It is clear that the global consequences of Covid-19 continue to impact the construction industry, with Clients and Contractors navigating complex contractual positions created when sites shutting down in full or in part and work delayed or disrupted. This is particularly difficult when intra-country travel of personnel and transportation of materials or equipment is necessary. Companies now require clear strategies to maneuver through the complexities of construction projects locally and abroad. Understanding the challenges and implementing strong practices throughout the project lifecycle, will help you position your company to minimize risk and loss and maximize outcomes.
Understand Your Position
FSG has extensive experience supporting Contractors dealing with complex contractual positions, such as the impacts caused by the current Covid-19 pandemic, that at first glance (and sometimes even second), appear to leave the Contractor in a position where it seems it cannot recover the additional cost and/or time.
It is vitally important for Contractors to understand their entitlement to recover time and cost expenditures directly due to the pandemic or indirectly due to a Client’s unsatisfactory response to the situation. This can include:
- The imposition of mandates and regulations by governments
- Availability of workforce
- Supply of materials
Understanding your claim allows you to take a strong position and develop powerful strategies to mitigate losses.
It is equally important that Contractors provide timely notifications and collate robust records to support claims relating to the pandemic. Identification and implementation of effective strategies for dealing with the impact on construction schemes will be redundant if such claims cannot be properly supported with cost and progress information.
Force Majeure/ Prevention
The concept of Force Majeure can be a critical tool in construction claim resolution. Force Majeure refers to uncontrollable circumstances that make it impossible to fulfil a contractual obligation. In its strictest definition, this is an extremely difficult test to pass. It is not enough that performance becomes less profitable, more expensive, takes longer, or is more difficult. The courts have interpreted Force Majeure as applicable only where performance is legally and physically impossible.
On the face of it, Covid-19, which has caused a complete shift away from normal social, personal, and economic behaviour, would at first glance appear to fall under the general understanding of Force Majeure.
Force Majeure clauses in construction contracts often include a list of particular circumstances that must exist in order for the clause to be triggered such as war, civil unrest, fire, flood, etc. The clause is generally intended to cover events that are outside the contemplation of the Parties and beyond the control of either Party.
It is therefore likely that the unprecedented nature and global, far-reaching response by governments and Public Health Authorities to the Covid-19 situation could constitute a Force Majeure type event under many construction contracts.
It is common for such ‘Prevention’ clauses to only provide relief from damages with any additional costs being added to the Contractor’s account. This is clearly the best case for Employers but leaves Contractors disadvantaged.
Options For Resolution
The ability to pursue resolution for entitlement on your contract requires a timely and thorough response now. Here are some options to explore:
- In many standard forms and bespoke contracts, there are conditions that do not require the high test of impossibility but provide relief from damages and payment of all or part of the additional costs incurred for dealing with the effects of Covid-19 mitigation measures.
- If your scheme has been affected by the Covid-19 pandemic, we strongly recommend seeking advice to establish the correct position and route to entitlement to recover additional cost and proper determination of Schedule Impact and right to relief.
- It is very important now that Covid-19 is classified as a known event, that Contractors carefully review proposed contractual terms prior to signing, as it may be very difficult to argue later that any impact due to Covid-19 or other similar pandemics could be classed as unforeseen.
Taking A Strong Position With FSG
The team at FSG has already assisted our existing Clients in the development of robust positions for dealing with the impact of Covid-19. If you have not yet reviewed your current and pending contracts for fallibility, we can provide a bespoke analysis service to guide you with sound practical advice and equip you with effective strategies to deal with the current pandemic situation. We can provide contract support at all levels from management to commercial administration and review contract terms and conditions for potential future work.
Partner With World-Class Skill And Experience
FSG is uniquely positioned within the global Pipeline, Windfarm, Waste to Energy, and Road & Bridge Infrastructure construction markets to deliver excellent Contract Management, Claim and Dispute Resolution, and Strategic Advice services. We focus on projects throughout Canada and the UK but can mobilize quickly to guide projects anywhere in the world. Leverage our experience providing solutions for the successful fulfillment of your next contract.
Maximize Profit. Minimize Risk.
Maximize profitability and minimize risk throughout your project life-cycle by partnering with the skilled, knowledgeable team at FSG. Whether you are seeking skilled Contract Management, intelligent Dispute Resolution, or expert Strategic Advice, connect with FSG to ensure the optimal outcomes for your next commercial project.