Projects on Lockdown: Impact of COVID-19 Restrictions
02 April 2020
The President of Ireland recently signed into law the Health (Preservation and Protection and other Emergency Measures in the Public Interest) Act 2020. The 2020 Act grants emergency powers to the government to tackle the COVID-19 crisis. Section 10 of the Act amends the Health Act 1947 and allows the Minister for Health to make regulations prohibiting or restricting the holding of certain events, including gatherings for work purposes. Crucially, in the context of construction projects, the 2020 Act itself does not introduce any specific restrictions but enables the Minster to do so through regulations.
At the time of writing, regulations issued under the legislation have not yet kept pace with events and government pronouncements. Until the anticipated applicable regulations are introduced, the change in law provisions in both the PWC and RIAI standard form contracts will likely not yet apply.
The outbreak of COVID-19 has already resulted in serious implications for construction projects. Aside from evaluating their obligations under health and safety legislation, employers and contractors operating under the RIAI contracts will have been looking to determine whether the outbreak constitutes a force majeure event. A force majeure event would typically provide contractual relief to the contractor. At Clause 30 of the standard RIAI contract, force majeure is a delay event which would entitle a contractor to an extension of time only and a corresponding release from any liability for liquidated damages for the period of delay caused by the outbreak, provided appropriate notification of the delay is given.
Clause 4 of the RIAI contracts provides for price variations where the cost of performance of the contract changes as a result of legislative enactments. Once the latest government directions are codified, Clause 4 will become a likely avenue for claims for additional costs by contractors. As with the force majeure provisions, the entitlement to additional costs will be determined by the specific amendments put in the place for each contract. Clause 4 and Clause 30 are often heavily amended.
Public Works Contract
Unlike the RIAI contract, force majeure is not included as a delay event in the Public Works Contract. Most contracting authorities will have taken the decision by now to issue notices in accordance with Clause 9.2 to suspend the works. This will entitle contractors to both an extension of time and a variation of the contract price. It is also important for contractors to be cognisant of their own obligations under Clauses 9.3 and 10.3 to notify the employer as soon as they become aware that the works are likely to be delayed. However, in the absence of a suspension notice, COVID-19 in and of itself does not provide any contractual relief to contractors.
In the context of the expected regulations, delays to the works caused by order of a court or other public authority exercising authority under law will entitle contractors to an extension of time. If the optional Clause PV2.4 forms part of the contract, a change in law will entitle the contractor to an adjustment of the contract sum.
COVID-19 has already proved to be a significant challenge for many employers and contractors. Both parties will have to manage their health and safety obligations in conjunction with the rights and obligations under their construction contracts.
The anticipated introduction of regulations under the 2020 Act may result in contractors being entitled to a change to the contract sum and an extension of time under both forms of contract. In the context of the often heavily amended RIAI contracts, both employers and contractors must carefully analyse any amendments to Clauses 4 and 30 to determine whether an entitlement to an extension of time and/or price variation can be sustained.
In all circumstances, it is vital that employers and contractors ensure that notice requirements in the contract are complied with in full.
For more information on the continuing impact of the COVID-19 pandemic on your existing or contemplated project, contact a member of our Construction team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.