The Day After Tomorrow....

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As the pressure to close-down any construction based sites grows, as it becomes evermore evident that in reality it is practically impossible to maintain a constant 2m distance between colleagues and the supply chain provision becomes harder as companies withdraw services, the healthcare priority will go hand in hand with the economic reality.

Closing down live construction sites which are under contract with clients to meet quality, time and budget, in order to comply with unclear Government instruction will undoubtedly lead to a heavy reliance upon Force Majeure clauses and compliance with them.

The immediate impact will be two fold - contractors will be keen to secure as much cash as possible from clients to counter their wage bills as even with a Government subsidy there will be a time lag in cash receipts, and secondly some clients will take the opportunity to hold onto cash for their own cashflow or in bad practice cases, where they suspect the contractor may not survive a long period of no work.

For those contractors and indeed sub-contractors that do survive I can only foresee a boom time for lawyers and QS's as they try and unpick the contractual clauses as to what notices should have been served when, in what format and to whom.

The Construction/Facilities industry model was broken before the outbreak of the Corona Virus with contractor's large and small, desperate to grow turnover at the cost of margin and consequently suffering when slow  cashflow exposed high levels of risk that had been taken on. Similarly clients have just been as eager to continue to accept lowest cost tenders despite all the sentiment and the Latham / Egan reports on the need to share risk, adopt a partnering approach and accept that contractors need regular cashflow and to make a margin.

Whilst the Government have pushed the need to adopt the Fair Payment Code what this doesn't reflect is the timescale taken by clients and main contractors, to agree what can be invoiced. Whilst the contracts are normally quite clear on these timescales they are commonly abused as the complexity of pursuing a breach for non-payment is usually costly and a last resort unless all relationships between the parties have broken down.

The Corona Virus has now only added another and potentially larger dimension to this scenario as no one can forecast accurately when we will return to some level of normality nor indeed what position the economy will be in.

One thing is for sure, there will inevitably be causalities of this period large and small, however as the world is  showing us at the moment whilst it performs its own correction as to how humans have messed up the ecology of the planet, just as in nature, there will be new chutes and maybe, a new way of working in the Construction/Facilities industry going forward.

We can only hope it is for the better.   


Blog kindly submitted to Hexagon FM by Ian Dunning