Proving your claim and what needs to be done now

Having reviewed their construction contracts, the next major concern was how parties should tackle proving any potential claims. In what is in effect Part 2 of his summary of the impact of COVID-19, Jon Miller provides some practical examples of the issues that need to be addressed. Advice that holds true for any construction claim.

Delays

Only delays to the Completion Date can give rise to an extension of time. Programming information is crucial. The burden is on the party making the claim to show why the COVID-19 shutdown delayed the Completion Date.

Most sites are able to continue working safely. We are aware of a site where working practices have been changed whereby there is no more than one operative in each room, operatives start at different times and ensure they maintain a distance of 2 metres throughout. 

But even then this will give rise to delays to the progress of the Works – i.e. changing working arrangements which slow progress may still give rise to an extension of time if they delay the Completion Date (and additional recoverable costs if the construction contract allows it). 

How many people were supposed to be on site? Who was self-isolating/ill/had a pre-existing condition? What trade(s) were they and where were they supposed to work? 

Was there a lack of supplies/materials? If so, when were they to be delivered (and eventually when did delivery take place)? 

Nearly all construction contracts impose a need to mitigate/use best endeavours to reduce delays.1 Record all attempts to try and find alternative labour and get new delivery dates – i.e. keep emails. 

Best endeavours – a new weapon?

Many contracts contain a provision whereby the contractor is to use their “best endeavours” to mitigate delays.2 We have experienced responses to requests for an extension of time whereby contractors and subcontractors have been reminded of their duty to use best endeavours and asked for an explanation of what they have been doing to discharge this responsibility. 

What is “best endeavours”?

Unfortunately (yet again) there is no definitive legal answer. Explanations have been given whereby:

• “Best endeavours means what it says – it does not mean second best endeavours.”3
• “Best endeavours are something less than efforts which go beyond the bounds of reason but are considerably more than casual and intermittent activities.”4
• “This proviso [to use best endeavours] is an important qualification of the right to an extension of time. Thus, for example, in some cases it might be the Contractor’s duty to re-programme the Works either to reduce or prevent delay. How far the Contractor must take other steps depends upon the circumstances of each case, but it is thought that the proviso does not contemplate expenditure of substantial sums of money.”5

I suggest that a “best endeavours” obligation would include:

• if the site is shut down, continuing with off-site activities insofar as they can safely be carried out (e.g. design, but this might even include off-site prefabrication);
• reprogramming the Works in accordance with the SOP; 
• looking at the possibility of replacing labour who cannot attend site (e.g. due to illness or self-isolation), even temporarily.

The key point as always, legally speaking, is to make sure that all efforts to use “best endeavours” are recorded and kept – e.g. emails.

Costs

• Record separately all costs related to stopping on site or any slowdown, e.g.:
• demobilisation and remobilisation costs;
• the costs of making the site safe;
• materials – what was originally allowed for in the Contract Price, and what did it increase to? 
• retaining labour/non-productive payments are often difficult to recover. Ask the employer/contractor what they want to do?

Costs – the big mistake

A common mistake people make is that the additional costs incurred are not clearly attributable to the relevant delay/shutdown due to matters such as COVID-19. For example, demobilisation and re-mobilisation costs should be recorded separately. Suppliers’ invoices should not simply cover all the materials delivered to site before and after a slowdown – get clear what materials increased in cost as a result of the shutdown and why. 

Particularly infuriating are timesheets with 7 (or more) hours for every day without any explanation of what was being done, or where the operatives were working. 

What is happening at the moment?

“Where it is not possible”/“Where it is possible”

The above phrases are being widely used in Government communications aimed at the workplace, and in construction industry advice.  Employers, contractors and subcontractors are looking for a clear set of rules telling them what to do, and have criticised the use of these phrases as suggesting almost anything is “possible” with sufficient time and money. 

One thing is clear however, it is impossible to produce a set of detailed rules which could govern a large number of different building operations.

