the construction industry and the impact of covid 19

Hwchamber.co.uk – As the Covid-19 situation continues to develop, further issues are arising and impacting upon the construction industry.

When the first lockdown was imposed, employers, main contractors and sub-contractors were very pragmatic. For a large number of projects, they agreed to close the site on the basis that the contractor was given more time, but agreed to not to charge, or to make a moderate charge, for the additional costs. With the benefit of hindsight, the sites that actually closed were only shut for a short period. We have not seen disputes arising from the shutdown, but what we have seen is that people did not consider the continuing effects of the Covid-19 related measures to ‘on site’ productivity when they made their agreements. It is these disputes that are starting to come through.

The government has continually emphasised that the construction industry should keep working, but with additional measures to keep people safe and to minimise the risk of infection. These measures have not rendered construction projects impossible to complete, but they have delayed and disrupted construction works on site and supply chains have also been severely disrupted. Construction projects depend on the flow of materials, equipment and labour and any interruption in that supply chain can delay delivery and increase costs.

We are seeing a rise in the number of construction disputes, due to disruption or loss of productivity claims, simply on the basis that, due to the Covid-19 restrictions, labour is less productive, and materials cannot be transported around sites efficiently. As it can take time for disputes to crystallise, we expect the number of enquiries to continue to rise in the next few months with an associated increase in the number of adjudications.

We have already seen how effective this alternative dispute resolution process can be during Covid-19, principally because of the short timeframe to obtain a decision. An adjudicator’s decision is binding until the dispute is finally determined by legal proceedings, arbitration or by agreement. However, in any event, using this form of dispute resolution can help possible cashflow issues.

In addition, some Technology and Construction Court cases decided in 2020 have demonstrated the court’s view that the parties could not rely on the Covid-19 pandemic and the unprecedented circumstances to avoid the adjudication process. In Millchris Developments Ltd v Waters [2020] 4 WLUK 45, the parties had to adapt and work around the challenges resulting from Covid-19; for example, site visits could be conducted by way of a video link, meetings could be held remotely and extensions could be proposed in the event of witnesses unavailable at the time.

Broseley London Ltd v Prime Asset Management Ltd [2020] EWHC 944 (TCC) confirmed that while cash-flow will undeniably be a problem for many businesses during the pandemic, the court was not prepared to permit adjudication to deviate from its principal purpose of facilitating a ‘pay now, argue later’ regime.

It is likely that guidance and procedures will continue to change, and parties will need to keep track of such changes via the government’s website.

The other point to note is that most awards are paid without challenge. The fight tends to go out of the dispute in the face of the adjudicator’s decision at the end of the process.

HCR’ construction and engineering team including solicitors, construction professionals and adjudicators, can take a truly holistic approach when considering any issue – if you would like advice, support or guidance, do get in touch.

Author: Keith Blizzard, Partner (non-solicitor), Head of Construction & Engineering Team, Harrison Clark Rickerbys

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