The Construction Leadership Council (CLC) has provided plenty of practical guidance to the construction industry over the course of the lock-down due to coronavirus. This includes the publication of Site Operating Procedures in April to introduce consistent measures on construction sites to ensure social distancing measures. It’s latest Contractual Best Practice Guidance published on 7 May 2020 (CLC Guidance) provides useful advice for both employers and contractors on measures to be taken to avert economic hardship and to recognise the unique circumstances we all face.
What is the reason for the CLC Guidance?
The CLC Guidance, which has the support of the Government, reflects concern for the long-term health of the construction industry as a result of the coronavirus (COVID-19) pandemic. Contractors and employers are asked to engage in collaborative discussions regarding payment and revision of contractual clauses. The intention is to encourage parties to mitigate the effects of the pandemic and constructively resolve contractual disputes.
What does the CLC Guidance recommend?
The key points of the CLC Guidance, which apply throughout the construction and maintenance supply chains, are:
- Parties should continue to follow contractual mechanisms, such as giving notices of delays applying for additional time and/or money.
- Parties should enter into 'without prejudice' and 'subject to contract' collaborative discussions with the aim of agreeing a suitable approach to potential disputes taking into account the impact COVID-19 on the project. This includes consideration of:
- possible extensions of time
- waiver of any relevant termination triggers
- possible adjustment of valuations and payments to assist the supply chain
- what additional costs are likely to be incurred and how these could be shared
- whether suspension of the project would help both parties
- whether any variations or re-sequencing of works is required or whether specific materials are likely to be delayed
- how best to protect and monitor payments to the supply chain.
Parties may need to have separate discussions with to third parties (such as insurers, sub-contractors, funders, purchasers or tenants) to take their position into account.
The CLC Guidance suggests that amicable compromise is preferable to time-consuming disputes which can result in damaged commercial relationships.
What is the Government intention?
The Government is clearly wanting to ensure that as the lock-down is eased there remains a ready supply chain to help get the economy back on track. Whether this happens will depend on attitudes of both employers and contractors to resolving issues. But the message from Government is clear, which is emphasised in Government's separate Guidance on Responsible Contractual Behaviour. We all need to act fairly and responsibly when performing and enforcing contracts so as to achieve just and equitable contract outcomes, protect jobs and help the economy recover.
Although neither the CLC Guidance nor the Guidance on Responsible Contractual Behaviour are binding there is at least an expectation that parties will do the right thing.
If you have any queries on a specific matter, please do contact Jonathan Hutt in the first instance.
