the Secretary determines that a termination is in the Department’s interest.”); Idaho Std. Spec. § 108.10.A (“The Department may terminate the contract in whole or in part for: . . . Conditions determined to be in the Department’s best interest.”); Maine Std. Spec. § 112.2.2 (“The Department may terminate this Contract for convenience or for any reason that is in the best interest of the Department. Terminations caused without fault of or for reasons beyond the control of the Contractor are Terminations for Convenience.”); Michigan Std. Spec. § 108.12 (“If the Department determines that termination is in the Department’s best interest, the Department may terminate the contract for convenience or any portion of the contract.”); Missouri Std. Spec. § 108.11 (“The Commission may terminate the entire contract, or any portion thereof, if the engineer determines that a termination is in the Commission›s best interest.”); Montana Std. Spec. § 108.10.1 (“The Department may terminate the contract in whole or part, whenever: . . . It is determined that termination is in the best interests of the Department.”); Mississippi Std. Spec. § 108.09 (“The Department may, by written notice, with the approval of the FHWA where applicable, terminate any Contract, or any portion thereof for the Department’s convenience, when it is determined that a termination is in the best interest of the Department.”); New Hampshire Std. Spec. § 108.11 (“The Department may, with the concurrence of the Governor and Executive Council, and with the approval of the FHWA where applicable, terminate the entire Contract or any portion thereof, if the Engineer determines that a termination is in the Department’s interest.”); New York Std. Spec. § 105-07.B (“Termination for Convenience. The Commissioner may, by written notice, terminate the contract or any portion thereof if he or she determines that termination would be in the best interests of the Department or of the State of New York.”); Vermont Std. Spec. § 108.14(A) (“The Agency may, by written order to the Contractor, terminate the Contract or any portion thereof when such termination would be in the best interest of the Agency.”); Washington Std. Spec. § 1-08.10(2) (“The Engineer may terminate the Contract in whole, or from time to time in part, whenever: . . . The Engineer determines that such termination is in the best interests of the Contracting Agency.”); West Virginia Std. Spec. § 108.9 (“The Division may terminate the entire Contract or any portion thereof, if the Engineer determines that a termination is in the Division’s interest.”).

²⁷⁷ See, e.g., Alabama Std. Spec. § 108.14(b) (“Also, should the State determine that further prosecution of the work on a project will not be in the best interest of the public, the Director may, by written order, eliminate or delete any or all remaining items of work on a contract.”); Arkansas Std. Spec. § 108.08 (“The Department may, by written order, terminate the Contract or any portion thereof after determining that for reasons beyond either Department or Contractor control the Contractor is prevented from proceeding with or completing the work as originally contracted for, and that termination would be in the public interest.”); Illinois Std. Spec. § 108.12 (“Termination for Public Convenience. The Department may, by written order, terminate the contract or any portion thereof after determining that for reasons beyond either Department or Contractor control, the Contractor is prevented from proceeding with or completing the work as originally contracted for, and that termination would, therefore, be in the public interest.”); Indiana Std. Spec. § 108.11 (“The Department may, by written order, terminate the contract or a portion thereof only after a meeting with the Contractor, and after determining that termination would be in the public interest.”); Iowa Std. Spec. § 1109.04.A (“The Contracting Authority will have the right to cancel any or all items from the contract . . . when the Contracting Authority determines that cancellation is in the public or national interest.”); Massachusetts Std. Spec. § 8.13 (“If the Department determines that it is in the public interest to do so, it may notify the Contractor to discontinue all work, or any part thereof.”); North Carolina Std. Spec. § 108-13(B) (“The Contract will be terminated under this article if: . . . The Department determines that a termination of the contract is in the best public interest.”); Wyoming Std. Spec. § 108.10 (“The department may at any time, by written notice, terminate all or part of the contract when the department determines it in the public’s interest to do so.”).

²⁷⁸ See, e.g., Alaska Std. Spec. § 108-1.09.1 (“The Contracting Officer may terminate the Contract in whole or in part due to: . . . Executive Orders of the President of the United States or the Governor of the State of Alaska with respect to . . . any disaster declaration.”); Idaho Std. Spec. § 108.10.A (“The Department may terminate the contract in whole or in part for: . . . Executive Orders of the President of the United States or the Governor of Idaho.”); Kansas Std. Spec. § 108.11.a (“The Secretary may defer a contract or cancel a contract for one or more of the following events: . . . Executive orders of the President of the United States of America or Governor of Kansas[ or] National emergencies . . ..”); Minnesota Std. Spec. § 1809 (“The Department may terminate the Contract, or any portion of the Contract, for any of the following reasons: . . . Limitations imposed by law, rule, regulation, or order of the local, State, or Federal government . . ..”); New Mexico Std. Spec. § 108.10 (“Reasons for termination may include, but are not limited to, the following: . . . Executive orders of the President of the United States; . . . Executive orders of the Governor of the State of New Mexico . . ..); Texas Std. Spec. Item 8, § 8 (“The Department may terminate the Contract in whole or in part whenever: . . . the Contractor is prevented from proceeding with the work as a direct result of an executive order of the President of the United States or the Governor of the State; . . . the Contractor is prevented from proceeding with the work due to a national emergency, or when the work to be performed under the Contract is stopped, directly or indirectly, because of the freezing or diversion of materials, equipment, or labor as the result of an order or a proclamation of the President of the United States; . . . the Contractor is prevented from proceeding with the work due to an order of any federal authority . . ..”).

