Principal and contractor in construction: help each other through the corona crisis!
Date: March 30, 2020
Modified November 14, 2023
Written by: Stefan Kloots
Reading time: +/- 2 minutes
Date: March 30, 2020
Modified November 14, 2023
Written by: Stefan Kloots
Reading time: +/- 2 minutes
In recent days I spoke - by phone - to many business owners in the construction industry, such as developers, contractors, installers and suppliers. My overall picture after those conversations is that (1) the number of new construction orders is dropping sharply because of the uncertainty, (2) some of the projects are stalled because clients don't consider continued work to be responsible, while contractors don't always feel the same way about it, but do accept it, and (3) executing parties are doing everything they can to continue current orders well (taking into account guidelines from the RIVM), but are running into difficulties, such as in obtaining materials. I discuss these points.
It is understandable that many clients choose not to issue new orders at this time in times of (financial) uncertainty. The consequence, however, is that too long a drought of new orders will irrevocably lead to a new construction crisis. This should actually be avoided as much as possible. After all, the construction industry still has plenty of work now, as order books were reasonably full (despite the nitrogen and PFAS issues). There is still a large shortage in housing construction; the current crisis does not change that. However, the consequences of stopping abruptly now will already be felt in a few months. It is therefore important that clients 'with strong shoulders' continue to invest, such as government clients, housing corporations, the supermarket industry and other parties whose revenues have not fallen (sharply) due to the 'corona crisis' or who can bridge this dip. Thus, projects that are 'corona-proof' (infra works, new construction, works in buildings that are now vacant due to work at home, exterior painting) should be commissioned precisely now.
Of course, if continued work is no longer justified, a project must be able to be stopped. There is always justification for this by contract or by law (such as force majeure). However, the question is if a contractor is able to continue working safely whether stopping work is justified. After all, the contractor must adhere to the RIVM guidelines, the "working safely together" protocol, and contractors themselves (often) make additional policies. This puts "the signals on green. Especially in this 'corona-crisis' we have to take each other's reasonable interests into account. Where going ahead is possible, projects should go ahead.
If there are financial motives of stopping a project, it should be made negotiable as such. My impression is that many contractors in these difficult times show understanding for clients' wishes and think along with them about postponing work. Where this leads to idle time at their own company, group companies or even colleagues are willing to help each other out, for example by borrowing labor.
For the time being, being able to sufficiently deploy one's own (Dutch) labor force does not seem to be the biggest problem. However, where specialized foreign labor is used (Polish and Portuguese, for example) or materials from abroad are applied (such as steel and Italian and French ceramics) this leads to the necessary limitations. Contractors have 'legal tools' in this - if necessary - under the UAV, UAV-GC and the law in order to obtain term limits. However, nobody foresaw a crisis like this and the question is therefore whether 'legal tools should be taken out of the toolbox'. In my opinion, if the contractor is able to explain the practical problems and involves the client in possible solutions, it should be possible to come up with a reasonable solution together to still complete the project as quickly as possible, at the least possible additional cost to both parties.
Creating a project is collaborative work par excellence. This particular time demands (1) even more of the collaboration between client and contractor and (2) giving each other some credit. The human factor is the most important success factor in difficult times. Helping each other leads to relationships for life, and so there is still something to be gained in this crisis.
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