Claire Mills, Senior Associate at Brodies LLP an ACE affiliate member, recently shared insights that would be useful to consultants in particular. Claire specialises in construction law and advises clients in a number of different sectors and industries.
Construction professionals should carefully check the terms of their appointment agreements to consider what their obligations are and what relief may be available to them as a result of the current COVID-19 pandemic.
For new projects, we are beginning to see construction professionals seeking specific terms/prolongation clauses to cover the effects of ongoing restrictive measures and a potential resurgence of COVID-19 resulting in new restrictions.
So, what are the key obligations and possible routes for relief, in the main industry standard forms of appointment and a typical bespoke developer generated appointment?
Some of the industry standard form professional appointments contain express duties on the consultants to provide early warning to the employer of any matters likely to impact the project, e.g., NEC 4 Professional Services Contract (NEC 4 PSC) and ACE Professional Services Agreement 2017 (ACE).
Bespoke appointments often contain similar provisions, requiring the consultant to advise the employer as soon as they are aware of any risk to the project budget or programme.
There will also likely be obligations upon consultants to carry out their services in accordance with a programme, so as not to cause any delay to the project. Consultants may be deemed to be aware of so-called third-party agreements with target dates for completion, and not put the employer in breach of these.
Where consultants are unable to perform their obligations under appointments due to COVID-19, they should carefully consider what their obligations are regarding the programme and what additional notices should be given.
NEC 4 PSC clause X7 entitles the employer to charge liquidated damages for late completion of services, unless relief is given by a change to the completion date due to a compensation event. Bespoke appointments typically do not have extension of time provisions, but it may be the case that consultants look to include these going forward.
Project delays attributable to COVID-19 may result in consultants providing the same services but over a longer time. Prolongation costs are typically not provided for in bespoke forms of appointments. However, some of the industry standard forms are more generous - compensation events under the NEC 4 PSC such as an instruction to stop the services or 'prevention' can provide relief to the consultant with a change in the Prices.
The ACE agreement specifically allows relief for disruption to the performance of the services due to events that were not reasonably foreseeable or other reasons beyond the consultant's control.
The long-term impact of COVID-19 is uncertain, but further delay and disruption is arguably foreseeable if there is a further resurgence or restrictions on movement are reinstated. Consultants and employers may therefore decide to agree parameters for prolongation costs in advance when negotiating new appointments.
In instances where consultants are required to perform additional services that are not part of the original scope or price - as a result of COVID-19 - there will typically be a mechanism for agreeing an additional fee for such services.
Consultants should be aware of specific terms of their appointments that may require formal written agreement in advance of carrying out such additional services, or prescriptive time-periods for submitting quotations or notices.
Future appointments may be more prescriptive about what services employers may expect to be included, to reflect the current or potential COVID-19 situation.
Employers looking to mothball projects as a result of COVID-19 may be looking at the suspension and termination provisions in appointments. Likewise, consultants may be looking to get out of appointments that are no longer economically viable.
Typically, bespoke appointments are a one-way street with employers having express rights to suspend for up to 12 months and/or terminate for any reason, but no corresponding rights for consultants. There is often no entitlement for the consultant to revisit the fee following a period of suspension, or indeed to receive any loss of profit upon early termination. Industry standard forms like ACE and RIBA professional services contracts tend to be more balanced by providing consultant rights to suspend for unforeseen reasons.
Finally, as COVID-19 restrictions ease slightly and businesses try to get back to the 'new normal', consultants and employers will need to be mindful of their duties under The Health Protection (Coronavirus) (Restrictions) (Scotland) Regulations 2020 (as amended) to operate their business in compliance with social distancing requirements and consider the impact that may have on carrying out consultants' services.
Likewise, they should not lose sight of their duties and obligations under pre-existing legislation such as the Health and Safety at Work Act 1974 and the CDM Regulations and the new dimension COVID-19 brings to this.
For more information visit their website Brodies LLP.