²⁷⁹ See, e.g., Alaska Std. Spec. § 108-1.09.1 (“The Contracting Officer may terminate the Contract in whole or in part due to: . . . Restraining orders or injunctions by a court of competent jurisdiction affecting prosecution of the work based on acts or omissions of persons or agencies other than the Contractor.”); Georgia Std. Spec. § 109.09.A (“The Department may, by written notice, terminate the Contract or a portion thereof for the Department’s convenience when the Department determines that the termination is in the State’s best interest, or when the Contractor is prevented from proceeding with the Contract as a direct result of one of the following conditions: . . . An injunction is imposed by a court of competent jurisdiction which stops the Contractor from proceeding with the Work and causes a delay of such duration that it is in the public interest to terminate the Contract and the Contractor was not at fault in creating the condition which led to

pandemic). State DOT contracts also often expressly provide that the state DOT may terminate the contract in the event of funding shortages,²⁸⁰ labor shortages, and material shortages²⁸¹ (which, again, may be expected in the event of a pandemic). State DOT contracts rarely expressly provide for termination in the event of a pandemic, although some do generally provide for termination under force majeure circumstances.²⁸² A state DOT

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the court’s injunction.”); Idaho Std. Spec. § 108.10.A (“The Department may terminate the contract in whole or in part for: . . . Court restraining orders based on acts or omissions of persons or agencies other than the Contractor.”); Kansas Std. Spec. § 108.11.a (“The Secretary may defer a contract or cancel a contract for one or more of the following events: . . . Injunctions (temporary restraining orders, preliminary injunctions, permanent injunctions)[ or] Other court orders . . ..”); Montana Std. Spec. § 108.10.1 (“The Department may terminate the contract in whole or part, whenever: . . . Work cannot proceed because of a preliminary, special, or permanent restraining order of a court of competent jurisdiction where the issuance of such restraining order is primarily caused by acts or omissions of persons or agencies other than the Contractor.”); New York Std. Spec. § 105-07.B (“Reasons for termination may include, but are not limited to . . . restraining orders or injunctions obtained by third-party citizen action resulting from national or local laws or regulations, or where the issuance of such order or injunction is primarily caused by acts or omissions of persons or agencies other than the Contractor . . ..”); North Carolina Std. Spec. § 108-13(A) (“The Department will consider termination of the contract upon written notification by the Contractor that any of the following circumstances exist. . . . If the Contractor is prevented from proceeding with the work required by the contract as a direct result of a restraining order, or other court order, or by reason of a permit requirement, and the Contractor will be unduly delayed in completing the project by reason of such order or requirement . . ..”); Tennessee Std. Spec. § 108.10.B (“Such reasons for termination may include, but need not necessarily be limited to, one of the following: . . . An injunction is imposed by a court of competent jurisdiction that stops the Contractor from proceeding with the Work and causes a delay of such duration that it is in the public interest to terminate the Contract and the Contractor was not at fault in creating the condition that led to the court’s injunction.”); Texas Std. Spec. Item 8, § 8 (“The Department may terminate the Contract in whole or in part whenever: . . . the Contractor is prevented from proceeding with the work by reason of a preliminary, special, or permanent restraining court order where the issuance of the restraining order is primarily caused by acts or omissions of persons or agencies other than the Contractor . . ..”); Washington Std. Spec. § 1-08.10(2) (“The Engineer may terminate the Contract in whole, or from time to time in part, whenever: . . . The Contractor is prevented from proceeding with the Work by reason of a preliminary, special, or permanent restraining order of a court of competent jurisdiction where the issuance of such restraining order is primarily caused by acts or omissions of persons or agencies other than the Contractor.”).

²⁸⁰ See, e.g., Kansas Std. Spec. § 108.11.a (“The Secretary may defer a contract or cancel a contract for one or more of the following events: . . . Insufficient appropriations to continue the Contract or make payments for charges under the Contract . . ..”); Minnesota Std. Spec. § 1809 (“The Department may terminate the Contract, or any portion of the Contract, for any of the following reasons: . . . Lack of funding or a funding reallocation that prevents the completion of the Work as planned . . ..”); Mississippi Std. Spec. § 108.09 (“Reasons for termination may include, but are not limited to: . . . Insufficient funds by the Department due to extenuating circumstances . . ..”); North Dakota Std. Spec. § 108.09 (“Reasons for termination include the following: . . . Changes in funding availability at either the State or federal level . . ..”); South Carolina Std. Spec. § 105.14 (“Such reasons for termination include, but need not be limited to, the following: . . . Insufficient funds by the Department due to extenuating circumstances . . ..”).

