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20th April 2020

End of the COVID-19 crisis lock down for construction?.

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There are plenty of reports that padlocks are being unlocked on construction sites which were mothballed at the start of the COVID-19 crisis. In fact, construction has been one of the industries the Government’s COVID restrictions have made an exception for, building work not being the sort of work activity which could be done “from home”. Some projects have never stopped.

As the country now looks toward a return to some form of new normal, employers and contractors should be reviewing site operational procedures and agreements which have been common place which put disputes about COVID related contractual entitlements temporarily to one side.

The cross representational Construction Leadership Council (CLC) has just issued a third set of guidance on site operating procedures. This is itself based on guidance from Public Health England (other guidance is to be relied upon in cases other than in England).

The CLC guidance (which applies to sites of all sizes) says that sites operating during the COVID-19 pandemic need to ensure that the workforce is protected and that the risk of virus infection spread is minimised.

In a reversal to a previous edition of its guidance which came under criticism for suggesting that non compliant construction project work should cease, the CLC now says that projects can proceed. The qualification is that where to do so is not possible without being able to follow social distancing guidelines in full in relation to particular site activities, consideration should be given as to whether that activity/ies needs to continue for the rest of the site to proceed. Going further the CLC says that if an activity cannot be undertaken safely, it should not take place.

The policy of the Government itself which has applied throughout therefore continues to apply in this guidance, namely that construction is an industry which should continue while respecting COVID-19 safety measures.

The CLC guidance must be considered in full by those managing projects. There is plenty said covering, how travel to work should be managed, about site hygiene and welfare arrangements, site access, planning to avoid close working on a site including the application of the 2 metre distancing measures.

Beyond that, when it comes to COVID related entitlements the contract provisions to focus on fall into two categories.

Contracts deal in various ways with what we might generally call, unforeseeable events. The JCT contracts for example make provisions for a contractor to claim for additional time to complete the works (the Relevant Events) including based on what is called force majeure events. This is a term which has been much debated in the context of the COVID crisis and which is taken to mean some superior force independent of the parties to the contract.

If though as in the case of the JCT the contract says little about what force majeure actually means, as there is no English law to imply an interpretation there remains a question as to whether a contractor could rely upon the COVID crisis to claim for an extension of time on such a ground.

Had in the end the Government’s COVID measures gone further, with say a tighter clampdown on the operation of the construction industry, the position might have been different. As it is construction has been able to proceed. Arguing that the COVID crisis has resulted in a project becoming more expensive to complete or that it will take more time than it was thought likely to when the contract was entered into, will not in itself add to the contractor’s case in relying upon force majeure.

Another Relevant Event under the JCT is where there has been a change in the applicable statutory requirements. Again though, a contractor will not be able to argue that the COVID measures issued by the Government have stopped construction activity altogether.

Even then force majeure or changes in statutory requirements do not feature in the JCT’s list of ‘Relevant Matters’ which would need to be identified if a contractor wants to claim for additional payment for completing a project.

If though the contract in question is based on NEC (The New Engineering Contract) form then there is arguably more of a case for a Contractor to seek compensation for both more time and more payment due to the COVID outbreak. The NEC deals with all forms of compensation together under the Compensation Event provisions. The reason the NEC position can differ from say the JCT is that the former does not use the simple term “force majeure” as one of its Compensation Events. Instead the NEC refers to, events which have stopped the Contractor from completing the Works, which neither party could have prevented and which an experienced Contractor would have judged to have had a small chance of occurring.

This wording in the NEC is arguably wide enough to be triggered by the very events which have impacted on construction post COVID. That said, identification of a Compensation Event is one matter. To be successful in a claim for compensation a contractor needs also to satisfy the claims procedure, including to notify of the potential for a Compensation Event within 8 weeks of becoming aware that the event has happened. See also the NEC’s early warning obligations.

We can anticipate a range of considerations will apply now as the construction industry faces up to a return to regular activity, but now is the time to review what is applicable in the case of each project.

For more information on how your project might be affected, please click here to email Colin Jones or speak to a member of Hewitsons' construction and procurement law team.