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COVID-19 has created a challenging environment for building, including material and trade delays and price increases. You may be looking to manage these issues through your contracts. Before you do, make sure you're aware of the following constraints:
- Understand that you are responsible for the suppliers selected for the project and are not necessarily entitled to any additional costs you incur because of a supply issue.
- Look at alternative sources for products – although, there will be no escaping a global supply issue.
- Investigate alternative products that are available in Australia or elsewhere. You will need to have your client’s approval to use an alternative product so ensure you follow the process set out in the contract for variations before you order an alternative product.
- Check with suppliers before placing orders and be clear on when to expect deliveries. Ensure you read your supplier agreements to understand what your rights are if goods are not received by the date that you have requested and agreed with the supplier.
- Ensure you manage delays caused by non-supply of products contractually and in writing. The key is to notify your client as soon as you become aware that a delay is likely to occur to the project and ensure that your notice of delay complies with the requirements of the contract. Submit updated notices of delay to keep your client abreast of a continuing delay and what steps you are taking to mitigate the delay.
- Ensure you submit a claim for an Extension of Time to the Date for Practical Completion within the timeframes noted in your contract. For domestic building work, this must be done within 10 business days of the delay occurring. For commercial/subcontract work, this is likely to be set out in the contract.
- Review your contract for a force majeure clause which may apply where it is not possible to source supplies for the project at all.
- Border and quarantine restrictions are unlikely to be a valid reason for additional time or costs under a contract. If you or your workers/subcontractors are forced into quarantine or unable to cross a border, then you are responsible for sending other workers or engaging another contractor to perform your contract on your behalf. If not, you are likely to be in breach of your contract. You should discuss all potential options with your client (builder or owner) to work out what arrangement you can agree on to minimise the delay and additional costs to both parties and the project.
Factor in delays and price increases wherever possible. Be aware that it's unlikely that you will be automatically entitled to an extension of time to the Date for Practical Completion if the delay could have been reasonably expected at the time you entered into the contract or submitted your tender.
We recommend that you raise the issue of supply delays with your client prior to submitting your tender and/or entering into the contract. Similarly, ensure that any quotes that you provide also address these potential issues.
It is possible to expedite cash flow by having more frequent regular progress payments based on the value and progress of work or more frequent stages of work.
It is important to note, for regulated domestic building contracts a claim for a progress payment (other than the deposit) can only be lawfully made if the amount is both directly related to the progress of carrying out the subject work at the building site, and proportionate to (or less than) the value of the subject work that relates to the claim.
To avoid potential for dispute, you might want to include in the contract detail as to how progress and value of work will be decided when making a payment claim.