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COVID-19 – Building Site Lockdown

2.4.2020

With the announcement from the New Zealand Government last week to elevate the COVID-19 alert level to Level 3 – Restrict, on Monday 23 March, then immediately to Level 4 – Eliminate on Wednesday 25 March, all within 48hrs, there were immediate impacts for our 106 Architects’ construction projects that were – or about to be – active on site.

For projects in Australia, we see work continue, albeit under health and safety practices that align with Federal and State Government requirements. These specifically relate to the foundation of Work Health and Safety (WHS) laws that require employers to take care of their workers in the workplace.

Current requirements include social distancing, as well, providing adequate facilities for workers to carry out their tasks safely, chiefly, personal and workplace hygiene measures. Updated SWMS (Safe Work Method Statements) will be required under COVID-19 conditions for those continuing to work.

Specific information for our Australian clients and contractors can be found here, at the Safe Work Australia site – https://www.safeworkaustralia.gov.au/covid-19-information-workplaces/preparing-workplaces-covid-19/building-and-construction-minimising

Our Victorian projects can find information via the Work Safe Victoria website here – https://www.worksafe.vic.gov.au/infectious-diseases and here – https://www.worksafe.vic.gov.au/construction

In New Zealand, as the lockdown commenced, all non-essential services ceased and people were required to stay at home. We anticipate Australia to move in the same direction. Soon.

Here are some of the key items we have needed to consider with our Client/Principals and Contractors:

Payment Claims

As the end of the month approached – with it, the end of the financial year for New Zealanders – we moved to assist Contractors to receive, and then assess, their payment claims for the project cycle. For some projects the cycle was monthly; others fortnightly.

Assisting to quickly gather a clear understanding of work completed with any supporting documentation required, was a key task we faced.

Where visiting sites to inspect work first-hand would not be possible, we worked through progress with the Contractors via FaceTime, photographs, and verbal descriptions on what work had been completed and ‘held’.

This has meant that the processing of the Payment Certificate over the past week, in a difficult situation, could take place in confidence with everyone working remotely.

Trust, kindness, and supporting both Client and Contractor has been the key.

Thinking ahead, Clients/Principals could consider increasing the frequency or changing the basis of the payment to the Contractor. This may assist the supply chain cash-flow for materials and products, and ease overall financial pressure on all parties. Equally, payments could be offered directly to suppliers and could ensure a project-specific flow of goods and services can be achieved (and secured) following the lockdown period.

Insolvency and re-mobilisation are two key factors currently circulating our sector at the moment. Modifying the payment claim basis through closer help and facilitation could go a long way.

The Site and Building Schedule

The shutdown of sites happened quickly in New Zealand and will happen in a similar manner in Australia. While the site remains the responsibility of the Contractor, the unknown period of time for closure means communication between Client and Contractor is key.

Much like the landlord/tenant relationship, there may be on-going costs to the Contractor relating to specific site structures and establishment as part of general overheads, either as direct and/or indirect costs.

The Contractor should contact their suppliers and see what relief they can provide, and can feasibly pass on to Clients. There should be a sensibility to the passing on of these costs, and any that may be associated with a likely Extension of Time (EoT) claim that may follow.

The cost of scaffold, for example, is an on-going overhead, however, these particular site structures will clearly not be used during lockdown other than support or potentially to enclose a structure. On-going certification and testing will not be taking place, so there may be a basis to challenge the need for an on-going cost for something that would not be certified or used.

Site fencing and security measures should also be checked for completeness, to ensure they are well-fixed in-place for any adverse weather conditions likely to be presented during inactivation of the site.

Consideration to re-mobilisation costs and securing trade supplies following a prolonged period of inactivity should also be given (see Financial and Resource Health, below).

Contractor and Principal – Financial and Resource Health

For projects that were about to kick-off or indeed underway, the issue of financial capability and durability to ride the crisis, should be considered. The same applies to human resources or labour availability, and what sort of plan might be put in place by the Contractor for when the project sets off again.

The questions are: Is the availability of supply items a danger or risk area for a project, and what is availability like, once projects recommence?

We have projects were Client or Principal-supplied items are included in the contract. Clients need to ascertain what challenges (and alternatives) they may have as a back-up should the supply chain be affected by COVID-19. Equally, where clients have paid for their fixtures upfront, ensuring that those fixtures are assigned to them and covered by insurances as off-site goods. Seek additional security for the cost and risk of those items not turning up, or for insolvency of a supplier – standard procedures, but more important in a riskier time.

There is a degree of increasing financial pressure and strangling of cashflow at the moment. It’s a difficult question to ask and assess, but ask: How is your Contractor placed to reignite again, once the green-light is given?

What can you do as the project owner, to alleviate any real or perceived pressure on the Contractor?

For example, do you really need the provision for Liquidated Damages in your contract, to be applied? Could you release the pressure, by granting a unilateral Extension of Time, to allow the Contractor to complete the project beyond the stated completion date, for events beyond their control?

Insurances

It would pay for both Principal and Contractor to advise their insurance brokers that building works have ceased, and confirm the shut-down date. There is a duty to formally advise of any changes to site or project conditions. At this time, it is unknown when construction is likely to resume, but we see it as being at least four weeks away.

The insurance policies and arrangements in-place have an end-date nominated for each project, however, an email trail to confirm changed site conditions is prudent. Once works are back up and running, a revised programme should be sought from the Contractor, with a new completion date passed onto the insurer. Check with your broker to additional costs, if any, there may be for extending the cover due to COVID-19.

With communication and consideration, you’ll be in good shape when construction kicks off again.

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