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  • Overview

    As we look towards 2022, our specialist lawyers explore the key issues for the construction industry in the year ahead.  

    1. Material Prices

    A major problem currently for the construction industry which will continue into 2022 is the massive price increases in materials. Some materials are suffering almost daily increases making it very difficult for contractors to quote firm prices when tendering for projects. This in turn causes problems for clients in being able to determine what the project costs is going to be. It is a particular problem for contractors on a fixed price agreed before this issue arose, who contractually will have to absorb the extra cost. Where extra cost is caused by increases in taxes/duties, standard form fluctuation clauses can help, but typically these are deleted.

    2. Supply Chain Disruption

    Very much linked to massive price increases in building materials is an on-going supply problem. Many materials are in very short supply and those that can be sourced are being sold at premium prices. The main causes of supply problems have been the Covid-19 pandemic and Brexit. This in turn can cause contractual problems as to the allocation of risk in terms of delay and increased costs – is it to be borne by the client or the contractor. In many cases now contracts are containing provisions giving some assistance to the contractor by allowing him extra time, although very often no extra cost. 

    3. Contract Renegotiations

    Because of the extreme problems being caused by the problems of supply and massive price increases of materials, there is likely to be an increase in the number requests by contractors to re-negotiate the terms of their building contracts in circumstances where the alternative is not being able to carry on, with potential insolvency threatening. Where clients are prepared to entertain this, the solution will either be by entering into a formal deed of variation of the contract terms, or alternatively by coming to an agreed written settlement of the monetary issues.
     

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