CLC COVID-19 Task Force – Contractual Best Practice Guidance Update October 2021

On 21st October 2021, the Construction Leadership Council (CLC) COVID-19 Task Force published updates to their government supported COVID-19 Contractual Best Practice Guidance.

This latest publication updates the existing suite of guidance, along with publishing five new pieces of guidance:

1. CLC COVID-19 Impact Assessment Toolkit;
2. NEC and CLC Guidance for Dealing with the Effects of COVID-19 under NEC3/4 Contracts;
3. CLC Deed of Variation under JCT 2016 Design & Build Contract;
4. CLC Deed of Variation under NEC3 ECC; and
5. CLC Settlement Agreement.

The CLC has consolidated all its guidance on Contractual Best Practice into one document to make it easy for the industry to use.

Andrew Croft, Partner in the Contracts and Projects Advisory team at Beale & Co is a member of the COVID-19 Contractual Best Practice Group and helped draft the original CLC guidance along with the recent updates. Beale & Co are very proud to continue supporting the industry deal with the pandemic.

Here we provide more details on key components of the updated guidance including Future Proofing and the COVID-19 Impact Assessment Toolkit.

Future Proofing: JCT/NEC Amendments

There is a continued focus on ‘future proofing’ contracts within the industry to help parties deal with the impact of the COVID-19 pandemic.

This revised guidance should be read in conjunction with the Template J: CLC – Future-proofing Clauses /Amendments which provided three options for amending the JCT Design and Build Contract 2016 (JCT D&B 2016)  and the NEC 3 and NEC 4 Engineering and Construction Contracts (NEC3 and NEC4 ECC).

A fourth option has now been included to the proposed amendments to reflect the progression of knowledge around the impact of COVID-19. This option includes three ‘bolt-ons’ (Option A, B and C) which can be used with the any of the three original options to allow parties to benchmark the impact of COVID-19 on their contract.

The options are: A) an entitlement to additional time/money where the effects of COVID-19 worsen after the date of the Contract, B) an entitlement to additional time or money where an impact occurs that is beyond the pre-agreed list of COVID-19 impacts and C) entitlement to a Relevant Event and Relevant Matter (under JCT D&B 2016) or a Compensation Event (under an NEC ECC) where there are changes to the pre-agreed list of assumptions or restrictions in relation to COVID-19.

The amendments in Template J may be used where existing contracts do not provide for an extension of time when dealing with delays caused by COVID-19 or where they do not allow for reimbursement of loss and expense incurred by dealing with COVID-19.

The suggested amendments and guidance are there to provide a useful starting point on how parties can deal with the continued issues presented by the pandemic contractually.

Impact Assessment Toolkit

This is a new piece of guidance added to the CLC Contractual Best Practice Guidance suite. The primary aim of this guidance is to enable the parties to demonstrate at a high-level the impact of COVID-19 on their projects. The toolkit is not designed to be used to calculate the quantum of claims.

The CLC encourages parties to negotiate and agree settlements that share the time and cost impact of COVID-19. However, smaller sub-contractors have less guidance and support to assist with such negotiation and settlement. This toolkit can help address this issue by demonstrating the productivity and cash flow impacts of COVID-19 thereby providing a starting point for negotiation and eventual settlement.

Making use of the guidance

The latest CLC guidance continues to be useful to all parties involved in construction projects.  The primary aim of the CLC is to encourage parties to be fair and responsible in the performance and enforcement of contracts impacted by COVID-19. The existing template notices/dialogues along with the new template variation and settlement agreements seek to do just this. The updated guidance should greatly assist all parties to kick-start discussions on dealing with the impact of the pandemic.

The new ‘bolt-ons’ in Option 4 are a direct reflection of the growing awareness of COVID-19’s impact on the construction industry. This impact extends far beyond the traditional effect of a virus. As such, option 4 is designed to help parties amend their existing contracts to tackle the continuously evolving effects of the pandemic. Using their current awareness, parties can define the impacts of COVID-19 on their project and receive a reasonable entitlement to time and money where there are any increases or changes to those impacts. Similarly, the updated guidance on future proofing builds on this knowledge and should be considered for all new contracts in an attempt to tackled COVID-19 head on.

For the industry, the Impact Assessment tool is a great way to ‘benchmark’ and illustrate the time and cost impacts of COVID-19 on your projects. It can be a powerful conversation starter with parties further up the supply chain and should be used as a tool to encourage fair and responsible contracting between all parties.

Please do not hesitate to contact Andrew Croft or your usual Beale & Co contact for more information.