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How COVID-19 is changing the construction landscape

24/03/2020

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United Kingdom

As government measures to mitigate the spread of coronavirus intensify, the construction industry is coming under pressure to react, creating more uncertainty for projects and contracts. Here, we provide some practical tips on how to avoid being caught out by rapidly changing circumstances.

  Since our blog on 12 March 2020 (COVID-19 and construction contracts), a lot has changed in the UK construction sector.
 
Government actions seeking to mitigate the impact of the virus are intensifying daily, and there is increasing pressure on the industry to react.
 
The Construction Leadership Council (CLC) held an emergency meeting yesterday (23 March) on the topic and has published Site Operating Procedures intended to introduce "consistent measures on sites of all sizes in line with the Government’s recommendations on social distancing".
 
Our last blog considered whether contractors are entitled to time and/or money under the most widely used domestic standard form contracts. Our analysis of these issues remains valid.
 
This blog considers more recent key changes and highlights new guidance on proceedings, some practical tips on how to avoid getting caught out by opportunist "smash-and-grab" type claims, and how to progress with ongoing tenders.
 
The CLC's – Site Operating Procedures
 
The CLC published the Site Operating Procedures on 23 March 2020 (these can be accessed here).
 
The procedures apply to sites of all sizes and cover a variety of topics, including self-isolation, travel to site, welfare facilities and avoiding close working.
 
To minimise interactions and congestion, sites must among other things, consider increasing the number and size of welfare facilities, staggering start and finish times and introduce enhanced cleaning.
 
With regard to close working, the measures recognise that "there will be situations where it is not possible or safe for workers to distance themselves from each other by 2 metres", and notes non-essential work that requires "close contact" or "skin to skin" contact between workers should not be carried out.
 
All those in the industry are encouraged to read the guidance that also states:
 
"If a site is not consistently implementing the measures set out below, it may be required to shut down."
 
Exercise of any statutory power by the UK government/any local or public authority
 
At the time of our previous blog, the government had interjected little in the way of statute.
 
Since then, new sweeping measures have been proposed and stand to be brought in under powers expected to be given to parliament under the Coronavirus Bill which will become an Act of Parliament if/when the legislation is approved.
 
The effect of this legislation will likely be to expand the instances where a contractor might be able to claim for an extension of time under clause 2.26.12 of the JCT DB 2016.
 
Similarly, this may be an instance in the NEC4 clause 60.1(19) or secondary option X2 (if selected), that will constitute a compensation event, and thus the potential for associated time and cost recovery.
 
Further guidance for the construction Industry
 
Actions by the courts (in particular, the Business and Property Courts)
 
The courts are beginning to issue guidance on how they will adapt to the coronavirus outbreak.
 
For example, the Business and Property Courts (BPC) have updated their "Protocol Regarding Remote Hearings", stating their intention to:
 
"Undertake as many hearings as possible remotely so as to minimise the risk of transmission of Covid-19", by a method decided by the judge in each case.
 
This may include:
 
  • BT conference call;
  • Skype for Business;
  • Court video link; or
  • An ordinary telephone call.
 
But, cases may still proceed in court, or be adjourned.
 
All remote hearings will be recorded, but the parties are not permitted to record the hearing themselves.
 
Indexed and paginated electronic bundles should be prepared and made available to the judge/clerk and the other parties well in advance of a remote hearing.
 
For all upcoming hearings, the court has requested that parties be proactive and consider, as far ahead as possible, how those hearings should be undertaken.
 
There are also discussions between the Law Society and the courts regarding the potential for limitation periods to be automatically extended.
 
Practical tips to avoid being caught out
 
Many business will find their processes challenged and attention diverted.
 
There will also be economic strain on businesses, who may look to improve cash flow in more opportunistic ways – for example, by serving applications for payment at offices that may have become largely vacant and seeking to take advantage of a missed payment notice with the launch of a "smash and grab" adjudication.
 
To avoid these situations materialising, businesses could consider the following steps:
 
  • Ensure there is an adequate method of picking up and distributing hard copy post from offices that may have become largely vacant (e.g., assigning an individual to handle mail or putting a redirection in place).
  • If the contract allows, consider requiring all notices to be served by email to prescribed addresses, or to amend the contracts address(s) for service.
  • Make sure correspondence is being copied to more than one individual capable of actioning it.
 
Tendering in the current climate
 
Businesses have to continue to consider the order book and future projects in these uncertain times.
 
We have already seen tenders being postponed and contractors will understandably be wary of committing to time/costs, when so much remains unclear.
 
Where possible, try to engage in dialogue (for example through requests for clarification) with those running tenders to see how, if at all, the process will be impacted.
 
For public procurement tenders, it is hoped those bodies will soon provide guidance to all parties involved.
 
We are seeing extensions of deferment provisions (such as in the JCT) being proposed, and accepted, in contracts which are being executed in the current environment. This may prove to be a commercially acceptable way forward for both parties.
 
For tenders due to conclude shortly, tendering parties should be cautious about any commitment that may be required to 'leave open' a tender for acceptance for a designated period of time.
 
 
If you have any questions or concerns about your projects in light of the coronavirus outbreak, Fieldfisher's construction and projects team would be happy to discuss your specific circumstances with you.
 
 
 

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