²⁸¹ See, e.g., Alabama Std. Spec. § 108.14(b) (“Should the Department find that the Contractor is unable to complete his contract work due to the inability to obtain specified materials or satisfactory substitutes therefor or labor, because of laws, rules or regulations placed into effect or the inability of industry to produce specified materials within a reasonable time; the Director may, by written notice, relieve the Contractor from that portion of the contract which cannot be performed.”); Arkansas Std. Spec. § 108.08 (“Reasons for termination may include, but need not be necessarily limited to: . . . national emergency that creates a serious shortage of materials . . ..”); Georgia Std. Spec. § 109.09.A (“The Department may, by written notice, terminate the Contract or a portion thereof for the Department’s convenience when the Department determines that the termination is in the State’s best interest, or when the Contractor is prevented from proceeding with the Contract as a direct result of one of the following conditions: . . . The Engineer and Contractor each make a determination, that, due to a shortage of critical materials required to complete the Work which is caused by allocation of these materials to work of a higher priority by the Federal Government or any agency thereof, it will be impossible to obtain these materials within a practical time limit and that it would be in the public interest to discontinue construction.”); Illinois Std. Spec. § 108.12 (“Such reasons for termination may include, but need not be necessarily limited to, . . . national emergency which creates a serious shortage of materials . . ..”); Indiana Std. Spec. § 108.11 (“Reasons for termination will include, but will not be limited to, the following: . . . national emergency which creates a serious shortage of materials . . ..”); Kentucky Std. Spec. § 108.11 (“When a national emergency exists, . . . by reason of orders of the U.S. Government or its duly authorized agencies; . . . and such emergency, upon a finding by the Department, creates a shortage of materials, labor, or equipment that prevents the Contractor from proceeding with his contract, the Department and the Contractor may defer such construction in whole or in part, or the Department may terminate such contract, or any part thereof.”); Louisiana Std. Spec. § 108.11 (“Such reasons for termination may include, but will not be limited to, executive orders of the President relating to prosecution of war or national defense, national emergency which creates a serious shortage of materials . . ..”); Minnesota Std. Spec. § 1809 (“The Department may terminate the Contract, or any portion of the Contract, for any of the following reasons: . . . Labor or Material shortage . . ..); New Mexico Std. Spec. § 108.10 (“Reasons for termination may include, but are not limited to, the following: . . . An emergency that creates a serious shortage of Materials, as deemed by the Secretary . . ..”); North Dakota Std. Spec. § 108.09 (“Reasons for termination include the following: . . . A national emergency that creates a serious shortage of materials, labor, equipment, or funds that will continue for an unreasonable length of time . . ..”); South Carolina Std. Spec. § 105.14 (“Such reasons for termination include, but need not be limited to, the following: . . . National Emergency that creates a serious shortage of materials . . ..”); Tennessee Std. Spec. § 108.10.B (“Such reasons for termination may include, but need not necessarily be limited to, one of the following: . . . The Engineer and Contractor each make a determination that, due to a shortage of critical materials required to complete the Work caused by allocation of these materials to work of a higher priority by the Federal Government or any agency thereof, it will be impossible to obtain these materials within a practical time limit and that it would be in the public interest to discontinue construction.”).

²⁸² See, e.g., North Dakota Std. Spec. § 108.09 (“Reasons for termination include the following: . . . An act of God . . ..”); Virginia Std. Spec. § 108.08(a) (“The Department may terminate the Contract or any portion thereof because of any of the following conditions: . . . National emergency.”); see also Iowa Std. Spec. § 1109.04.A (“The Contracting Authority will have the right to cancel any or all items from the contract when unforeseen circumstances, unanticipated design changes, or

could almost always find contractual authority (either under the specifically enumerated causes, or the general “best interests” clause, of the termination for convenience provision) to terminate a contract due to a pandemic.

When a state DOT terminates a contract for its convenience, the contractor is obligated to stop performing the contract work and stop incurring costs (e.g., not enter into agreements with subcontractors or suppliers to furnish additional labor or materials in furtherance of the contract work).²⁸³ As discussed in greater detail in Section III.B.5 below, the contractor is generally entitled to be paid by the state DOT for the contractor’s costs incurred prior to and as a result of the termination.²⁸⁴ However, unlike common law remedies for “efficient breach,” the state DOT is typically not obligated to award the contractor the full “benefit of its bargain”²⁸⁵—the state DOT contractor is not entitled to its anticipated profits on the work not performed.²⁸⁶

Standard construction industry contract forms, following the lead of government contracts, typically include some version of a termination for convenience clause.²⁸⁷ Contract forms drafted by one party often provide that in the event of termination for convenience, the non-drafting party is only entitled to is actual costs incurred, not anticipated profits on the work not performed. However, such an overly broad right to termination for convenience in a private contract runs the risk of the contract being deemed illusory or otherwise unenforceable, where there are no adverse consequences to the terminating party.²⁸⁸ A state DOT, on the other hand, has a generally enforceable right to terminate a contract for its convenience, without becoming responsible to fully compensate the contractor for the benefit of its bargain. A state DOT’s termination for convenience will almost always be upheld, except in cases where the state DOT did not act in good faith.²⁸⁹ For example, if a state DOT terminates a contract ostensibly due to a pandemic, but the pandemic does not materially affect the contractor’s ability to perform,

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other reasons beyond the control of the Contractor prevent or unreasonably delay completion of the contract or certain items of the contract . . ..”); Kentucky Std. Spec. § 108.12 (“When unexpected state, federal , or local conditions of extraordinary significance occur which are beyond the control of both the Contractor and the Department, causing the Department to determine that termination of a contract will be in the public interest, the Department will terminate all or selected portions of the work in the Contract that remain incomplete.”); Louisiana Std. Spec. § 108.11 (“The Department may, by written notice, terminate the contract or any portion thereof when, for reasons beyond either the Department’s or contractor’s control, the contractor is prevented from proceeding or completing the work as originally contracted, or when termination would be in the public interest.”); New Mexico Std. Spec. § 108.10 (“The Department may terminate, by written notice and order, all or part of the Contract, after determining the following: . . . That the Contractor is prevented from proceeding with or completing the Work as originally contracted for reasons beyond the control of the Contractor . . ..”); Tennessee Std. Spec. § 108.10.B (“The Department may, by a written Contract Termination Notice, with the approval of the FHWA where applicable, terminate any contract or a portion thereof after determining that for reasons beyond the control of the Contractor, the work contracted for cannot be completed.”).

²⁸³ Silberman, supra note 20, at 16-17 (“The most important among these obligations are to stop work and notify all subcontractors that the agency has terminated the prime contract and to instruct the subcontractors to stop work, protect and preserve work-in-progress, terminate existing lower-tier subcontracts and supply orders, and not enter into any new subcontracts or orders for the project.”).

