Material Suppliers Best Prepare for Additional Costs During Construction Projects

If the first half of 2020 has proven anything, it is that the pandemic will leave a lasting impact on how society goes about day-to-day living. Many are working from home, stores are cleaning checkout counters after every customer, and masks are a common wardrobe choice. Several companies are adapting their operations within their existing structures, but how might the same concerns be addressed midway through the construction of a new building, and what will this mean for the construction industry's material suppliers?

Chicago will be one of the first cities to put these questions to the test later this summer when the city unveils a $26 million office building that was purposefully designed with COVID-19 in mind, according to Construction Dive. This project differs from most as the construction of Fulton East was already underway prior to the outbreak. Changes were soon made by developer Parkside Realty, Inc., and design-builder Clayco who modified the building's design in real time—quite a challenge for a 90,000-square-foot, 12-story building.

New impressive features include a touch-free thermal scanning system in the lobby for temperature checks, touch-free building access as well as a touch-free intercom and elevator system. Outdoor balconies and a rooftop garden were also added to allow for more social distancing, while restroom walls were coated with a paint that kills "greater than 99.9% of Staph, MRSA, E. coli and other pathogens within two hours of exposure."

Bob Wislow, chairman and CEO of Parkside Realty, Inc., said the modifications required "extensive research" on today's health, safety and wellness features, a timely process that not all construction companies can afford.

"We believe we have entered a new era where many firms will be less inclined to pursue large floor plate buildings filled with a huge number of employees or multiple companies on each floor sharing washrooms, corridors and public areas or high-rise buildings with crowded lobbies and long waits for the elevators," Wislow said in the company's press release.

An engineering feat nonetheless, sudden changes to a project of this scale can raise concerns for material suppliers, said Chris Ring, of NACM's Secured Transaction Services. In a perfect world, he said, the additional costs to the project would have been contractually modified in the general contract, subcontracts and purchase orders up and down the ladder of supply. However, in the case of this Chicago project, it is likely the original general contract price did not include the costs associated with COVID-19 safety concerns.

"If the change orders had not been contractually modified, disputes can arise causing payment issues down the ladder of supply," Ring said. "Material suppliers could still file a lien; however, terms and conditions of contracts come in to play if a lawsuit needs to be filed, i.e., battle of the forms. If contract modifications cannot be verified, the material supplier can suggest selling to the general contractor, property owner, etc."

It is still too soon to tell just how many companies will take the same avenue as Fulton East, but there is no time like the present for material suppliers to address any additional cost clauses in their contracts should the need arise.

—Andrew Michaels, editorial associate