Key takeaways from the Procurement Policy Notice 04/20 for those in the construction sector

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06 October, 2020

PPN 04/20 provides essential considerations for those in the construction sector, acknowledging that Covid-19 is not a shot term crisis.

Partnership and transparency

Contracting authorities are reminded to continue to work in partnership with suppliers, to pay suppliers as promptly as possible and look to try to resolve disputes out of the courtroom. The intention is for the pandemic to be used to accelerate such practice changes within the sector.

On site

The changing nature of regulations for site operations and health and safety is a difficult issue and reference to the regulations in force at the Base Date should be recorded. Requirements under the regulations should also be taken account of when pricing new and existing work.

Fluctuations

Those entering contracts for upcoming projects should consider using a suitable fluctuations provision in light of the anticipated unpredictability, with potential for a second lockdown and the end of the Brexit transition period.

Delay affecting works

JCT's principal contracts provide for a time extension for delay that arises from: 'the exercise after the Base Date by the United Kingdom Government or any Local or Public Authority of any statutory power.... which directly affects the execution of the Works' and for 'force majeure'.

As such, new Government interventions, including changes to previous interventions after the Base Date (as defined in the contract) which cause delay could give rise to an extension. The main difficulty is recognising what is known at the Base Date therefore ensuring this is clear in the contract by reference to published documents is advised.

Force majeure is not likely to apply to the current pandemic for new projects, because clearly, it is known. However, the consequences are not fully known, so force majeure may still become relevant. Nevertheless, there are limitations to the use of force majeure, and it is recommended to seek advice on its use before entering a new contract.

'A Pandemic Event'

CLC are considering adding a new Relevant Event of 'a Pandemic Event' in the time extension provision:

  1. any pandemic […],
  2. any measures, recommendations, regulations and legislation issued by the government and/or public authorities in relation to any pandemic […], and/or
  3. any consequences of any pandemic which are outside the reasonable control of the Contractor, which affects the Works […].

Though such a clause may be appealing, it could be problematic as it is currently drafted. For example, the definition only refers to a pandemic, rather than an epidemic, which could be limiting. Also, the wording of final paragraph is especially wide so it should at least be restricted to consequences which directly affect Works.

Case law reminder

RSK Environment Ltd v Hexagon Housing Association Ltd [2020] EWHC 2049 (TCC)

RSK carried out a geo-environmental investigation for Hexagon's contractor, Skillcrown, on a development site. The final report named Hexagon and Skillcrown as its clients. Hexagon purchased the site which later suffered ground collapse and alleged that RSK had been negligent in preparing the report. It was RSK's case that it did not have a direct contractual relationship with Hexagon and they issued a claim, seeking declarations that the contract between RSK and Skillcrown limited RSK's liability, and that applied to any duty owed to Hexagon.

The problem for RSK was that the contractual relationship between the parties was not clear and the Judge was clear that a court cannot determine issues without proper findings as to the existence of any contract. This case highlights the risks where reports are addressed to multiple parties and the importance to ensure limitations of liability clauses are effective.

For more information contact John Pickervance in our Construction & Infrastructure department via email or phone on 0333 207 1134. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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