Construction Industry Council – Site Orientation Procedures Version 6 (“the SOP”)

Against this backdrop the SOP and its previous versions have become the benchmark as to how sites operate in the new post-COVID-19 world. The SOP covers areas such as how to travel to and from site (i.e. public transport should be avoided, if operatives drive to site in their own transport with others they should keep the windows open etc.), hand washing (when entering and leaving the site), toilet facilities (an attendant may be necessary to reduce overcrowding) etc.

When dealing with construction operations, significantly the SOP does not say work should stop if operatives cannot keep at least 2 metres from each other.  

In these circumstances a hierarchy of controls is recommended:

• can the risk be eliminated completely (i.e. does it need to be done now or can it be done more safely in the future)?
• reducing the risk – reducing the number of people involved – e.g. avoiding the use of the lift (which will be very interesting in high-rise developments);
• isolating – keeping small teams together and separate from other operatives;
• control – limiting face-to-face working to 15 minutes or less;
• PPE – whilst not used when the 2 metre rule is in place, PPE could be relevant where this rule cannot be adhered to. 
• The latest version of the SOP issued on 20 October 2020 even requires site canteens to display an NHS Track and Trace QR code

The SOP is guidance only, and does not have the force of law.  Indeed, according to a Construction News survey 1 in 5 construction workers on site still believe there has been little or no attempt to maintain the 2 metre distancing rule.6  

Nevertheless the HSE are almost certainly going to rely on the SOP when deciding if a site is operating safely or not, which ultimately could lead to enforcement action – apparently the HSE received more than 4,500 reports relating to COVID-19 between 9 March and the first week of May.7

What should I do if the SOP is not being followed?

Highlight the failure in writing to the relevant subcontractor, principal contractor and the employer who all have duties not only to their employees but also those who might be impacted by the works under the Health and Safety at Work Act/CDM Regulations.  Bear in mind though, there is no absolute requirement that everyone must be at least 2 metres away from each other at all times.

Refusing to work can have serious implications commercially speaking and will nearly always amount to a breach of contract, unless there is clear justification for the refusal.  As always, gather together as much evidence as possible via photographs, emails written at the time etc., highlighting the issues.  

As an adjudicator it never fails to surprise me when someone complains of a significant event on site, but has failed to even mention it in an email to anyone.

Extensions of time and money

A significant number of notices requesting an extension of time, and in some cases loss and expense, have been issued. Many of the notices are relying on a wide range of reasons, not only force majeure but also changes in law and statutory requirements, the issue of instructions in order to justify more time, and sometimes money. and ascertained damages being payable.

However, the small survey I conducted8  covered around 40–50 projects and it appears to be that for some small commercial/residential developments employers and contractors alike have agreed to suspend the work with some form of agreement on financial terms.  The same projects are now looking at what can be done to reopen.  This, however, appears to be the exception.

Overall a few extensions of time, let alone anything else, have been dealt with. To some extent this may be quite rightly due to employers, contractors, consultants etc. all directing their efforts as to how they can proceed in light of the current restrictions, and particularly the SOP.  However, to quote a leading developer who spoke to me, many employers, contractors etc. are “kicking the tin can down the road”.

Essentially the question as to whether even an extension of time should be granted is not being answered. The common response is to simply ask what “best endeavours” are being used to mitigate the delay. 

A senior representative of a large firm of consultants pointed out that many consultants are not entirely sure what to do with an extension of time claim based upon COVID-19. As mentioned before there are no real English cases as to whether COVID-19 would constitute force majeure under the JCT contract (although I believe that it would), and faced with this uncertainty some consultants are not entirely sure how they should react.

Records, records and records (again)

What is becoming apparent is that, with the parties’ energies being directed as to how they can safely operate on site, very little attention is being paid to record keeping as to what the impact of the COVID-19 pandemic actually is on the works. Records are vital for establishing whether the contractor is entitled to an extension of time and (if applicable) any loss and expense. 

