Fears grow over Covid contract disputes as attitudes harden

Aaron Morby 3 months ago
Share

Construction leaders fear the industry could be heading for a big rise in contract disputes as signs emerge of hardening attitudes against claims for financial loss.

The Construction Leadership Council said that while the industry had worked together last year to get sites up and working, a survey has revealed the mood is changing.

Now there was real concern that as impacted projects begin to complete businesses will become embroiled in costly and long-running disputes over the effects of Covid-19 on projects.

It also warned that the indications were that 2021 may bring the ‘perfect storm’ of Brexit; reduced construction activity; the end of government business support schemes; introduction of reverse charge VAT and a significant increase in the number of claims across the supply chain.

The CLC surveyed was carried out among a range of leading industry professionals in the field of construction claims and disputes.

This revealed there had been an increase in the number of Covid-19 related construction claims being rejected.

Initial indications found that while parties were inclined to settle an entitlement to additional time for completion, there was reluctance to agree financial losses, costs and expenses.

Those responding said that high rise projects and finishing and commissioning trades would face the greatest contractual difficulties.

The survey uncovered anecdotal evidence of commercial behaviour hardening throughout the supply chain, including greater emphasis on management of existing contracts, increased tender lists and sub-economic pricing, increasing insolvencies and robust protective discussions on risk allocation in new contracts.

The CLC warned that without proper fair and reasonable administration of construction contracts, Covid-19 could have a significant and detrimental effect on the industry.

“The CLC asks that industry works together to support the long-term health of our sector by constructively resolving all contractual disputes arising from the pandemic,” said a spokesman.

Legal experts at Fenwick Elliott confirmed clients and contractors were taking a harder line on claims.

Senior Partner Simon Tolson said: “Many of those projects are now at or nearing practical completion.

“Numerous contractors and subbies are telling me there are now even harder chins out there. I strongly believe this reflects employers and main contractors protecting their margins amid fears of how 2021 may pan out.

“Brexit is in that mix too, so all that pent up caution breeds disputes as cashflow is not going in the right direction.

“I suspect that because the industry is seen as doing well picking itself off the floor since last April many feel the claims made are exaggerated.

“But with 15 to 20% drops in productivity, it’s a bit like the reality of ‘excess deaths’. Its very real, and claims are seen as only way out.

“I have seen from last spring to the end of 2020 many Covid Extension of Time and Loss & Expenses claims ‘parked’ until final account. A few have settled on a haggle but not many.

“Suicide bidding is also back in fashion as I am seeing bad contracts taken up that should have been declined so more blood on the carpet is likely.

“I think the CLC and Build UK have done a great job to encourage dialogue to avoid disputes but jaw jaw sometimes only goes so far.”

 

Latest news

BAM tops new-look interactive contracts leagues

Check out new customisable contracts leagues that let you rank firms by type of work won
3 hours ago

Willmott Dixon set for major Oldham secondary school

Plans submitted for 1,200 academy designed by FaulknerBrowns
12 hours ago

Costain technology chief joins new Atkins business

John Batterbee to lead Atkins' new Applied Technology Practice
13 hours ago

Bauer/Keller JV to start £95m HS2 foundations job

Over 200 ground engineering experts will work on Chilterns to Warwickshire stretch
20 hours ago

All phases of £161m north London housing scheme approved

Countryside gains planning for full Peel Place in Kilburn
20 hours ago

Kane nets £29m MEP package on Balfour resi blocks

Specialist to focus on offsite construction across four south London towers from 11 to 30 storeys
20 hours ago

Formula 1 flywheel tech powers up Kier tower crane

Innovative energy storage technology delivers 40% fuel saving at Shakespeare North site
2 days ago

Willmott Dixon bags £23m futuristic car park in Gateshead

10-storey steel-framed car park will be fitted with photovoltaic panels
2 days ago

Construction rebound resumes as output jumps 1.6%

Optimism grows as commercial new work jumps 4%
2 days ago

Laing O’Rourke targets staff gender balance by 2033

New mission statement also commits to operational net zero by the end of the decade
2 days ago

Ex-Wates Resi MD launches housing contractor Real

Paul Nicholls launches builder after buying Rydon Construction's businesses in the south
3 days ago

Billington warns of further steel price volatility ahead

Profits plunge by over 70% to £1.6m after Covid impacts sales and steel prices soar
2 days ago

Green light for £46m Shoreditch hotel and office scheme

Construction to start next year on former street food site
2 days ago

B&K set for £200m Nottingham Broadmarsh offices scheme

400,000 sq ft New Albion Place scheme planned next to old Broadmarsh shopping centre
2 days ago

Readie lands £28m deal for Moog Controls centre

Contractor confirmed by developer Barberry at Tewkesbury site
2 days ago

BAM names new construction chief for Scotland

Jim Ward replaces Bruce Dickson who is promoted to Royal BAM
2 days ago

Costain head of digital construction leaving

Contractor and chief digital officer Nathan Marsh part company
3 days ago

Bristol Uni puts back £300m Temple Quarter start to 2022

Delay supports design rethink to create more flexible space post-Covid
3 days ago

Engie gets green light for Rugeley Power Station revamp

Remediation work to start on site next month before cooling towers come down
3 days ago

FM Conway nabs infrastructure for Kent innovation park

Deal paves way for 1.1m sq ft Innovation Park Medway
3 days ago

Planning for 1,000 homes at north west London hospital site

Network Homes gains outline planning for full Northwick Park Hospital site regeneration scheme
3 days ago

Eric Wright to start £21m Burnley retail scheme

Work to start this summer on Pioneer Place shops and leisure development
3 days ago

Contractor jailed for filling old quarry with hazardous waste

M E Foley (Contractors) boss jailed for over two years
6 days ago

Bids invited for £540m JV North contractors framework

Race start for places on northern housing association consortium new-build framework
6 days ago

Contractor moves to four-day-week to boost work/life balance

Building and renovation specialist Orocco to give all site and office staff Fridays off
6 days ago

Scaffolding collapses on top floor of apartment site

Roads sealed off around resi job after scaffolding damaged during high winds
6 days ago

£250m South East Consortium housing framework winners

Vistry and Wates gain places on major projects lot for first time
6 days ago

Construction buyers report strong “spring surge” in output

Industry output expands at sharpest pace since September 2014
7 days ago

Three consortia shortlisted for Britain’s longest road tunnel

Murphy joins international line-up of firms shortlisted for £2.3bn Lower Thames Crossing
1 week ago

Arup staff have bank details hacked by cyber criminals

Ransomware attack sees staff data compromised at consultant
7 days ago

Contractor services