SB 5333, sponsored by Sen. Jeff Holy (R–Spokane), deems any clause in a public works contract that waives, releases, or extinguishes the rights of a contractor, subcontractor, or supplier to damages or an equitable adjustment arising out of a delay in performance caused by COVID-19 pandemic emergency proclamations as against public policy and void and unenforceable.

Current law provides that certain types of contracts or contract terms are against public policy and unenforceable. However, this typically includes clauses that cause unreasonable delay in performance due to acts or omissions of the contractee.

The proposed legislation assumes that the impacts of COVID-19 (including increased personal protection equipment wear, social distancing, and additional cleaning) is the responsibility of the contractee. While the original bill would have impacted all construction contracts, the amended bill specifically addresses public works contracts.

This, in effect, forces cities and other local governments to absorb risks and costs for risks discussed at time of the original contracting bid. Proponents argue that if the public owner mandates changes (such as social distancing or additional protective equipment), the public owner is responsible for shouldering the cost. Further, the legislation would only apply to future contracts during COVID-19. Additionally, proponents argue the bill does not apply retroactively, and only applies during the COVID-19 emergency. These provisions do not apply in any similar public health crisis or natural disaster.

SB 5333 received a public hearing in the Senate Ways and Means Committee on February 18. During the hearing, WSDOT testified that, at the onset of the pandemic, they shouldered costs in three scenarios:

• WSDOT paid contractors any direct costs due to the initial project suspensions.
• WSDOT shared costs with contractors to provide personal protective equipment.
• WSDOT contributed towards costs associated with schedule recovery.

WSDOT will not pay for any costs associated with delays and inefficiencies in the project, due to force majeure language included in their contracts. While the bill does not undo any of the change orders already written, the bill allows contractors to appeal to agencies and local governments that there were additional costs associated with the pandemic that the public entity should cover (including incurred costs associated with home office and profit). Consequently, WSDOT interprets the bill to be both prospective and retrospective.

Please contact Carl Schroeder or Maggie Douglas with any feedback your city may have on this issue.