COVID-19 – the Beginning
Rewind. It’s early 2020. You are a Contractor. COVID-19 has hit. Many Principals and Contractors are working together to move projects forward.
Regular updates, friendly conversations. Overcoming supply delays. Safe sites.
Fast Forward to Later in 2020
Fast forward to later in 2020. COVID-19 is still present but not dominating headlines like it once did.
Your job is late. The Principal may have incurred additional finance and holding costs. They are worried that the value of what they’re now selling has nose-dived
The Principal has less cash than expected.
What happens next?
The Principal seeks to levy liquidated damages against you.
You say “but remember COVID-19”?
They say “sure, it’s a real shame, but the job is late, we’re losing money. We’re sorry but we’re exercising our right to levy LDs against you and withhold payment”
You panic. LDs will crush the profitability of this job.
You scurry to your Contract and legal resources.
Are you actually exposed to Liquidated Damages or do you have a way of defending them?
Do you have a right to an EOT due to Covid 19, or its consequences?
Did you submit a notice of delay? Did you comply with time requirements?
All these thoughts run through your mind as you urgently map out your cash flow and profitability forecasts if LDs can’t be avoided.
What you can do now to maximise payment and Minimise Risk
Back to the present day.
What can you do now to best prepare yourself for these LDs and payment negotiations at the end of the job?
If you haven’t already done so, pull out your contract for each of your projects.
Set aside some time, and calmly work through the necessary questions.
Jot down some notes for each project, each contract.
Know where you stand contractually.
Do have an arguable right to an EOT? Perhaps Force Majeure or Change in Law?
What about delay costs?
If you’ve not already done so, lodge your contractual notices now, even if they’re outside the strict time bars in the Contract.
Think about how you could you argue that the LDs are unenforceable.
Consider whether the Principal may have waived its right to rely on time bars?
Don’t just be reactive to your Principal’s position or hope that they’ll remain amicable going forward.
Anticipate how a dispute (if it arises) may play out. Should you accelerate these difficult conversations with the Principal now, striking a deal on any anticipated delays to the overall project?
If as the project proceeds, a negotiated outcome becomes less likely, you may wish to consider your formal dispute resolution options.
In summary, be ready, hope for the best, but prepare for the worst. This approach will help balance your risks against maximising profits on your construction project.