²⁸⁴ See, e.g., Delaware Std. Spec. § 108.11.A (“In the event that termination occurs, without fault and for reasons beyond the contractor’s control, the Department will pay for all completed work at the contract price as of the termination date.”); New Jersey Std. Spec. § 108.15.01 (“When the Department orders termination for convenience, the Department will make payment for the Items completed as of the date of termination at the Contract price. The Department will make payment for the work in the order of termination, including work that was not in the Contract.”); Virginia Std. Spec. § 108.08(b)2 (“Within 30 days after the Contractor receives the Department’s notice of termination for convenience, or within such time as the Contractor and the Engineer mutually agree, the Contractor shall submit a request for payment due for work performed through the effective date of termination and as a result of the termination for convenience.”); Wyoming Std. Spec. § 108.10 (“When all or part of the contract is terminated, the department will pay the pay item price for the actual number of units completed or will compensate the contractor for actual costs incurred for work not started or completed.”).

²⁸⁵ Jeffrey R. Cagle, Craig D. Cherry & Melanie I. Kemp, The Classification of General and Special Damages for Pleading Purposes in Texas, 51 BAYLOR L. REV. 629, 663–64 (1999) (“For example, the benefit of the bargain for the builder in a construction contract is the amount of the contract minus the cost to the builder to complete the project. . . . In other words, the benefit of the bargain should compensate for profits that would have been made if the bargain had been performed as promised.”).

²⁸⁶ See, e.g., Kentucky Std. Spec. § 108.11.02 (“When the Department terminates the Contract or any portion of the Contract, and the Contractor is released before completing all items of work included in the Contract, the Department will pay for the actual items of work completed. . . . The Department will not pay for any claim for anticipated profits.”); Mississippi Std. Spec. § 108.09 (“The Department will not pay for loss of overhead or anticipated profits, including anticipated earnings on usage of owned equipment, or impacts, delay, or other direct or indirect costs resulting from the termination.”); Wisconsin Std. Spec. § 108.13 (“Within 60 calendar days of the effective termination date, submit claims for additional costs actually incurred. Do not include claims for loss of anticipated profits on work not performed.”).

²⁸⁷ See, e.g., 5 PHILIP L. BRUNER & PATRICK J. O’CONNOR, JR., BRUNER AND O’CONNER ON CONSTRUCTION LAW § 19:61 (2002) (“Termination for convenience clauses”).

²⁸⁸ Silberman, supra note 20, at 16 (“Overly broad termination for convenience provisions may be considered illusory.”); see also Ezeldin & Helw, supra note 29, at 04518005-7 (“Termination for convenience is an absolute right of the employer, but when the employer uses such right in ordinary circumstances, he or she shall compensate the contractor for loss of overhead and profit.”).

²⁸⁹ Silberman, supra note 20, at 20 (“But even under the broadest of provisions, there are limitations on the agency’s ability to terminate without cause. Most jurisdictions prohibit convenience terminations made in bad faith or clear abuse of discretion.”); see also Ford Contracting, Inc. v. Kentucky Transp. Cabinet, 429 S.W.3d 397 (Ky. App. 2014) (“After hearing the conflicting evidence, the hearing officer found that the Department had not properly terminated the contract for convenience [and] imposed upon the Department a duty of good faith to do ‘everything necessary to carry out the contract,’ thereby limiting the Department’s discretion to terminate a contract only if a substantial change in circumstances occurs.”).

then the contractor might successfully argue that the contract was breached, entitling the contractor to monetary damages in addition to the contractual payment for termination for convenience.

In the survey of all fifty state DOTs conducted as part of this research, no survey respondents reported terminating any projects for convenience as a direct result of the COVID-19 pandemic. However, the California Department of Transportation (Caltrans) reported, “There were over a dozen contract terminations due to default during the 2021/22 year, and the evidence suggests that the impacts of COVID supply chain and work force issues likely contributed to the economic challenges that resulted in these defaults.” Caltrans also reported that COVID-related delays generally qualified for a noncompensable time extension, and that numerous “time extensions were provided when appropriate.” In other words, if the contractor was delayed only due to COVID-related supply chain and workforce issues, then the contractor should have been able to avoid termination for default. Presumably, the dozen or so terminations for default involved delays that were not entirely outside the control of the contractor.

2. Suspension

Instead of terminating a contract due to a pandemic, a state DOT may be more likely to suspend contract performance. Suspension is typically preferred to termination where “performing a contract has been disrupted temporarily, and it is foreseen that performance can be resumed” once the project is no longer disrupted.²⁹⁰ In the early days of the COVID-19 pandemic, many construction projects worldwide were suspended, sometimes as a result of government lockdown orders, in an effort to prevent the spread of disease and infection.²⁹¹ Although suspension halts progress of construction work, it also relieves the project owner from the obligation to pay for the work not performed, which was seen as advantageous to some public owners concerned about the continued availability of funding at a time when the financial impact of COVID-19 was uncertain. Some construction project owners suspended performance because of increasing prices for materials due to supply chain disruptions associated with the COVID-19 pandemic.²⁹²

Suspension of a construction project by the project owner is analogous to the construction contractor seeking a time extension due to a force majeure occurrence such as a pandemic. However, as discussed in Section II.C.1, the force majeure or excusable delay provision in most state DOT construction contracts provides a remedy for the contractor, not the state DOT. Instead, the state DOT’s ability to suspend the project is much broader than the contractor’s ability to obtain a time extension.²⁹³ A state DOT construction contract often lists multiple reasons that would justify suspension (including nonconforming performance by the contractor).²⁹⁴ The enumerated reasons for suspension may or may not include force majeure occurrences such as a pandemic.²⁹⁵ However, there is typically a broad catchall provision that entitles the state DOT to suspend contract performance for any reason deemed to be “in the public interest,”²⁹⁶ or simply for the convenience of the state DOT.²⁹⁷ A state DOT would almost always be able to find contractual authority to suspend contract performance, if desired, due to a pandemic.

