Phil Morrison, who heads up our Construction Team, answers the key questions those in the construction industry have about the coronavirus crisis.
Are all the construction sites closed down due to the coronavirus crisis?
Not necessarily, the UK government’s latest advice is that UK construction sites may remain open, subject to workers maintaining appropriate social distancing. The government has said work can continue so long as people are 2m (6.5ft) apart. The CLC has published a full list of site operating procedures designed to protect site workers.
As a contractor, you must ensure that all employees are able to work safely and in accordance with government guidelines.
As a contractor what should I do?
Now is the time to communicate with employers and sub-contractors to agree a way to deal with the impact of a site shut down and also to plan ahead for the works restarting.
You should also check your contracts. The closing of a site or the suspension of works will not bring a contract to an end. It is therefore important to be aware of the contractual terms that you are working under. If there is going to be a delay to the completion date and/or an increase in costs, then you must follow the contractual procedures and issue the necessary notices for delay and loss and expense.
Why are contractual notices important?
Construction contracts rely on contractual mechanisms which rely on the issuing of notices. If there is going to be a delay then JCT and NEC contracts require the service of early warning notices, notices of delay, or notification of compensation events and these must be served in accordance with the terms of the contract. If these notices are not issued, a contractor will not be entitled to claim for delay and could lead to exposure to delay damages.
Who is responsible for site security and safety during the coronavirus crisis?
As a contractor, you will be responsible for site safety until the site is closed down and taken over by the employer. It is therefore essential to put measures in place to secure the site during shut down. The works should be reviewed so that the structures will be left stable and the works protected.
How do I ensure that I do not lose monies that are owed to me?
Notwithstanding that sites are shutting down, contractors and sub-contractors are still entitled to apply for payment. However, the project budgets will face disruption and contractors cash flow will be interrupted. It is worth remembering that relevant events give an entitlement to more time, but not money.
A contractor should take advice to ensure that the contract entitles the contractor to make a claim for loss & expense. In particular, check whether the contract contains any conditions that must be complied with as a precondition to entitlement; for example, the NEC3/4 contract has strict timescales for notifying a compensation event. Failure to comply normally means no entitlement to additional time or money.
Although works are not ongoing, the contractor will still be able to claim for ongoing preliminaries, such as the cost of site welfare, insurance, managerial staff and site security. If you are entitled to payment of loss and expense, the cost of labour could be recoverable, subject to the terms of the contract.
Do I need to continue to maintain accurate records?
Yes, yes and yes again. In any claim for payment, time or additional monies, it is imperative that the best evidence of documentation is produced. The contractor should compile evidence of progress on site and the condition of the works and site at closure.
If the site is closed due to coronavirus, can I relax?
No, contractors should continue to administer the contractual terms and in particular the payment process.
Contractors should ensure that any payment applications are processed and responded to with the required payment notices and/or pay less notices.
Also ensure you notify your supply chain of this and agree alternative means of issuing all communications, not just payment applications.
What will my insurance company require from me if I wish to claim due to COVID-19?
The insurance companies will want to know exactly what is going on. Insurance policies will contain strict notification procedures that must be followed in order for the insurer to consider your claim. If you are responsible for insuring the site during the works, make sure that you notify your insurer of a site shut down in any event.
How do I prepare for restarting once the coronavirus crisis comes to an end?
We do not know how long the uncertainty will last, but everyone needs to consider how they will gear up to restart on-site once it is safe to do so. If you halt plant hire, will it be available for re-hire when the sites open? What materials do you have available for restart? Do you source some of your materials abroad? If that country is still in lockdown, can you look at alternative suppliers?
It is foreseeable that once works restart, all contractors will be seeking plant, labour, and materials at the same time. No contractor wants to receive a notice of delay if they are unable to restart timeously.
Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.