Record, review, respond and react
Construction activity is declining at the fastest pace since the financial crisis of ten years ago, and for many businesses in the industry the main preoccupation is becoming the search for a survival strategy. Delays and disruption to projects and payments are the new normal.
Unprecedented Covid-19 support has been offered by the government to companies desperate to safeguard cashflow as payments from clients slow to a trickle. Payments under the various government schemes are slow to come through however and for many taking urgent action to mitigate the impact of the hit to cashflow is essential.
Fortunately, practical advice for contractors and others in the industry is coming forward now that it can be seen how the construction supply chain is being impacted.
A key requirement becoming clearer is to establish proper recording and reporting procedures that may prove vital, now and as the world returns to some degree of normality.
“On a practical level our main recommendation, irrespective of the form of contract employed, is to act now and record all events that impact your ability to perform your obligations and make any progress,” says international dispute resolution expert Iain Wishart of Iain Wishart Group.
“Firstly, we recommend that you talk directly to the Employer and Consultants and seek a consensus on ways of mitigating the effects both potential and real. It would also assist all parties in trying to move things forward in a measured way.
“Many projects rely on various supplies from domestic and international sources and such supplies are, and are increasingly likely to be, delayed, disrupted, or cancelled, due to temporary or possibly permanent closure of manufacturers and suppliers in all countries.
“There will be potential shortages of available labour. Site staff, labour and consultants will be disrupted as people become infected, travelling is restricted and/or lockdowns are enforced.
“The availability of materials, plant and equipment will be restricted. The overall effect on the Construction Industry could be catastrophic.”
Mr Wishart says there is a lot of legal advice going around as to the contract terms and conditions that apply and that advice is obviously very important. “However, the real danger to the industry is that contractors will not be able to survive, as not only will they face the problems of keeping sites running with potential material and perhaps labour shortages, they will also face total disaster if their clients can’t afford to pay them.
“In those situations, no disrespect to the legal profession, but the contract will not help. The industry is going to need money.” Mr Wishart advises contractors talk directly to the Employer and any consultants involved to seek a consensus on ways of mitigating the effects.
“Solutions would need planned, concerted and co-operative efforts and, without doubt, government money. We work a lot outside of the UK, and can also see huge problems abroad, even in places like Dubai where we have an office. Money in some overseas markets can be short at the best of times and payments slow, but with the tourist industry virtually closed, there will not be a lot of money going around until things settle down.”
Mr Wishart says his recommendations can be instigated immediately and can be maintained even if the project is ‘locked down’. “Our main recommendation, irrespective of the form of Contract employed, is to act now and record all events that impact your ability to perform your obligations and make any progress.
“Even if you achieve a broad measure of project cooperation, we still recommend that you undertake some measures (see below) now to record events. Your survival might depend on it.”
The recommendations include:
- Ensure your daily resource levels are recorded;
- If works are proceeding, record the resources employed on the various activities;
- If works are idle (temporarily or permanently) record the resources that are affected;
- Record the progress, if any, that is achieved;
- If you are able, take photographs of what is (or is not) happening;
- Check your material delivery schedules;
- Contact your suppliers for updates on projected deliveries;
- Check the impact of those delivery updates on your programmes;
- Contact your suppliers and subcontractors and maintain regular dialogue as to labour, material, plant and equipment availability.
- Record the discussions in writing;
- Ensure the records are accurate;
- Keep your Employer up to date with the potential impact of all of the above on your ability to proceed and progress the construction work and ultimately complete the Project. Record such discussions in writing;
- Issue notices and or early warnings as required under the Contract to protect your position;
- Set up database of the above records so that it is readily available;
- Ensure all emails are logged and available in a central file;
- Establish a secure back up file for all the records / documentation;
- Keep all records until any discussions / issues have been fully and finally resolved.
- There is no better record than a contemporaneous one!
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