Suspension by the state DOT for any reason beyond the control of the contractor (such as a pandemic) would typically entitle the contractor to a time extension roughly coextensive with the duration that the project is suspended.²⁹⁸ The duration

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²⁹⁰ Ezeldin & Helw, supra note 29, at 04518005-2.

²⁹¹ Salami et al., supra note 5, at 1200 (“In most part of the world, construction sites are closed following majorly the governmental recommendation to support in stemming the fast-spreading Covid-19 infection.”); see also Hansen et al., supra note 67, at 03722003-4 (providing example of construction work being temporarily suspended due to “local regulations in an effort to stop the spread of the COVID-19 outbreak in the neighborhood”).

²⁹² Olanrewaju et al., supra note 8, at 04522054-6 (“Material shortages caused by a lack of production and transportation for materials, components, and labor have a significant impact on prices of materials and wages of labor. . . . [M]any projects are suspended due to an increase in the cost of materials and components.”).

²⁹³ See, e.g., Maine Std. Spec. § 104.2.6 (“The Department has the right to suspend any or all Work at any time for any reason.”); Oklahoma Std. Spec. § 104.05 (“The Resident Engineer may suspend all or any portion of the work for any reason during performance of the Contract.”).

²⁹⁴ See, e.g., Georgia Std. Spec. § 108.06 (“The Engineer has the authority to suspend the work wholly or in part, for as long as he may deem necessary, because of unsuitable weather, or other conditions considered unfavorable for continuing the work, or for as long as he may deem necessary by reason of failure of the Contractor to carry out orders given, or to comply with any provisions of the Contract.”).

²⁹⁵ See, e.g., Florida Std. Spec. § 8-6.1.1 (“The Engineer has the authority to suspend the Contractor’s operations, wholly or in part, pursuant to a Governor’s Declaration of a State of Emergency.”); Maine Std. Spec. § 107.5.2 (“Upon request of the Contractor or upon its own initiative, the Department may suspend the Work due to Uncontrollable Events.”).

²⁹⁶ See, e.g., Missouri Std. Spec. § 105.1.2.3 (“Work may also be wholly or partially suspended for: . . . Any condition or reason determined to be in the public interest.”); Oregon Std. Spec. § 00180.70 (“The Engineer has authority to suspend the Work, or part of the Work, for any of the following causes: . . . Any reason considered by the Agency to be in the public interest.”); see also New Mexico Std. Spec. § 105.8.1 (conferring upon the Project Manager the “Authority to wholly or Partially Suspend the Work for reasons beyond the control of the Contractor or not connected to the construction of the Project when the Project Manager deems such a suspension to be in the best interests of the public and the Department”).

²⁹⁷ See, e.g., Hawaii Std. Spec. § 108.10(A) (“The Engineer may, by written order, suspend the performance of the work, either in whole or in part, for such periods as the Engineer may deem necessary, for any cause, including but not limited to: . . . The convenience of the State.”); Kentucky Std. Spec. § 108.08 (“The Engineer may order the Contractor in writing to suspend, delay or interrupt all or part of the work for such period of time as the Engineer may determine to be appropriate for the convenience of the Commonwealth.”); New Jersey Std. Spec. § 108.13 (“Convenience of the Department. For the convenience of the Department, the RE may direct, in writing, the Contractor to suspend all or any portion of the Work for the period of time that the RE determines to be appropriate.”).

²⁹⁸ See, e.g., Nevada Std. Spec. § 108.08(b) (“In case of ordered suspension of major items of work and through no fault of the

of the time extension resulting from project suspension would be analyzed much the same way as if the contractor initiated the request for time extension because of a force majeure occurrence. If the state DOT suspends all construction activities on a project, then activities on the critical path would be suspended, and a contractor who is otherwise on schedule would thus be entitled to a time extension for each day that critical path activities are suspended,²⁹⁹ and perhaps some additional time for remobilization or project recovery after the suspension is lifted. However, the entire duration of the suspension may not be excusable if the suspension is due in part to the fault of the contractor,³⁰⁰ or if the project was concurrently delayed by causes within the contractor’s control at the time the state DOT issued a pandemic-related suspension.

In addition to a time extension, suspension of contract work by the state DOT may entitle the contractor to additional compensation. For projects receiving federal-aid highway funds, federal law requires the contract to contain a provision allowing the contractor to obtain additional compensation in some cases where the work is suspended by the state DOT. The standard language incorporated into most state DOT construction contracts provides that the contractor may request a price adjustment if “the performance of all or any portion of the work is suspended or delayed by the engineer in writing for an unreasonable period of time (not originally anticipated, customary, or inherent to the construction industry).”³⁰¹ The contractor typically must make the request for price adjustment in writing within seven days of receipt of a notice ending the suspension, or else the claim could be deemed waived.³⁰²

It is notable that the contractor could be entitled to extra compensation for a pandemic-related suspension by the state DOT, whereas (as discussed in Section III.A.1.a) the contractor’s typical remedy for a force majeure occurrence such as a pandemic is a time extension but no compensation.³⁰³ For this reason, a state DOT may be hesitant to suspend a project due to a pandemic, and may instead wait for the contractor to initiate a request for time extension under the force majeure or excusable delay provision. The suspension notice could be viewed as an action by the state DOT that transforms the pandemic-related delay from an excusable delay to a compensable delay (as discussed in Section III.A.1.b).³⁰⁴ In fact, the contractor’s request for a price adjustment for suspension is analyzed much the same way as a compensable delay claim. The price adjustment for a suspension will not be allowed if the project is concurrently delayed by any other cause outside the state DOT’s control.³⁰⁵ A price adjustment will not be allowed if the suspension is due in part to the fault of the contractor³⁰⁶ (in which case the contractor may not even be entitled to a time extension³⁰⁷).

