Only a few weeks ago, there was considerable pressure in the mainstream media advocating a wholesale shut down of construction operations for the duration of the lockdown. The industry has since shown commendable resilience and innovation in finding ways to determine which works can, and cannot, sensibly continue.
We referred a couple of weeks ago to the Construction Industry Council’s guidance as being a useful “yardstick” to demonstrating the reasonableness of the workings of that decision. The version 3 update published last week (available here) reflects the focus being placed on determining what practical arrangements can be accommodated on a given site, this of course being highly dependent on what stage the works are at and what trades need to be working on site. The guidance, and response of the industry, recognises that a “one size fits all” policy would be plainly inappropriate.
Inevitably, the position cannot be that clear cut, with the availability of materials and supplies (particularly those from overseas), potential labour shortages and availability of subcontractors remaining key factors as to whether works can proceed at all, or beyond a certain point.
Many of our clients have naturally been keen to understand the ramifications to their projects that are on site, by understanding how and where their contracts apportion the risks arising from COVID-19. As well as the “legal answer”, much of our discussions have focused on the practicalities of putting the right paper trail in place to ensure those entitlements can be claimed, to maximise the prospects of getting the project back on track on the best possible terms, once sites are fully back up and running.
Many are also wanting, or are being presented with, last minute amendments to contracts that were just about to be signed up when the COVID-19 crisis escalated, to apportion the consequences of disruption going forward. As ever, all such risk shifting if done entirely one way carries a price, and many parties are keen to adopt a pragmatic and reasonable approach to sharing the risk, particular so far as potential delays are concerned. The same is also true of any parties wishing to renegotiate terms for projects not yet on site, or for later phases of work.
Looking ahead, as far as anyone sensibly can, it seems increasingly clear that even if the government finds a way to lift the restrictions quickly and comprehensively, it will take some time for the supply chain to get back in sync. Every site, and every phase of every project, is different and may or may not have been able to continue, as compared with its peers. Had the industry simply been required to shut down on a given date, and later re-open, then pre-existing programmes, work sequencing and material lead in times would be less out of sync.
There will inevitably be an element of “start stop” progress to projects, whilst the sector gets fully back up to speed and capacity, which will affect both projects that are already on site and those due to start in the coming weeks and months. The impact of COVID-19 is therefore likely to become more nuanced and subject to a greater number of variables, during the recovery phase. This is all quite apart from the increased risk of key supply chain members becoming insolvent as a result of COVID-19 related pressures from across all their projects becoming overwhelming.
From a practical point of view, comprehensive record keeping to “paper trail” the decisions as to whether works can safely continue that have been made so far, and which will continue to have to be made in the coming weeks, is vital. The same is true in relation to the knock on effects to later phases of the project or projects not already on site. Plans will need to be made for the recovery phase, and updated as they are impacted by external factors. Clearly, those records should be prepared with the most pertinent points from your contract firmly in mind, so as to maximise their usefulness and safeguard your position. Such records will be extremely important not only in seeking to reach an amicable agreement to get projects fully back on track, but also in any disputes that arise.
Thus far, with the notable exception of some parties openly flouting payment terms and delaying payments, there has been an encouragingly pragmatic stance taken on many contracts to deal with the immediate impacts on projects arising from the escalation of the Covid-19 crisis. It will though be vitally important for what will be the inevitable bumps in the road to recovery to be pro-actively managed from both a legal and practical point of view, to ensure a strong paper trail is in place. This is particularly so on those projects where the stakes may become progressively higher, if delays during the recovery phase are compounded by external factors. Now more than ever, the importance of good record keeping is key.