Spec Finish

A recent FIS webinar delivered by law firm, Anderson Strathern LLP , provided an overview of the supply chain issues currently facing the construction industry, how contractors can manage existing contractual commitments and negotiate new contracts for future projects, how to manage early (or late) delivery of construction materials and the impact on contractors when there are delays to programme timetables. HOWTO REVIEW A CONTRACT A S a supply chain we are acutely aware how risk is being managed and how intense the core risks (price, design and time) are in the construction sector – all of them influenced by external events. Inflation is galloping away, Grenfell had a profound effect on the way that design is being managed through the supply chain, and the new Building Safety Act will extend that. As a result, projects are being delayed and growing time pressures are being felt. Gillian Green (solicitor) ran through the external factors affecting the industry (Brexit, the pandemic, rising inflation, the impact of Grenfell and the war in Ukraine). The pressure on logistics and material availability is expected to continue this year so will need to be factored into contractors’ costs and programming while considering what protections and remedies they have available in existing contracts for material unavailability, supply chain delays and rights to substitute materials. Negotiate each contract When negotiating contract terms with employers, subcontractors often think that they are stuck with the terms provided by the employer, so it is important to negotiate before entering into a contract, because with the predicted shortages in materials and labour set to continue (let alone inflation and rising energy costs) employers will expect you to fight your corner. Key terms to consider: 1. Specification of materials clauses – discuss options with the employer with the aimof achievingmore flexibility. If you know you can get the samematerial (or material that is equally suitable) frommultiple sources, don’t restrict yourself to one supplier or one specified type of material. 2. Fluctuation provisions are back in fashion and allow adjustment of the contract sum in the case of changes to the price of labour, materials and tax during a construction project. Fluctuation clauses are complicated, so it is critical that the project administrator understands what the contract says and how to apply the provisions correctly. 3. Ensure that there is an entitlement for extra time or money to address any supply chain issues. 4. Think about the factors that could impact the delivery of your proposed works or services and take these into consideration to extend your proposed programme. Early delivery materials Many suppliers try to deliver to site early and when the contractor refuses to take the delivery the supplier insists that the contractor pays for storage. So agree a delivery date with the supplier before entering into a supply contract, if the supplier refuses to commit to one, communicate this to the employer and agree a plan, e.g. find an alternative supplier or agree an acceptable storage solution if necessary. Importantly, in respect of title and risk of thematerials, ensure that only the title of materials but not the risk will pass to you upon payment to the supplier, so ask the supplier for photographic evidence showing that thematerials are separately stored and marked with your company name and project name. If the supplier attempts to deliver earlier than agreed and you refuse to accept delivery the supplier is responsible for the materials until they are delivered. Include a liquidated damages clause into any contract for the supply of materials – if the supplier is late delivering (thus impacting your works) the supplier is obliged to pay you compensation. Long delays In building contracts it is common for the contractor to have a start date to be noted as ‘to be agreed’, so if the project suffers a long delay the contractor has no idea when a notice to commence will be issued. Before entering into a new contract, ensure: • the sequence of works (FIS members will often be the last on site); • you have ‘clear and unfettered’ access to the site; • you clarify the dates of possession and completion of the main contract works; • you establish dates for commencement of the sub-contracted works; and • you understand critical path items and any liquidated damages you might be liable for. Work out howmuch time you will need to execute your works on site, howmuch notice you will need to start work on site, the time you will need to complete any off-site work (if any) and factors that you consider to be out of your control, such as preceding works Legal 14 www.thefis.org