If it is deemed that the contractor is entitled to a price adjustment for the suspension, the price adjustment should be the amount that the contractor’s cost of performance increased as a result of the suspension.³⁰⁸ The contractor could be entitled to costs incurred during the duration of the suspension, such as the daily cost of idle equipment left on-site, as well as some standby labor costs, project management, and extended overhead.³⁰⁹ The price adjustment could also cover the costs of extra work arising from the suspension, such as the cost to maintain or protect the work from degradation during the suspension period.³¹⁰ The contractor would typically not be entitled to profit on the extra work, although some courts have awarded lost profits as a result

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Contractor, the time for completion shall be extended an amount equal to the elapsed time between effective dates of order to suspend and order to resume.”). But see Florida Std. Spec. § 8-6.1.1 (“Contract Time will be charged during all suspensions of Contractor’s operations. The Department, at its sole discretion, may grant an extension of Contract Time and reimburse the Contractor for specific costs associated with such suspension.”).

²⁹⁹ See, e.g., Hawaii Std. Spec. § 108.05(B)(5) (“During periods of partial suspensions of the work, the Contractor will be granted a time extension only if the partial suspension affects the critical path.”).

³⁰⁰ See, e.g., Illinois Std. Spec. § 108.07 (“The period of suspension shall not count against the time of performance established in the contract unless the suspension is ordered due to the acts or omissions of the Contractor.”); Iowa Std. Spec. § 1108.06.C (“Working days will not be charged during periods of suspension of work directed or approved by the Engineer except when the suspension is a result of a violation of terms of the contract.”).

³⁰¹ 23 C.F.R. § 635.109(a)(2)(i) (2023).

³⁰² 23 C.F.R. § 635.109(a)(2)(iii) (2023).

³⁰³ See, e.g., Osman & Ataei, supra note 7, at 06521004-3 (observing that under Illinois State Toll Highway Authority standard specifications, whereas the contractor’s remedy for a delay outside the contractor’s control is an uncompensated time extension, the contractor may be entitled to additional compensation if the work is suspended by the engineer, resulting in “an extraordinary delay due to an Act of God”); see also Merritt-Chapman & Scott Corp. v. U. S., 439 F.2d 185, 190, 194 Ct. Cl. 461, 471 (1971) (observing that highway contractor could be entitled to “money damages” under suspension provision notwithstanding no entitlement to damages under excusable delay provision).

³⁰⁴ See, e.g., Delaware Std. Spec. § 108.7.C.2 (“Excusable, compensable delays include: . . . Delays due to an engineer-ordered suspension . . ..”); Indiana Std. Spec. § (“The following are excusable, compensable delays: . . . Delays due to suspension of work ordered by the Engineer . . ..”); New Hampshire Std. Spec. § 108.07.C (providing that “[d]elays due to an Engineer-ordered suspension” are “excusable, compensable delays”).

³⁰⁵ 23 C.F.R. § 635.109(a)(2)(iv) (2023).

³⁰⁶ 23 C.F.R. § 635.109(a)(2)(ii) (2023).

³⁰⁷ See, e.g., Contracting & Material Co. v. City of Chicago, 64 Ill. 2d 21, 349 N.E.2d 389 (1976) (denying time extension to highway contractor despite project owner’s suspension order, where contractor was slightly behind schedule when suspension was ordered, and contractor failed to comply with contractual double-shift condition for time extensions).

³⁰⁸ 23 C.F.R. § 635.109(a)(2)(ii) (2023).

³⁰⁹ See, e.g., North Carolina Std. Spec. § 104-4(A) (allowing contractor to file a claim where “additional compensation for idle equipment or labor is justifiably due as a result of such suspension”); see also Ford Contracting, Inc. v. Kentucky Transp. Cabinet, 429 S.W.3d 397, 410 (Ky. Ct. App. 2014) (concluding that highway contractor is entitled to idle equipment costs when project is suspended).

³¹⁰ See, e.g., Mississippi Std. Spec. § 108.04.3 (“The Contractor shall take every precaution to prevent damage or deterioration of the work, provide suitable drainage of the roadway and erect temporary structures where necessary” in the event of a suspension.).

of suspensions,³¹¹ perhaps to compensate the contractor for opportunities lost as a result of the extended project duration.

However, the contractor has a duty to take steps to mitigate its increased costs arising out of the suspension, which may involve actions such as demobilizing some equipment to avoid daily rental charges, redeploying resources to other projects that are not suspended, and protecting the work from degradation during the suspension to avoid increased cost of repair after the suspension is lifted. Failure to mitigate could result in the contractor not being fully compensated for its extra costs incurred as a result of the suspension.³¹²

In the survey of state DOTs conducted as part of this research project, only two (PennDOT and WSDOT) reported any significant suspensions initiated by the state DOT. Both reported providing additional compensation to contractors as a result of the suspension orders. On the other hand, two survey respondents (SCDOT and Michigan DOT) reported that they allowed contractors to “self-suspend” project work as needed due to COVID-19, with the understanding that those contractors could seek a time extension but not additional compensation.

