Scott McKinnell, a partner in Pannone’s Construction, Engineering, and Projects Group, investigates whether contractors or subcontractors may be entitled to additional time and money to complete their projects as a result of strike action.
THE CONSTRUCTION INDUSTRY, like other sectors of British society, has been impacted by recent public sector strikes, whether as a result of increased time for equipment, materials, and labour to arrive on site due to transportation issues or, in some cases, due to staff being unable to perform their normal duties due to last-minute childcare arrangements.
The current generation of construction professionals has not had to deal with this in many cases before, and with the prospect of further industrial action in the coming weeks and months, they must now consider what may be a significant impact on the progress of works on site, as well as the implications for the extra time and cost that it takes to complete works.
The extent to which parties can rely on the impact of strikes will vary depending on the contract form chosen, and the provisions, unlike the picket lines, may not be as clearly drawn as the parties might have expected. The position also differs depending on which standard form contract is used.
JCT and NEC are the two most commonly used contract types in the industry today.
A strike is listed as a relevant event entitling a contractor to a time extension in the JCT Standard Building Contract, Design and Build Contract, and Standard Building Subcontract. The contractor has an obligation to notify the employer of the strike when it becomes reasonably clear that the works are likely to be delayed.
The contractor must also use his best efforts to avoid any further delays caused by the strike action. Whether or not these requirements have been met will be determined by individual circumstances and may be open to interpretation.
A strike, on the other hand, is unimportant in the context of a loss and expense claim. As a result, while the contractor is entitled to more time, he is not entitled to more money.
Under NEC 3 contracts, the contractor may be entitled to both additional time and additional money as a result of work delays caused by strike action.
According to NEC 3, as long as the strike is not limited to the contractor’s employees, it is an employer’s risk under the contract and thus a compensation event entitles the contractor to additional time and money. However, the additional costs only apply to loss or damage to the works, plant, and materials – the employer’s property. The contractor is personally liable for any loss or damage to his own property. This may not go so far as to entitle the contractor to additional funds, especially if there is no loss or damage to the works, plant, or materials.
The contractor may also seek to rely on Clause 60.1(19), claiming that an event has occurred that prevents the contractor from completing the works or from completing the works by the date shown in the Accepted Programme and that neither party could prevent, that an experienced contractor would have judged at the date of the contract as having such a small chance of occurring that it would not have been reasonable to have allowed for it, and that is not one of the other compendial events.
While the strikes themselves may have defined positions, the provisions dealing with their effects in standard contracts appear to leave room for manoeuvre on the part of both the employer and the contractor. So, in standard form contracts, the picket lines are less clear, and it is worth carefully scrutinising the situation before claiming extra time or money, especially since standard forms are frequently subject to bespoke amendments on a project-by-project basis.