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23 March 2020

Limit the impact of COVID-19 on your UK construction project

Introduction

Clients are asking us what they can do to lessen the impact that the pandemic is having on their construction operations. Their challenges range from main contractors being denied access to the site, developers concerned about project delays and fulfilling obligations to their purchasers, as well as the anticipation of shortages of imported materials and labour.

Many will have entered a standard form construction contract such as the JCT. The first step is to check the contractual provisions. For example, the present circumstances may amount to force majeure and under the JCT standard form there is no contractual definition of force majeure.

Notice 

There will often be notice provisions that apply when completion of the work is likely to be delayed beyond the target completion date. Giving notice enables both parties to monitor the effects of delay and mitigation. A failure to give notice may result in the loss of an entitlement to an extension of time.  Even if a contractor is entitled to an extension of time as a result of a force majeure event, it would not be entitled to loss and expense.

Change in legislation

The JCT standard form includes as a Relevant Event ‘the exercise after the Base Date by the United Kingdom Government of any statutory power which directly affects the execution of the Work’.

The UK Government has not (yet) put in place emergency legal restrictions such as shutting down sites or restricting working conditions or movement of labour. If such legislation is brought into force then that is likely to trigger claims extensions of time under standard form contracts, as well as raise the prospect of claims under policies of insurance

Termination

Force majeure may operate as an event entitling a party to terminate. Usually the contract will stipulate that termination is not available until the work has been suspended as a result of the event for an appreciable time, which is usually a period of two months.

Summary

The first step is to review the terms of your contract and find out what the rights of both parties are in relation to extending time for completion and obtaining additional payment for direct loss and expense.

The key areas of risk appear to be shortage of materials and labour. We are heavily dependent on materials imported from China, Germany and Italy and those are likely to be disrupted. Careful consideration should be given to alternative supply chains.

Everyone engaged in a construction project is responsible for the health and safety of their work force.  This pandemic brings into sharp relief that responsibility and our response should be enhanced welfare facilities onsite, sanitation training and policing, encouragement to self-isolate as appropriate, avoiding non-essential travel and generally following the government guidelines.

In every case you should keep and maintain detailed records of the delays caused and the loss and expense derived from the COVID-19 outbreak.

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