Thursday, April 30, 2020
As the country awaits with bated breath the next update from the Government on the Covid-19 restrictions post-5 May 2020, the construction industry is busily preparing for a return to work, but clearly this will not be a return to the ‘norm’ as indicated by the Construction Industry Federation’s recent publications (see our separate note on the CIF Standard Operating Procedures here).
In the meantime, for those involved in public sector projects, whether on the Employer or the Contractor-side, the most recent Office of Government Procurement is the ‘go to’ guidance to understand what should be done in terms of proposed or current tender processes and live contracts. Of particular note is the recommended 6-week extension period for on-going tender processes to give contractors and their supply chain additional time to deal with the current impact of Covid-19 and what this may mean in terms of project delivery. In addition. Contractors will, no doubt, welcome the introduction of an ex gratia payment, which may go some way to easing the burden of impact of this crisis on their businesses. There is detailed guidance on how such payments should be calculated.
We have summarised below the main components of the OGP guidance.
The OGP guidance is aimed at:
- Contracting Authorities that are required to procure essential professional services or works specifically related to Covid-19 response measures;
- Contracting Authorities that are currently engaged in a procurement process to engage a works contractor or works-related service providers using a Public Works Contract or standard Conditions of Engagement; and
- Employers/Clients that are currently a party to a Public Works Contract or standard Conditions of Engagement in respect of either essential construction services or non-essential construction services.
The OGP guidance does not apply to Contracting Authorities not using the standard Public Works Contracts or the standard Conditions of Engagement under the Capital Works Management Framework and there has been recognition that in certain situations requiring urgent works/services that other forms of contract may be appropriate and are permitted.
The main points from the OGP guidance are outlined below:
- Procurement of Construction Services
- Contracting Authorities can contribute to maintaining market confidence by progressing a steady flow of contract opportunities.
- Contracting Authorities should consider longer tender deadlines and selection criteria should be reviewed to ensure that the standards chosen do not present unrealistic and disproportionate barriers to entry in the present circumstances.
- If the deadline for submission of offers has not passed, it is recommended that the date for receipt of tenders should be extended for at least 6 weeks which should be reviewed 2 weeks prior to the deadline, unless the Public Health Measures have been eased sufficiently.
- If the deadline for submission of offers has passed, it is recommended that Contracting Authorities do not conclude until there is greater certainty.
- Consultancy Contracts
- Both parties should establish the best approach to ensure service can be continued.
- For non-essential services, Clients should consider the continuing development of projects to ensure that they are ready to go to tender once the Public Health Measures are relaxed or withdrawn.
- Construction Contracts
- If the project is determined essential by the Employer, then work may continue.
- The Public Works Contracts make provision for delay and both parties should use this for notification and management of delay.
- Where the work is deemed non-essential, Employers should ensure that interim payments reflect the progress made up to the site closure.
- Subject to notification having been given of site closure, the delay should be treated as having commenced on the date of site closure following the publication of Public Health Measures on 28th March 2020.
- The Public Works Contracts do not provide an entitlement to the Contractor to recover costs associated with a delay arising from site closure in the current circumstances.
- In order to alleviate financial pressure on Contractors, the Employer will make an ex gratia payment to the Contractor for the period of site closure while the Public Health Measures are in place.
- This payment is done without an admission of responsibility by the Employer and acceptance of the payment by the Contractor is on the basis that it is paid without an admission of responsibility.
- The ex gratia payment will be in respect of a portion of permissible items on the Contractor’s Preliminaries, unavoidably incurred, reasonable and vouched.
- Prior to any such ex gratia payment being made, the Employer and the Contractor will record the amount of the ex gratia payment in a supplemental agreement. The form of letter agreement to be used for a Covid-19 ex gratia payment can be downloaded from here.
- The ex gratia payment should be included with the next scheduled interim payment following the recording of the agreement of the costs. Shorter interim payment periods may be considered where necessary.
- Further guidance is given in the Note on how to calculate ex gratia payments.
The complete OGP guidance can be viewed here and for further information or advice, please contact any member of our Construction, Project and PPP Team.