Covid-19: Carry on Constructing
The fact that the Nightingale Hospital is needed is terrifying but its almost overnight appearance is utterly inspiring and demonstrates so much that is brilliant about construction.
Construction is the industry that designs, builds and maintains the stage upon which we play out our lives, including the necessary infrastructure and facilities that protect, educate and connect. It epitomises teamwork, as there are teams at work at every level of the multi-layered and interconnected supply chains that deliver the projects. And construction combines cutting edge design and manufacturing techniques with trades developed over centuries. The Nightingale, and similar new hospitals, are shining examples.
Yet whilst these hospitals are rightly applauded as a huge high for construction, the industry is at a low and needs treatment itself. Construction has been suffering from tight margins, lack of investment and labour shortages for years. Covid-19 has sharpened the pain. Now construction is caught in the crossfire between the need to protect its people from Covid-19, the economic need to keep cash flowing and the public need for critical projects to be delivered. Typical dilemmas we are seeing are these:
Should sites close?
Provided that the guidance from Public Health England can be followed, and social distancing measures can be implemented, the Government says construction should continue. Some thinking is required to decide if work could, or should, carry on. It will depend on the criticality of each project, the nature of each site and its facilities, the type of work and the health of the personnel involved.
Many construction businesses have stopped work on some or all projects because they cannot meet the conditions or comply with the Health and Safety at Work Act, or because their supply chain has temporarily broken down. Those that do continue must repeatedly review and update risk assessments, policies and procedures; and ensure they are understood and implemented.
If work stops, can we recover time and money?
It depends on the contract (as ever). Contractors should be able to rely on the following types of clauses to claim time and money if the Employer chooses to close sites and this causes delay: compliance with an instruction; postponement of work on site or prevention.
If the decision to stop is the Contractor’s choice, then the clauses above are unlikely to help. Instead, it could consider one of these options.
1 A conversation. These are unprecedented times and Covid-19 is affecting everyone in the supply chain professionally and personally. An open conversation may lead to a sensible division of risk and pave the way for a quick remobilisation when possible. This should be the starting point. If it fails, then one of the following may work, or help encourage another conversation.
2 Force majeure. If force majeure is defined to cover disease or a pandemic, then the Contractor may be in luck and recover time, but generally not money. The standard JCT forms do not define force majeure and there is limited case law to help, so the position is unclear. Even if it is interpreted to cover a pandemic, the question is whether this event prevents works from going ahead. Given that the UK Government has specifically stated that construction can continue, the Contractor will need to explain why its specific circumstances mean it cannot. The Contractor must then think carefully about whether it wants to invoke the clause, because some trigger a right to terminate, which may not be the intended consequence.
3 Frustration. This is a doctrine (not a clause), which operates to terminate a contract automatically if performance becomes impossible, so the thresholds are high and hard to prove. The event must have occurred after the contract was formed, not have been contemplated beforehand, be neither party’s fault and make performance impossible (not just slower or more expensive).
4 Breach of contract. If the Employer is responsible for health and safety, and its insistence that works continue puts people at risk, it could be in breach. The Contractor may be able to find an angle to argue that its associated losses are recoverable, and the Employer should not be able to profit from its own breach. Caution should be exercised, and advice taken, because the argument will be fact and contract specific and walking off site could be a repudiatory breach.
" Construction has been suffering from tight margins, lack of investment and labour shortages for years. Covid-19 has sharpened the pain. "
How can contractors protect themselves?
Not every contract will cover the Covid-19 situation directly or clearly and not every contracting party will take the same approach. Ultimately the key messages are to keep people safe and to keep lines of communication open across every level of the supply chain, but contractually there are two key steps.
1 Record what is happening as events unfold. Those working and requiring subcontractors to continue should record how and why it is safe; e.g. take photographs, write and update policies and procedures and keep notes of the content and attendees of implementation measures (e.g. toolbox talks). Those leaving site should put the paper trail in place to show that it was unsafe or impossible to continue. Write to management and the health and safety leads, take photographs or videos of unsafe practices showing that social distancing was not possible and not happening.
2 Issue notices. Each contract will specify when notices must be issued to obtain extensions of time, loss and expense, or (conversely) damages for delay. It will also tell you what to put in the notice, who to send it to, where, when and how. Every rule must be followed (especially the time limits), or the notice might not take effect and entitlements may be lost.
Looking ahead, what can we do to prepare for the post-Covid-19 period?
1 Make the most of the package of support offered by the Government. Most businesses are doing this already and team members are on furlough, grants are being obtained etc.
2 Embrace technology. Almost overnight huge teams have started working from home, where webinars, video calls, WhatsApp all make meetings, conferences and even online hearings possible. It is extraordinary how flexible working has taken off and how many projects are being delivered “virtually”. This will continue, so now is the time to get used to it.
3 Health check your contracts. If there are quieter moments, use the time to check if you are using the right forms with the right amendments in the right way, or if precedent contracts need refreshing. Are template notices and flowcharts in place for current and future projects? Do all relevant people know how to use them or would some training help?
4 Look after your people. Stay in touch with employees, the supply chain, employers, consultants and advisors, to ensure their well-being, maintain relationships, deliver what is possible remotely and to be ready to ramp back up again when restrictions are lifted. Technology makes it easy!
The last point is crucial, because it is people that matter the most. This is what the Covid-19 crisis brings home so acutely, why continuing to work is not an easy choice to make, why the teamwork part of construction must come into its own now and in the post-Covid-19 era, and why the efforts of those working on and in Nightingale matter so very much.
Finally, stay positive! Construction is fundamental to society. It is an industry that is doing, and will do, fantastic things. After all, a hospital was just built in 9 days.