While many companies have to close entirely, in construction, work continues as much as possible for now. This is just as well, because construction has already been hit hard by the nitrogen and PFAS issues. However, continuing to work is no longer always fully possible, and moreover, it cannot be ruled out that more restrictive measures will apply. I offer four tips for you as a construction contractor (contractors, subcontractors, suppliers) on how to deal with the challenges posed by coronavirus (COVID-19).
"Safety first" 1.
As an employer, you have an important duty of care, not only for your own employees, but also for all parties working on the construction site under your responsibility, such as self-employed workers and subcontractors. Failure to take adequate precautions can lead to:
- liability of your company to persons at work under your responsibility who become ill;
- downtime of employees/zzpersons/subcontractors that can stall projects.
So make sure you take adequate precautions for all parties working under your responsibility, using the RIVM guidelines as a starting point. Consider, for example, keeping a sufficient distance (1.5 meters), washing hands regularly with warm water, scrubbing after each other instead of at the same time, relaying instructions by phone (or via Skype, Facetime) as much as possible, and having office personnel work at home. The precautions to be taken should also be included in the H&S plan.
2. Take advantage of government support measures
If your business does shut down in whole or in part, it is important to respond to it in time to avoid liquidity problems. The government has already taken various measures:
- this news release details the arrangements surrounding the Emergency Fund to Bridge Employment (to the best of our knowledge);
- in this article you will read frequently asked questions about the Temporary Emergency Measure Bridge for Work Retention
- this article explains the special measures the government has taken to keep businesses afloat, such as government guarantees when bank credit is extended and deferral options for paying tax debts.
If government measures are insufficient for your business, get timely advice on options and risks in the face of bankruptcy.
3. New projects: make customization agreements
When entering into new contracts for construction projects, it is wise to make customized agreements on the construction period and the price of the work. If, for example, a lock-down or other far-reaching restrictions were to be imposed, it is possible that construction could come to a standstill, personnel could only be deployed on a limited basis, or construction products could no longer be available or could increase sharply in price. If such situations arise, this leads to substantial additional costs for you as a construction contractor, which you should try to avoid as much as possible. Clauses can be built into the contract for this purpose:
- As far as the construction period is concerned, the simplest solution is to agree on a schedule with your client (and thus not a fatal delivery date that leads to a penalty/discount if exceeded). It could also be agreed that a completion date does apply, but that evaluation moments about the development of the coronavirus and its consequences for the construction period are built in (for example, every month). If work on the critical path cannot continue due to circumstances related to the coronavirus, this would entitle to an extension of the construction period and possibly additional payment of construction site costs. Furthermore, it can be agreed that the parties will strive to make up for any delays later with acceleration measures, as soon as this is safely possible;
- given the uncertainty in the market, it is currently difficult to issue a fixed price for a work. A special "corona clause" can be drawn up for this purpose. For example, this clause can be linked to an open budget. This means that at a later moment a post-calculation takes place and the actual costs are compared with the budgeted costs, whereby the contractor has to explain which price increases are the result of (measures in the context of) the corona virus and the contractor has a warning obligation, just as with additional work;
- also consider that as a result of the coronavirus, work may be performed less effectively than normal, for example, due to shift work, "hygiene stops," or supply constraints. As the contractor, you must factor that into the pricing;
- certain construction work is more "coronaproof" than others. Therefore, it may be an option to bring forward work scheduled later (such as exterior painting) and postpone others.
4. Existing projects: possible right to term extension and additional payment and consultation with client
Projects in progress are in danger of stalling and running out of time as a result of the corona virus. This is because, for example, work is done in shifts or personnel (or subcontractors/suppliers) drop out, or materials are no longer available. Product prices may also rise. I distinguish a number of situations:
- If it is possible to continue working with proper precautions, in principle there is no right to an extension of the deadline (or compensation for additional site costs). After all, the advice - for the time being - does not prevent personnel from working, provided the RIVM guidelines are followed and appropriate measures are taken.
- If the government declares a "lock-down," work is absolutely prevented. In principle, that gives (for contracts entered into before the coronavirus led to restrictions in the Netherlands) a right to term extensions and additional payments for the duration of the 'lock-down' itself, including a reasonable start-up period afterwards:
- If a contract has been concluded on the basis of the UAV 2012, paragraph 6 (11-13) UAV, paragraph 47 UAV and paragraph 8 (4) UAV can be invoked for a right to additional payment or extension of the term respectively. See also this article on this subject. If 'workable working days' are contracted for, the days on which no work can be done are considered to be unworkable;
- the UAV-GC have similar provisions to the UAV in Section 11 paragraphs 2 and 3 and Section 44 paragraph 1 (c);
- If a contract has not been concluded under standard terms and conditions or the standard terms and conditions provide limited or insufficiently specific rules for a situation such as this (such as the Woningborg terms and conditions), the law applies as a safety net. With article 6:75 BW (about force majeure), article 6:248 BW (about supplementing or limiting the contract on the grounds of reasonableness and fairness), article 7:753 BW (about cost-increasing circumstances) and article 6:258 BW (about unforeseen circumstances) the law has legal entrances that can be invoked in case of a complete lock-down.
- If, despite the precautionary measures taken (and without further restrictions from the government than is currently the case), you are faced with the (partial) failure of staff / subcontractors / suppliers due to the coronavirus, a successful reliance on contractual and legal provisions as mentioned above under b is uncertain and should be considered in the specific case. Consider (in addition to staff outages due to illness) also special cases such as the (limited) availability of ceramic products from France and Italy or the deployment of specialized labor from abroad. Here questions arise such as "what precautions were taken and how do they relate to what you had to do as a good employer?" and "could the delays have been prevented with even more precautions (did you do everything you could reasonably influence)?" and "what impossibilities are attributable to you as the contractor?". On passing on price increases of construction products (in this case as a result of the corona virus), Section 47 UAV and 6:258 BW impose strict requirements.
Either way, it is wise for you to announce possible delays and price increases as soon as possible (warn!) and discuss them with your client. After all, he too has to act as a good principal and will, in an exceptional situation like this, want to think along with you about a solution in which public health is put first and damage is limited as much as possible in the interest of both parties.
If you have any questions about the tips or would like to discuss specific issues, please feel free to contact me.
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