MDA Attorneys notes lack of clauses dealing with pandemic in construction tenders, contracts

Natalie Reyneke, director at MDA Attorneys

“Clearly the pandemic can no longer be unforeseen and treated as a force majeure event, which is the provision most claims have relied upon during the significant disruptions of the past year. The ramifications are not only foreseeable (such as levels of lockdown which restrict movement), but they can now be provided for in contracts and tenders.

"Covid-19 is likely to continue to wreak havoc on South Africa’s construction sector for at least another year and parties need to be agile and prepared for further possible repercussions,” says Natalie Reyneke, director at MDA Attorneys.

Areas of impact

The most common matters dealt with by MDA’s clients were identified and relevant clauses to deal with these issues were added to public sector tenders and contracts:

• Works on site were suspended or completely halted.
  
• Border closures affected the supply chain, materials and goods delivery.
  
• The restriction of movement meant demobilising workers from sites and necessitated additional travel arrangements.
  
• Health and safety measures had procedural and cost implications.

“Most of the public works tender documents we reviewed incorporated the General Conditions of Contract for Construction Works (GCC) 3rd edition, 2015, 2nd print,” explains Reyneke. “Amendments to applicable laws and events that occur after commencement instructions are two areas of this contract that need to be adapted for Covid-19.”

What can be done?

In view of the uncertainty surrounding the pandemic, parties who commission work (employers) may be faced with time and additional money claims from contractors.

“Since Covid-19 and its potential impacts on the time and cost of a project have not been factored into the tender documents, we are advising our clients to include them as early as possible. A key issue to be agreed is whether pandemic-related issues should be a shared risk between both parties,” says Reyneke.

The clauses of a contract that should be amended are now much simpler to identify. They include:

• Delays and/or other events preventing performance, which will entitle a claim for extension of time with related costs,
  
• Access, mobilisation, demobilisation to and from site,
  
• Health and safety,
  
• Price adjustment, escalation in supplier costs,
  
• Types of insurances to be considered for proper cover relating to certain unforeseen events and the impact as a result, as well as
  
• Termination of the contract.

Reyneke warns that parties should carefully review the circumstances and expressly define Covid-19-related events as well as the entitlements to time and money that could be claimed by the contractor.

“The risks and circumstances differ for each project. Identify and research them and ensure your agreement includes clear, balanced duties and responsibilities for efficient, cost-effective operations,” she says.