We have been recommending preparing a daily narrative of what has happened on site, the number of operatives, the areas where they are working, and the reason for any shortcomings (e.g. operatives who have to self-isolate).  This can even be done in the form of daywork sheets/daily allocation sheets provided they include the details, and could prove very useful in the future.

CLC Guidance

Faced with the potential for disputes that may keep the legal profession busy for years the CLC has recently issued their "Best Practice Guidance”9 in an attempt to avoid the intransigence which often blights the construction industry.  The document also contains sample notices to be given for claiming an extension of time for COVID-19 under a JCT and NEC contract, and an explanatory note on how the notices should operate. 

The “Best Practice Guidance” recognises that the parties need to protect their positions by issuing notices, and I would expect the relevant notices to be given already under most standard form building contracts, but this is not enough. 

The “Best Practice Guidance” then goes further by encouraging the parties to meet and discuss the problems that they are inevitably facing on site, and the commercial issues involved, and gives the precedent for a “Without Prejudice Subject to Contract” approach whereby the parties should be able to discuss the issues faced more openly without fear of what is being said being used against them in the future. 

The “Best Practice Guidance” even explains what is meant by the terms “without prejudice” and “subject to contract” and contains a suggested agenda for any “without prejudice and subject to contract meetings”.

Whilst the SOP produced by the CLC may have turned into the “go to” document for operating on site, it remains to be seen whether the “Best Practice Guidance” will have anything like the same impact.  I have to say that my experience so far is that everybody is rather reluctant to discuss time and money, but hopefully the “Best Practice Guidance” will give the encouragement and tools for this to happen in at least some cases. 

New contracts –dealing with COVID-19

There are inherent uncertainties in trying to price and programme new projects which are planned to start in the latter half of 2020 and beyond. No one knows when the restrictions will change next or end. In broad terms the few contracts that are being negotiated currently tend to be on the principle of “benchmarking”.

Conclusions 

We have seen situations where a contractor under the NEC has made it clear its valuation of the delays and additional costs caused by COVID-19 assume the SOP would apply to the works but only until (say) 1 December 2020. Other contractors are trying to set out exactly what they have allowed for within their price by way of working restrictions etc., and for how long, with an added clause saying that should these restrictions change this could lead to a delay, increase in price, or even a decrease in the Contract Sum if the restrictions are removed far quicker than everyone anticipated. 

However, that being said, a conversation with a recent developer revealed that they are finding that some contractors on new projects are seeking to insert clauses within new construction contracts containing not only more time but more money for COVID-19 related delays, but the developer’s view regarding the state of the market is that contractors are starting to look at the lack of work going forward, and are not pushing too hard when it comes to seeking further money for disruption caused by COVID-19. 

Finally, the CLC has published a suite of clauses to be inserted within the JCT D&B 2016 and NEC410 contracts whereby COVID-19 can either just give rise to an extension of time, an extension of time and the costs shared between the contractor and the employer (how they are shared is to be negotiated), or the contractor receives an extension of time and all costs associated with COVID-19. The amendments and guidance can be found at the CLC website.

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• 1. E.g. JCT 2016 D&B clause 2.25.6.1.
• 2. For example see the JCT D&B 2016 clause 2.25.6.1.
• 3. Sheffield District Railway v Great Central Railway [1911] 27 TLR 451.
• 4. Pips (Leisure Productions) Ltd v Walton (1980) 43 P&CR 415.
• 5. Keating on Building Contracts, 6th edition (Sweet and Maxwell), p. 642.
• 6. Construction News, 6 May 2020, www.constructionnews.co.uk (online).
• 7. Construction News, Article, 6 May 2020, www.constructionnews.co.uk (online).
• 8. I.e. sending an email to all of my colleagues of whom a few replied.
• 9. Construction Leadership Council, “CLC COVID-19 Contractual Best Practice Guidance”, 7 May 2020. I should point out here that I was involved but not exclusively in drafting this document.
• 10. Which I have been involved with.