One in three contracts are not fit to address the effects of Covid-19, with contractual ‘employers’ bearing the brunt of additional costs and time delays on more than half of projects, according to new research by Turner & Townsend.
A survey by the global professional services company showed that the majority of liability arising from Covid-19 events was believed to be held by the contractual ‘employer’ – the party that engages the contractor, rather than the supplier.
The findings highlight a clear need for greater clarity over contract terms, particularly with 83% of respondents experiencing a pause or temporary site closure because of Covid-19, and a further 72% considered that productivity generally has reduced on projects currently on site compared to pre-pandemic levels.
45% of those surveyed reported an increase in contractual disputes since the start of the pandemic, while one third believe their contracts were unfit to address the effects of notifiable Covid-19 events – partly due to the interpretation of liability for unforeseen events and reliance upon force majeure clauses.
Furthermore, 43% of respondents considered that Covid-19 events were not sufficient on their own to claim additional time and/or money. As a result, 63% of respondents have sought contractual guidance from the government due to the uncertainty, with another third consulting industry bodies or other industry professionals.
With contractors still cautious about existing contract provisions and liability for cost and time events caused by Covid-19, the research found that 49% are allowing for Covid-19 related costs in their tender submissions.
Nick Jones, associate director, contract services at Turner & Townsend, said: “The Covid-19 pandemic hit live projects with delays, site closures and reductions in productivity. Almost a year on though and we still do not have enough clarity on the liability within construction contracts. This needs to be addressed, and quickly, particularly with new projects coming online thick and fast as part of the push for economic recovery.”
“As contractors and clients alike now seek to recover losses incurred during the pandemic, it’s important to seek specialist advice. If 2020 has taught us anything, it is that all parties will now want to ensure clarity for Covid-19 event liability through the drafting of expressly worded contract terms, and the contractual ‘employers’ may also be looking to address the current imbalance of risk and responsibility for the future.”