Construction Costs 2021 E

California Market - Construction Estimates

Blog Series
CONSTRUCTION COSTS
​Article 05

FORCE MAJEURE

Force Majeure Clauses

​Now, more than ever, in this inflationary period it is important to be aware of situations that are out of the contractor’s control. Most contract these days will have a force majeure clause in their contract. Force Majeure is a French term that literally means "greater force”. This can refer to acts of God, war, adverse weather, tsunamis, earthquakes, forest fires, road closures, etc… Actually it covers anything that is out of the control of the contractor.

​Local strikes at the city slowing down the permit process, civil unrest, new laws and regulations taking effect are several other examples of force majeure that can affect your project. 

An example of force majeure is explained below.

Supply Chain Issues #1
California Cargo Clog

​Governor Newsom’s new California EPA Standards are the reason for the shipping crisis at California ports. Today, it is reported that approximately 167 ships are sitting out at sea waiting to unload. Cargo ships are anchored offshore of California because the ports are jammed with containers waiting for trucks. It’s all because the new regulations in California for trucking companies are so strict. Few companies can afford the new compliant trucks. Newsom effectively cut the trucking capacity in half by making the air standards so strict for these vehicles. Bottom line: There are not enough compliant trucks to clear the docks. Steep fines are issued to trucking companies that do not have compliant vehichles and therefore they’ve been forced to stay out of California.
 
This supply line issue may affect projects because many of the building materials have been coming from overseas. Your building materials may only be a few hours away, but government regulations implemented too forcefully have created a crisis. Therefore, force majeure is in effect for building supplies and project pricing.
 
Couple this with the current rate of inflation and you have a very challenging work environment.