Many companies involved in complex industrial projects have already announced potential delays of 12 to 18 months due to the Covid-19 pandemic, while many contractors are henceforth seeing their resources diminishing. Supply chains have been significantly disrupted, operating methods have been radically modified and the situation is still evolving. No expert has known such a faltering environment during their career, whatever their seniority may be. However, we would like to highlight some considerations and draw preliminary conclusions related to this crisis: it underlines the importance of best practices to cope with unpredictable events, protect margin and contractual balance.

Performance of private contracts and force majeure

For many experts the main question within the scope of private contracts is: may the Covid-19 pandemic enable the suspension or termination of one’s obligations under a business contract by invoking the force majeure event? The legal principles presented by numerous law firms and experts around the world covering civil codes and the common law may allow parties to excuse non-performance and/or delays and disruptions due to the Covid-19 pandemic:

The ultimate resolution of these issues will depend on the specifics of the contract and the facts in each case, as well as developments in case law, executive orders and legislation. However, the most probable scenario is that most parties will be looking at potential Extension Of Time (EOT) to complete their projects.

Practical steps for an Extension Of Time

An EOT is “additional time granted to the Contractor to provide an extended contractual time period or date by which work is to be, or should be completed and to relieve it from liability for damages for delay (usually liquidated damages)”, as defined by the Society of Construction Law. Rights and obligations under contracts are becoming key for justifying an EOT. Our contract management and delay analysis experts recommend to the parties involved to follow these practical steps in order to preserve their rights:

1 – Consider in detail the procedural requirements

To respect the procedural requirements relative to contractual obligations in the scope of an EOT, we recommend investigating clauses related to notifications, evidence gathering, justification and assessment of the delay events. It should be done to anticipate any potential EOT’s request. We offer contractual audit services which might help you to identify and comply with these obligations.

2 – Consider remedies under the contract or negotiating variations

Pleas’ possibilities that are indicated in the contractual clauses should be considered before any EOT’s submission. Contractors might also consider potential negotiations to modify the contract. Our experts can assist you with these negotiations thanks to their operational and litigation knowledge.

3 – Seek means of Risk Mitigation

As long as the health crisis lasts the parties need to manage its effects on the work capacity. Alternative means of task delivery are to be sought to reduce delays and minimize costs or loss for the parties. Margin Recovery and Risk Mitigation are historically our fields of expertise: we can help you to find appropriate measures.

4 – Update the programme

The programme should be updated to record progress, variations, changes of logic, methods and sequences, means of risk mitigation or acceleration. Our delay analysts emphasize that it represents the only sound way to identify the activity float and thus the critical path to prove the impact of each delay event.

5 – Produce and store evidence

We recommend anticipating any potential submission of evidence: all the documents relating to progress and delay, disruption events have to be generated and stored, but also the records for additional costs. Our software solution OppiData® can be adapted as a DMS solution, tailored for these purposes. We recommend forming and enriching detailed files for each risk event in the long run: this documentation might substantiate causes and effects for each delay event. All these elements need to be evidenced for any EOT submission: the monitoring of documents is essential to protect the margin.

Recovery and learning

We express our sympathy to the professionals who have been impacted by the Covid-19, in their personal life or their business field. We must learn from this health crisis, which was unpredictable and still brings immeasurable effects as we are writing. It shows that best practices are vital to ensure business recovery. Our contract management experts train and coach operational teams to that end: best practices can always be enhanced and acquired.

The quality of the support provided to contractors to help manage the Covid-19 crisis will play a crucial part in their agility to recover from its impacts. As former project managers for complex projects in industry, construction and infrastructure, we understand that intricate operational and legal actions have to be led with diligence. Contractors and their legal counsels will find in our range of services the expertise, the experience and the perspective they need to protect threatened margins.

Yvon Poras & Mareex’s experts