COVID-19 (PART 2) – IS A CONTRACTOR ENTITLED TO A COMPENSATION AND DELAY EVENT UNDER A PUBLIC WORKS CONTRACT DESIGNED BY THE EMPLOYER?

COVID-19 – IS A CONTRACTOR ENTITLED TO A COMPENSATION AND DELAY EVENT UNDER A PUBLIC WORKS CONTRACT DESIGNED BY THE EMPLOYER?
(PART 2)

1. Since publishing my earlier paper, the Irish Government has now ordered that all non-essential construction sites close from midnight Friday 27 March to 12 April 2020. According to the Governments website, these measures will be reflected in the regulations to be made under the Health (Preservation and Protection and Other Emergency Measures in the Public Interest) Act 2000.

2. In light of the Governments order, I now re-examine the Public Works Contract (designed by the Employer) to determine what effect this may have on a Contractors entitlement.

3. Again, a key provision is sub-clause 4.5.4 which states

‘The Employer’s Representative shall give an instruction that is, in the Employer’s Representative’s opinion, necessary for the completion of the Works. If, in the Employer’s Representative’s opinion, it is physically impossible or contrary to Legal Requirements to complete the Works in accordance with the Works Requirements, the Employer’s Representative shall give a Change Order. The Employer’s Representative shall give an instruction required under this sub-clause 4.5.4 within the time required by sub-clause 4.11.’

4. In my earlier paper, I discussed the Works possibly meaning part of the Works rather than the whole of the Works; the ER’s expressed obligation to act in good faith and GCCC’s guidance on how this obligation should be executed. I also discussed the meaning of physical impossibility, so I won’t repeat it again in this paper. However, I do want to consider the ‘Legal Requirement’ part of sub-clause 4.5.4 in more depth in light of the Governments recent order to close non-essential construction sites.

5. Legal Requirements is defined under sub-clause 1.1 of the Contract as being

‘a requirement that applies to the Works as a result of any of the following:
• Law
• a Consent
• a decision of an Irish court, the European Court of Justice or the European Court of First Instance
• the requirements of any person having authority in connection with the Works under any Law
• the requirements of any person with whose systems the Works will connect
• the legal rights of any person.’

6. The Governments change in law under the Health Act 2000, to give effect to its order, in my view, falls under point 1 of sub-clause 1.1.

7. Sub-clause 4.5.4 says that if it is contrary to Legal Requirement to complete the works in accordance with the Works Requirement, then the ER has an obligation to issue a Change Order.

8. A Change Order is defined under sub-clause 1.1 of the Contract as

‘an instruction of the Employer’s Representative to change [including add to or omit from] the Works or to change [including impose or remove] constraints in the Contract on how the Works are to be executed.’

and Schedule Part 1 K item 1 confirms that a Change Order entitles the Contractor to be compensated and granted an extension of time.

9. Another action that the ER may elect to take is to suspend the Works under sub-clause 9.2.1. The Schedule Part 1K item 3 again confirms that this would also entitle the Contractor to a compensation and delay event.

10. So, it seems so far, that sub-clause 4.5.4 (change in the law) and 9.2.1 (ER suspension) allows the Contractor to be compensated and granted an extension of time.
11. However, the Schedule Part 1K item 15 looks to limit the Contractors entitlement to just a delay event with no compensation when

‘Delay to the Works caused by the order or other act of a court or other public authority exercising authority under Law, that did not arise as a result of or in connection with an act, omission or breach of Legal Requirements of the Contractor or the Contractor’s Personnel or a breach of the Contract by the Contractor’

12. There seems to be conflicting relief between sub-clause 4.5.4 and sub-clause 9.2.1 on the one hand and Schedule Part 1K item 15 on the other.

13. What if the date for completion of the Works was not delayed due to the Governments order to close construction sites? Does that mean the Contractor would not be entitled to an extension of time as well as no compensation? This would seem a very strict reading of the Contract.

14. The battleground for compensation and extension of time due to Covid-19 could well fall between competing sub-clause 4.5.4 and Schedule K item 15. Maybe the Employers and the ER’s obligation to act in good faith under sub-clause 4.1 and the GCCC’s guidance on how this obligation is to be applied may well provide us with the answer to what the Contractors entitlement might be.

************************************

Posted in Uncategorized.