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ONE SIZE DOESN’T FIT ALL

EOIN CASSIDY, PARTNER AT MASON HAYES & CURRAN, TAKES A LOOK AT THE REPERCUSSIONS THAT COVID-19 IS HAVING ON
CONSTRUCTION CONTRACTS

At the initial stage of the Covid-19 pandemic, employers and contractors alike were feverishly reviewing the force majeure provisions in their construction contracts, hoping to see terms like “epidemic”, “pandemic” or “infectious disease” included. Making express provision for the allocation of risk in relation to new safer work practices or supply chain disruption due to a pandemic are not typical features of construction contract negotiation and many of these risks were unforeseen by the parties.

OneAt this stage however, we are all adapting to living with the virus on a day-to-day basis and for the construction sector, it is clear that Covid-19 related risks are no longer unforeseeable and in the most part they should not be classed as unforeseen. Employers and contractors negotiating their construction contracts now and into the future will need to consider how the risk associated with Covid-19 is allocated, in particular:

• Additional cost of compliance with Covid-19 social distancing regulations
• Extensions of time due to site closures or a reduction of the number of personnel permitted on-site

ISSUES TO BE CONSIDERED


Initial negotiations will likely focus on:
• The existing restrictions continuing
• Stronger restrictions affecting construction work practices coming into force
• Complete site closures
• Supply chain disruption

In each case, the risk allocation may be more appropriate for one party to assume than the other and in the current environment, some level of disruption and revised work practices to comply with existing guidelines should be expected by any contractor and would be expected to remain a contractor risk.

However, where the consequences of the event cannot be readily identified at tendering stage, for example site closures, it may be more appropriate for the risk to be shared between the parties.

COST INCREASES
The pandemic can impact issues such as additional labour costs, for example stemming from a sectoral employment order and costs relating to a mandatory site closure. Site closure cost might include for example demobilisation costs, remobilisation costs and/or scaffolding rental. The parties may want to list out expressly what categories of cost the employer will be liable for and to what maximum level. The allocation of risk for each category will vary on a case-by-case basis depending on the bargaining position of both parties and the specific type of works involved.

Read the full article in Issue 5 of Irish Construction Industry Magazine

Denise Maguire        
Editor of Irish Construction Industry Magazine

Email: denise@mcdmedia.ie           www.mcdmedia.ie