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Collaboration in the construction industry remains key

24 February 2022 | David Morris

David Morris examines the key lessons learned from the past and the future in the construction industry over the last two years.

Recent and high-profile insolvencies in the South West are fresh in many people’s minds, serving as reminders to construction contract parties of just how wrong things can go when chances are taken.

Despite the recent storms in the UK, both the immediate and more long-term future looks bright for the construction industry. However, we would be wise to take heed of the difficulties faced over the last couple of years when it comes to construction contracts as we move forward, especially considering the current climate of rising prices and inflation. 

Get your terms in order

Discussions are ongoing over post-pandemic changes to the main precedent construction contracts, but they have yet to change form. Having said that, we rarely see unamended documents now, but we do still see parties effectively shaking stands, or just signing up to the contracts they are presented with. This is a real risk and can leave parties exposed to all the issues they have recently faced, including delays, shortages of labour and materials, and big and sudden price increases.

All contracts create risks and obligations; we would advise parties to familiarise themselves with their contracts and be aware of what they are signing up to. If you don’t, you potentially open yourselves up to terms that are impossible to adhere to, parties who may have stretched too far, and huge claims.

Plan as far ahead as possible

Although it is very difficult to predict the future, we now know a lot more about the construction environment now than we did two years ago, so do your best to:

  • Plan and prepare for labour shortages or price increases;
  • Put forward alternative materials if they are readily available and the spec can be reduced without compromising design;
  • Know how you’ll try to prevent, reduce and mitigate delays;
  • Avoid unrealistic timescales and reduced or unaffordable fees;
  • Ensure suspension and termination provisions are in your favour; and
  • Get collateral warranties agreed early on.

Collaboration is key

Whether it’s design, materials, labour, timescales or cost, there’s always a conversation that can be had with the party to the contract. Particularly on cost, consider using fluctuation provisions in construction contracts to cover price increases – that’s what they were created for. Managing cost risk is vital for each contracting party, and fluctuation clauses provide a pre-determined mechanism for managing those changes during the project. Work with the other contracting party to seek a solution that works for all, and if collaboration is not there, ensure you are comfortable with the risk that you sign up to.

No one benefits from a project that ceases to be economically or commercially viable. Though the contract is often seen as frustration that can hold up commencement, it is in fact the central piece in the jigsaw of production that should enable the project to succeed for every party.

Specialist Construction legal advice

If you are in any doubt about your contracts, whether before, during or after works, then our construction team can assist you. Please get in touch by calling 0117 906 9400 or email hello@gl.law. Alternatively, please complete our contact form.  

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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