3. Nonpayment

As discussed above, the state DOT has the option of terminating or suspending contract performance if necessitated by a pandemic, which would allow the state DOT to avoid paying the full contract price for the work not performed. Alternatively, the state DOT may be able to avoid payment to the contractor without terminating or suspending the work. Some state DOT form construction contracts excuse the state DOT’s failure to pay its contractor when such failure is due to unforeseeable circumstances or “uncontrollable events,” such as quarantine restrictions.³¹³ Government orders issued as a result of a pandemic, such as judicial rulings halting contract performance, could also be invoked by state DOTs to excuse payment.³¹⁴ However, the state DOT would only be temporarily excused for failure to make timely payment for work already performed. Once the circumstances preventing payment are abated, the contractor would almost certainly be entitled to prompt compensation for work performed.

4. Restrictive Protocols

Where contracts were not terminated or suspended as a result of the COVID-19 pandemic, state DOTs and other transportation agencies may have imposed restrictive work protocols designed to reduce infection or transmission (such as mandatory masking, jobsite disinfecting, screening, testing, contact tracing, reduced crews and staggered shifts, and quarantining of infected or exposed workers).³¹⁵ Generally speaking, in public construction contracts, the owner has broad latitude to expect the contractor to comply with governmental orders relating to health, safety, and environmental concerns, and the contractor on a fixed-price contract is expected to factor into its price such orders as are foreseeable.³¹⁶ However, state DOTs may be hesitant to require such measures, for the same reason that they may be hesitant to suspend the work—these orders could be viewed as an affirmative act by the project owner that entitles the contractor to additional compensation. This prospect is discussed in the following Section III.B.5, which discusses the contractor’s remedies in the event that a project owner (such as a state DOT) takes action as a result of a pandemic.

5. Contractor Defenses and Remedies

If a state DOT elects to terminate, suspend, or otherwise disrupt contract work as a result of a pandemic, the contractor is typically not in a position to contest that decision. Public construction contracts typically provide that the state DOT or other public agency can terminate or suspend the work for its own convenience. Even if the contractor contends that the pandemic does not prevent performance, and even if the contractor wants to continue performing the work, the state DOT has the authority to terminate or suspend the work. The contractor’s primary monetary remedy is compensation for work performed, and direct costs arising from the suspension or termination order.

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³¹¹ See, e.g., Ford Contracting, Inc. v. Kentucky Transp. Cabinet, 429 S.W.3d 397, 411 (Ky. Ct. App. 2014) (awarding lost profits to contractor where Kentucky Transportation Cabinet, Department of Highways placed project on “indefinite hold”); M.J. Lee Const. Co. v. Oklahoma Transp. Authority, 125 P.3d 1205, 1212 n.13 (Okla. 2005) (observing that under 1999 edition of Oklahoma Std. Spec., “the contractor may be compensated for loss profits where the engineer suspends the work”).

³¹² See, e.g., Ford Contracting, Inc. v. Kentucky Transp. Cabinet, 429 S.W.3d 397, 411 (Ky. Ct. App. 2014) (allowing state DOT to reduce damages owed to suspended contractor to the extent that contractor failed to mitigate its damages).

³¹³ See, e.g., Maine Std. Spec. § 108.2.2 (“These payment obligations shall not apply in the event of unforeseeable circumstances such as insufficient legislative appropriations, information systems failure, and other Uncontrollable Events.”). “Uncontrollable Event” in the Maine DOT contract is defined to include “quarantine restrictions.” Maine Std. Spec. § 101.2.

³¹⁴ Zeppelin v. Federal Highway Administration, 293 F.Supp.3d 1267, 1283 (2017) (opining that a judicial injunction halting work on a project would provide a force majeure defense to nonpayment by Colorado DOT).

³¹⁵ See, e.g., Colorado Std. Spec. § 107.06(a) (requiring contractor to prepare a safety plan addressing, inter alia, “[s]upplemental PPE to be used during the pandemic” and “[c]leaning and sanitizing practices for equipment, workspaces, and sanitation facilities both for everyday situations and for a situation where a worker is found to have been infected by the pandemic virus”).

³¹⁶ See, e.g., Arkansas Std. Spec. § 107.01 (“[T]he Contractor shall at all times observe and comply with all such laws, ordinances, regulations, quarantines, orders, and decrees . . ..”); North Carolina Std. Spec. § 107-1 (“The Contractor shall keep himself fully informed of all Federal, State and local laws, ordinances and regulations, and all orders and decrees of bodies or tribunals having any jurisdiction or authority which may in any manner affect those engaged or employed in the work or which in any way affect the conduct of the work. He shall at all times observe and comply with all such laws, ordinances, regulations, orders and decrees . . .. If during the course of the contract any such laws, ordinances and regulations, and all orders and decrees may be changed, the Contractor shall comply fully with the same.”); see also McMillan et al., supra note 135, at 45 (“Health, safety, and environmental provisions often require work to stop when there is a real and present, or imminent, risk to safety. Often such provisions play in the owner’s favor because they exclude claims for damages in cases in which there is a requirement to stop the work for safety reasons.”).

