Part 2 – Interpreting Construction Contracts Reference Covid19 & the New Home Working v Office Experience
Since writing our previous article on Covid19 in June 2020, it is still too early to be sure how each of the various construction contracts used in the construction industry will play out the contractual and legal consequences of Covid19. We would welcome contractors, claims, delay, dispute and legal professionals getting in touch with us to give their observations as trends start to emerge. In this blog article, we will touch on a few points relating to construction contracts, and then move to look at how the future of office and remote based working is already evolving and will continue to evolve to adjust to working life while there is an ongoing Covid19 risk.
What can still be seen now, is perhaps a calm before the storm – a time for information to be gathered for possible future use in relation to time and cost claims and disputes. Both lawyers and claims and dispute consultancies have published very little general new guidance in the last few months outside bespoke paid advice to their fee paying customers.
NEC4 & FIDIC
In relation to the NEC4 form of contract, as with most forms of contract, it doesn’t contain a specific clause for dealing with a pandemic, but as David Feehan at CDC notes, it;
…provides several routes for an extension of time and additional cost. Whilst there is no specific Force Majeure provision, clause 60.1(19) provides for a compensatable event scenario which would likely cover the COVID 19 pandemic.
He goes on to explain a number of possible complications, and also specific factors relating to the territory of Hong Kong. He also notes that FIDIC have issued a Guidance Memorandum that aims to cover commonly experienced COVID scenarios and potential routes and remedies for that type of construction contract.
The past affecting current & future entitlements
How future Covid19 related contractual entitlements will be determined remains to be seen, and much of this may be concluded in court, but as David Feehan notes, one aspect to note is that earlier employer delays to works that resulted in the project being pushed into a period affected by Covid19 could lead the later delays also being claimed for as a consequential effect of the earlier delay event.
What if a further Covid19 wave and even additional lockdown happens?
The possibility of further disruption to the construction industry and expected productivity levels and working practices both on site and within the site office, regional office and head office environment, should be considered and risk managed. Arbicon advise in their Q&As relating to Covid-19 for the Construction Industry, that risk sharing agreements and contract amendments should be considered. It may be reasonable to assume that Force Majeure may become a less likely route to compensation as Covid19 becomes ‘normal’ and arguably foreseeable, with everyone needing to live with it for the foreseeable future. Clearly getting good advice and making informed decisions is critical at the current time.
Embracing working from home where possible and making a commute to the office worthwhile
Much of physical construction work has to be done on site and can’t be done at home. However, for construction consultants and much of the construction design and supply chain, the latest advice as of 1/7/2020 from the Construction Leadership Council remains for “people that can work from home to continue to do so”.
Many of Maxim’s clients have and continue to fully embrace this advice and use Teams, Zoom and other collaboration tools and have often found that productivity has been maintained while working remotely and consequently are not rushing to get their staff back into the office. On-boarding new employees and training inexperienced staff remains a challenge we understand, as is the business development function that has traditionally relied on face to face meeting and hospitality. However, where there is a will there is a way and even this can be overcome. ‘Virtual’ client socialising, networking and business development has started taking place with ‘virtual pub’ meet ups and wine couriered to clients’ homes to allow ‘real’ wine tasting events to take place online in groups with real wine to be enjoyed as the incentive to attend!
So what kind of an office environment might (many/most/some) employees return to?
When futurists and idealists wrote of a possible work life balance utopia, and others perhaps of the opposite dystopian nightmare of not being permitted to travel or be with your work colleagues, few foresaw that a global pandemic would make such issues ones experienced first-hand in the UK and by much of the world’s population.
While some say this creates the chance to create a better ‘new normal’, the reality is that pretty similar economic forces to those extant in the past will still be playing out in the new context. Some claim we are facing a K-shaped economic recovery which is potentially a serious social and political issue which the construction industry should play its part in minimising. For companies that need to make their office work environments safe for their employees to come back to, they do have the opportunity to re-imagine working practices and the purpose and experience of office working.
The RICS has written a number of articles relating to Covid19, and a 12th June 2020 article covers the basics on re-opening the office environment from a health and safety, perception of safety and practical viewpoints.
Others in the private sector, have thought even more deeply about the practical and philosophical point of office working, collaboration, and the cost/benefit/risk of the commuting that is required. Unispace appear to be one of the thought leaders in this area. In one of a number of blogs on the subject, Unispace identify the progression from Activity Based Working (ABW), to Experience Based Working (EBW) and draw out the point of being in an office environment – to be there to make something specific happen. Depending on the business, this could be any combination of idea generation, decision making, team building or maintaining the company culture and way of doing things. Once this purpose is achieved or reinvigorated, then people can return to working remotely until the next office-based meeting is necessary.
There remain a lot of ongoing unknowns about Covid19 and the future direction of the construction industry in terms of contractual entitlements, methods of working and further responses needed to combat Covid19. Certainly agile companies and empowered workers have been at an advantage when responding to the challenges of the pandemic. As many governments have, the UK government has published a Roadmap to Recovery for the construction industry. It highlights three phases of activity; a Restart, a Reset and a Reinvent stage. All of these stages rely on partnership rather than conflict between the construction industry supply chain. We continue to wait with bated breath to see whether such thoughts and recommendations for collaboration and partnership turn to positive action. Such an approach will reduce the length and depth of any slowdown or recession in the construction industry and in the wider national and international economy. The glass is surely half full?