Part 1 – Construction Disputes: Evidencing Costs & Delays Incurred
It feels and is a long time since Maxim last wrote about the impact of Covid-19 on the construction industry. Much of the UK construction industry was halted but has now returned or is progressively returning to work to face the new challenges it has brought with it. The construction and engineering industries of most countries around the world have been detrimentally affected and disrupted by Covid-19. What is the outlook?
Britain’s economy shrunk by 20.4% in April 2020, the first figures relating to the full month of UK lockdown. It was also reported that construction output had fallen by 40% in April and that 1.5 million construction workers were temporarily being paid by the UK government to avoid immediate mass unemployment and potential long term impact to the UK economy. Other similar schemes are in place elsewhere in the world e.g. in Hong Kong.
Until there is an effective vaccine, uncertainty may well prevail about how the world, and those in the construction industry in particular should best adapt to the new circumstances. One thing that is for certain though is that there are now many more contractual notices being issued throughout the construction industry supply chain as a consequence of Covid-19. Mark Mills of Aquila Forensics details his analysis of destruction or recovery in the construction industry, and I quote:
"Whilst the cause of disruption to usual working practices is evident, the attribution of liability and quantification of the impact are yet to be fully explored and understood"
In the second post in this series, I will look at how some of the main construction contracts can be interpreted in the context of Covid circumstances, but in this post, I want to look at the often overlooked foundation underpinning the ability to prepare construction claims and prolongation costs in construction disputes; that of the need for good housekeeping and record keeping. As American Admiral William H McRaven is quoted as saying;
“If you want to change the world, start off by making your bed”
Before you can identify or infer entitlements in your written construction contract, you need to know where you stand in terms of actual versus expected costs and can explain the timeline and cause through which these costs and delays were actually incurred. This will be looked at with particular reference to prolongation cost claims, although other heads of claim such as disruption may also be relevant to consider. The following definitions are adapted from an article published by Pinsent Masons.
- Prolongation claims are claims for actual costs; these therefore need to be both known and be able to be credibly evidenced.
Costs from the relevant period
- For the best outcome, records will be needed for the all of the delay event, not just from when the delay was subsequently noticed.
The importance of notices
- If notices relating to possible time or cost impact are not served and retained, this may affect entitlement and the possibility of its effects reasonably being mitigated by various parties.
Justification of costs
- Again, records of evidence are needed, detailing the evidential relationship between the costs incurred and the delay that is being claimed against - a correlation may well not be sufficient.
- The existence of a detailed and realistic baseline programme is needed to demonstrate that the project programme was on track until the prolonged costs were incurred and are therefore demonstrably additional and justifiable.
- The maintenance by all parties of site diaries, photographs, timesheets and allocation sheets in written or electronic format are invaluable to evidence activity, inactivity and the delay and prolongation that is being claimed for.
It is a sobering thought that we now live in times of not just job changes and job resignations, but also times when staff are furloughed and may be made redundant. A Construction Enquirer article contained the statistic that up to 80% of construction staff do their project correspondence via email. If the member of staff has left the company or is uncontactable, what access to, or retention policies apply to, that member of staff’s vital project correspondence and records?
Mark Mills demonstrates in his hypothetical example of the costs relating to a suspended project, that if key records and data are lost with the departure of staff, the salary saved from a redundancy of a good but expensive member of staff, set against the possible project and company costs of data and narrative loss, is absolutely a false economy and could have disastrous consequences.
The same point can be made in relation to the retention and usage of your trusted external claims consultant, legal advisors and construction recruitment consultant. If you pay peanuts, you get monkeys. When cash flow is increasingly tight and the contractual position is likely to be unclear, now is not the time to be monkeying around when there are business critical decisions and judgement calls to be made by all stakeholders in the construction industry sectors.