In fact, an order or other written decision by the state DOT or other governmental agency expressly terminating, suspending, or otherwise changing the contract work is generally helpful to the contractor who will be seeking compensation for pandemic-related costs. If it is left to the contractor to declare that a force majeure event has occurred, then the contractor’s remedy could be limited to a time extension, as discussed in Section III.A.1. Even then, decisions made by the contractor to modify work protocols to address the pandemic might be treated as means and methods decisions within the contractor’s control, which could make the resulting delay inexcusable. Therefore, contractors should generally welcome (and not challenge) a state DOT’s express direction regarding whether and how to proceed with the contract work in response to a pandemic.³¹⁷ A contractor seeking additional compensation should seek such direction in writing.³¹⁸

If the state DOT elects to terminate the contract as a result of a pandemic, and not due to default of the contractor, then the contractor is automatically entitled to be paid for work performed to date.³¹⁹ The contractor whose work is terminated for the convenience of the state DOT is also generally entitled to be paid for actual costs incurred as a result of the termination, such as the cost to protect the work in place and the cost to demobilize from the project.³²⁰ The contractor is also generally entitled to payment for costs incurred for work that has not yet been performed, including the advance costs incurred to subcontractors or to suppliers for equipment rental and materials (including restocking fees or cancellation fees for purchases that can be returned).³²¹ The terminated contractor may also be able to recover compensation analogous to damages for “efficient breach,” such as the contractor’s cost of investigating the project and bidding on the project.³²² The terminated contractor is generally entitled to recover overhead on its allowable costs.³²³ However, whereas private contracting parties are ordinarily entitled to the benefit of their bargain when the other party elects to terminate a contract for its convenience,³²⁴ a state DOT contractor is generally not entitled to lost profits on the portion of the work not performed.³²⁵

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³¹⁷ McMillan et al., supra note 135, at 45 (“A contractor will have a stronger argument when the government issues a mandatory order (e.g., shutting down construction or mandating certain health and safety measures as a condition of permitting construction to resume or continue) and a more challenging argument when the contractor is voluntarily complying with nonbinding guidance.”).

³¹⁸ Han & Kim, supra note 154, at 56 (“[A] variation cannot generally be obtained in the absence of written instructions–such written instruction would be a condition precedent to a variation.”).

³¹⁹ See, e.g., New Mexico Std. Spec. § 108.10.1 (“When the Department issues a notice and order for a Contract termination effective on a certain date the Department will pay[ f ]or the actual number of units or items of Work completed at the Bid Item Unit Price; [and f ]or items of Work started but not completed as negotiated and mutually agreed.”); New York Std. Spec. § 105-07.B (“When the contract, or any portion thereof is terminated, for any of the above mentioned reasons, before completion of all items of work in the contract, payment will be made for the actual numbers of units or items of work completed at the contract unit price, or as mutually agreed for items of work partially completed . . ..”); South Carolina Std. Spec. § 105.14 (“When the Department orders “Termination for Convenience” of a contract effective on a certain date, all completed items of work as of that date will be paid for at the contract bid price. Payment for partially completed work is made at agreed prices or by Force Account methods described elsewhere in these specifications.”); South Dakota Std. Spec. § 8.11 (“When the Department terminates a contract effective on a certain date, the Department will pay for items of work completed as of that date at the contract bid price. The Department will pay for partially completed work either at agreed prices or by force account methods.”).

³²⁰ See, e.g., North Dakota Std. Spec. § 108.09 (“The Department will pay the Contractor for costs that the Contractor has incurred before or as a result of the termination for convenience . . .. In addition, the Department will pay the Contractor for mobilization efforts, guaranteed payments for private land usage as part of the original contract, and any other costs resulting from the termination for convenience . . ..”); New York Std. Spec. § 105-07.B (“In such cases of termination, reimbursement for organization of the work (when not otherwise included in the contract) and moving equipment to and from the contract site will be considered where the volume of work completed is too small to compensate the Contractor for these expenses under the contract unit prices, the intent being that an equitable settlement will be made with the Contractor.”); South Dakota Std. Spec. § 8.11 (“The Department may consider reimbursement for organization of the work, other overhead expense (when not otherwise included in the contract), and moving equipment and materials to and from the job; the intent being an equitable settlement with the Contractor.”).

³²¹ See, e.g., New Mexico Std. Spec. § 108.10.1 (“When the Department issues a notice and order for a Contract termination effective on a certain date the Department will pay: . . . For invoices to restock or for invoices for Material on hand for Work not yet started.”); Tennessee Std. Spec. § 108.10.C (“If the Engineer and the Contractor do not agree to purchase such materials, the Department may reimburse the Contractor for any reasonable restocking fees and handling costs incurred by the Contractor in returning unused materials to the vendor.”).

³²² See, e.g., New Mexico Std. Spec. § 108.10.1 (allowing terminated contractor to submit a claim for “[a]ctual and direct bidding and Project investigative costs which are separate and excluded from home office overhead costs”); South Carolina Std. Spec. § 105.14 (allowing terminated contractor to submit a claim for “[b]idding and project investigative costs”).

³²³ See, e.g., New Mexico Std. Spec. § 108.10.1 (allowing contractor to seek “[a]n additional ten percent (10%) of the total . . . to cover home office overhead and salaried labor expenses” as part of its claim for termination costs).

³²⁴ Ezeldin & Helw, supra note 29, at 04518005-7 (“Termination for convenience is an absolute right of the employer, but when the employer uses such right in ordinary circumstances, he or she shall compensate the contractor for loss of overhead and profit.”).

³²⁵ See, e.g., New Hampshire Std. Spec. § 108.11.B.1 (“Anticipated profits will not be considered as part of any settlement.”); New York Std. Spec. § 105-07.B (“[N]o claim for loss of anticipated profits on uncompleted work shall be made by the Contractor nor shall the State of New York be liable for the loss of anticipated profits for such uncompleted work.”); South Carolina Std. Spec. § 105.14 (“In no event will the loss of anticipated profits be allowed as damages.”); South Dakota Std. Spec. § 8.11 (“The Department will not consider the loss of anticipated profits in the settlement.”). But see Oklahoma Std. Spec. § 108.11.B(1) (“The Contractor and the Department may agree upon the whole or any part of the amount due the Contractor because of the termination. The amount may include a reasonable allowance for profit on work completed.”).