Moth balling of construction works: a commercial/contractual perspective

2/4/20
closed due to Covid 19

Unprecedented circumstances are causing huge anxiety and concern, as well as much confusion, as is obvious to all.

Given the high probability that there is to be a cessation of most or all ‘non-essential’ construction work, (which is yet to be defined, but it can be assumed, for the purposes of this ‘conversation’, this means anything that does not directly or indirectly relate to dealing with the consequences of Coronavirus: Covid-19, and urgent public health and safety), contractors and subcontractors are likely to be the most directly affected, in already difficult times.

There is a wealth of information being distributed about the ‘legal’ implications. What are the practical and commercial impacts, what can be done to reasonably, fairly, protect the interests of each and all parties, especially hard-pressed contractors?

Firstly:  ‘Follow The Contract’ is the watchword; most contracts contain suitable clauses, however, interpreting them can be tricky, but get the contract out of the drawer and read and understand it thoroughly (or ask your professional adviser to intervene and interpret).

Secondly:  Take Professional Advice, commercial and legal – this is a minefield; custom precedence and interpretation, especially concepts such as ‘change in legislation’ and ‘Force Majeure’  will take some serious unravelling; this is a job for specialists familiar with contract formation and construction disputes.

Thirdly:  Keep detailed records and make sure that, post the event, an audit trail can be followed – if you are not sure what records to keep, then take advice.

The sequence of potential ‘thresholds’ or decision points should be considered, prepared for and if invoked, appropriate action taken:

  • Continue Working – unless or until directed by government legislation, this is the most likely contractual position; clearly this is increasingly impractical as the situation evolves, but it is expressed or implied by many, if not most contracts (and bespoke amendments).
  • Cease Works following Direct Instruction from the Employer –most contract forms allow for this eventuality; the imperative is to ensure, record and be able to demonstrate, compliance with contractual procedure.
  • Cease Works due to inability to comply with government advice and directives, such as social distancing –a more difficult criteria to follow, prove and justify; ensure site staff, management and labour record what specific circumstances triggered this.
  • Cease Works by mutual agreement: It may be commons sense; it may be the obvious course of action, but, once the dust settles and projects over-run cost, programme and fail to meet expectations, and this becomes a distant memory, each party will seek to apportion responsibility to others – they always do: document things properly, make proper records – too often businesses rely on endless e-mail chains with small kernels of key information scattered around randomly!

Commercial Risk Management, specialist QS/Cost Consultants, Programme and Planning Analysts, and commercial construction experts, is in dialogue with a range of legal firms, each suited to different scale, scope and type of specialist and main contractors, to develop and offer guidance to ensure sites and contracts are mothballed appropriately, are ready for mobilisation as we emerge the other side, can manage their responsibilities for suspended sites in the interim, (and will be ready to mitigate the inevitable disputes).

Rather than preparing for the traditional ‘adversarial’ outcomes, CRM is here to help ‘design in’ and ‘work out’ better outcomes.

Please use this link to download useful guidance checklists on Mothballing Sites & Contracts, the first in a short series of guidance notes we shall be distributing.

Of course, if you have anything imminent or specific, we’re here to help.

Mothballing a Site

Mothballing a Contract