Perfect Storm for Construction Projects

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Continuity for the construction sector

We have now entered new national lockdown restrictions across the country to help to control the spread of Covid-19.  This has brought in new restrictions but the Government position currently remains the same in respect of the construction sector in England although there are suggestions that Scotland may be reviewing the position. 

The current position in England is that firms and tradespeople in the construction sector and its supply chain, including merchants, suppliers and produce manufacturers should continue to operate during this national lockdown.  Where it is essential to travel or stay in accommodation whether to get to work or for the purposes of carrying out work, those in the industry remain able to do so.

CLC procedures

The Site Operating Procedures published by the Construction Leadership Council (CLC) has recently been updated to version 7. Despite this, there remains a real concern that parties to construction contracts will become embroiled in disputes over the effects of Covid-19.

The CLC has published a number of other guidance documents summarising how to resolve disputes, on record keeping and future proofing contracts which is all very useful and can be read here.  It has also recently conducted a survey across the industry across industry professionals dealing with construction claims and its results are very interesting.

Feedback attained from survey respondents

The majority of respondents indicated:

  1. an increase in notifications and claims because of COVID-19 both on current and legacy projects;
  2. an increase in the number of claims being rejected because of COVID-19; parties have been inclined to settle time related claims but there is a reluctance to agree loss and expense claims;
  3. short term reports indicate a positive and increased level of collaboration but longer term indications were of commercial behaviour hardening;
  4. there is an expectation that the number of claims that turn into formal disputes will rise in 2021 as a natural progression. The key triggers are reaching final account, tightening cash-flows, financial reporting requirements, project/client types and reduced goodwill; and
  5. indications are that 2021 may bring the perfect storm of a negative economic environment, Brexit, reduced market activity, the end of Government support schemes, the introduction of the VAT reverse charge and an increased number of claims.

It is common for disputes not to fully materialise until a project is complete for all sorts of reasons but it is becoming apparent that COVID-19 is now having a significant impact.  We have seen lots of examples of parties collaborating and trying to maintain a relationship during the works in order to complete the project.  However, it is not unusual for the gloves to come off as soon as practical completion has been achieved and at final account.

It remains essential for parties involved in construction projects to maintain good records as they can make or break a claim or defence.  They may also help the parties to resolve claims more efficiently between themselves and can help to mitigate the delay and/or additional costs.

Here to help

At Myerson, our Construction Team offers advice on all aspects of contentious issues.  We act on a range of matters including assisting in the resolution of payment disputes and claims for extensions of time and/or loss and expense in order to avoid the need for more formal proceedings.  For more information, please contact Myerson’s Construction team on 0161 941 4000 or via email.