March 31, 2020

Covid-19 Projects: How is Coronavirus affecting UK Projects?

Laura Coates view on how the Coronavirus outbreak is likely to impact UK projects and the measures clients could take to protect themselves

How is Covid-19 likely to affect the projects you work on?

It is a general principle of PPP projects that project companies and service providers accept full responsibility for providing the services and undertaking the project operations, regardless of the availability of labour and materials. Project impacts at the moment are:

  1. Shortage of staff is a key concern, as the majority of UK PPPs are in the operational phase. Whether this is due to illness or self-isolation, or restrictions on labour movement, there is likely to be a related impact on the ability to provide services to and maintain facilities across a range of assets.
  2. Healthcare assets face huge strain and increased demand, and are in the process of implementing disaster planning mechanisms and adapting facilities to focus on high intensity care, which will have a knock-on impact on project companies and service providers.
  3. Services may be adjusted or increased if requested, to respond to emergency events at very short notice.
  4. For schools projects they are experiencing partial or total closures to pupils, with the related challenges that brings for providing services, and for scheduled maintenance works to be deferred (or in some cases expedited whilst facilities are not in use).

What are the main concerns for the private sector that you're seeing at the moment?

Aside from natural concerns relating to health and safety, and the difficulty of preparing for the unknown, our clients are:

  1. Assessing their exposure to risk and liability relating to Covid-19 and considering how to prepare for/mitigate their potential costs and losses.
  2. Considering how financial deductions will be calculated if staff shortages or other restrictions mean that services cannot be provided to the required standard, and the potential reliefs and protections that may be available in the circumstances. These may include: 

    · Compensation events if the Authority needs to restrict access to the facilities,
    · An Excusing Cause in the event that project companies/service providers are excluded from facilities, or
    · Compensation for Authority step-in if the Authority restricts access to facilities due to health and safety concerns or in its exercising its statutory duties.

  3. Addressing the Cabinet Office Public Policy Note 02/20 which provides some comfort for projects parties, and focuses on practical steps to provide financial support to supply chains and operate performance-based contracts in a collaborative and flexible manner, including the operation of payment mechanisms.
  4. The application of the payment mechanism for volume related services, and the consequential impact on supply chains (such as catering sub-contractors) is also an area of discussion.

How can clients in the private sector protect themselves from potential impacts and/or ensure they benefit from available relief?

Relief and liability varies from project to project, so the starting point is always a detailed review of the terms of the relevant project documents. Parties needs to:

  1. Ensure that, to the extent relief or compensation is conditional upon compliance with contractual requirements, such provisions are adhered to where possible (including the time, manner and content of any notices that have to be served).
  2. Be aware of potential limitations on their rights to compensation, and look to ensure that any costs are reasonably and properly incurred.
  3. Take all reasonable steps to mitigate costs and losses, and to co-operate with each other.
  4. Where variations are requested in emergency situations and there is not time for contractual processes to be followed, parties should ensure that the request is documented in writing and, where possible, confirmed by the Authority.

In the event that it is not clear, contractually, what action the Authority is taking, parties should seek written clarification as soon as possible.