JBCC questions and answers for COVID-19
In this article we look at some of the most pressing JBCC COVID-19 related questions we dealt with during this time and hope to impress some of our views on the matter, for our readers.
COVID-19’s impact on the construction industry has been extensive. Many industry role-players had to grapple with the contractual implications caused by the pandemic and moreover, by the unprecedented consequential impact of a lockdown imposed on their projects.
The situation created a flurry of JBCC, and COVID-19 related questions and published commentaries and parties found it challenging to manoeuvre their contractual rights and obligations within this new reality.
Is it a Force Majeure or not?
This was a hotly debated topic. At times it seemed as if many people had some vested interest in the matter NOT being classified a Force Majeure. Many commentators overstretched the concept and their imagination in an attempt to coerce it into a different category. To what end, I’m not entirely sure.
The JBCC defines a Force Majeure as “an exceptional event or circumstance that:
- could not have been reasonably foreseen
- is beyond the control of the parties, and
- could not reasonably have been avoided or overcome”
Under the strict and straight-forward interpretation of the wording, the COVID-19 pandemic would qualify as a Force Majeure as it satisfies all 3 aforementioned conditions.
Some has argued that it’s not the disease that caused delays but rather the government’s response to it.
Another well-known publication tried to say that : once a national disaster had been declared on Sunday 15 March 2020 it became a certainty that lockdown would follow and therefore, the lockdown did not satisfy the definition of a Force Majeure.
I cannot disagree more. Under this bizarre definition very few circumstances would constitute a Force Majeure.
NASA would essentially phone you on a Monday to confirm that a foreign object is hurtling towards your construction site from outer space. The object is set to hit you by Friday. These commentators would have us believe that after Monday, you could reasonably foresee that your site is about to be destroyed on Friday and hence, the destruction of you site by a meteorite is not a Force Majeure anymore.
In my humble opinion, the announcement of the lockdown, in other words, Government’s response to the COVID-19 disease is also a Force Majeure.
From a practical standpoint we should not be splitting hairs about the milliseconds between foreseeing and not foreseeing a circumstance. I don’t think that’s the clause’s intention. It would make much more sense that “foreseeable” refers to an earlier context, one where the Employer was busy conceptualising the project or when the Contractor was busy tendering and pricing for the work.
If something should have been foreseeable at tender stage, it should reasonably have been allowed for by one of the parties. Something like a government lockdown as a response to an infectious disease would not qualify as being reasonably foreseeable in most projects conceptualised before 2020.
Furthermore, sanity prevailed quite recently in a judgement in South Africa between the hospitality industry and insurers where the insurers also argued that it’s not the disease itself that caused the delay but rather the government’s response to the disease. This argument was firmly rejected by the learned Judge.
Could a Contractor / Subcontractor claim for an extension of time as a result of the lockdown due to COVID-19?
Yes. Under all versions of JBCC the Force Majeure (Vis Major) provision provides entitlement to claim an extension of time. Under the latest version: Clause 23.1 entitles a Contractor to “a revision of the date for practical completion by the principal agent without an adjustment of the contract value for a delay to practical completion caused by one or more of the following events:
23.1.5 Exercise of statutory power by a body of state or public or local authority that directly affects the execution of the works
23.1.6 Force majeure”
There is also clause 23.3 which entitles the Contractor / Subcontractor to claim for any event beyond their reasonable control.
Could a Contractor / Subcontractor claim for an extension of time as a result of the restrictions/additional requirements imposed under the lower lockdown levels?
Yes. Although the burden of proof of the impact of these measures are still carried by the Contractor / Subcontractor.
What about the value adjustment, can I claim for an EOT with an adjustment of my time-related Preliminaries?
One of the great features of JBCC is its division of risk when it comes to delay claims. It categorises the risk for delays between culpable, excusable, and compensable delays.
Culpable delays are those for which a Contractor is delayed by their own accord and for which the Employer can elect to levy a penalty.
Excusable delays are those events which fall under Clause 23.1. It means the Contractor must get relief of penalties, but there is no obligation on the Employer to compensate the Contractor for the additional time-related overheads they suffer. The purpose is to apportion risk fairly between parties when an event happens which is beyond both their control. Something like weather, a meteorite strike or a deadly virus causing a lockdown on the site.
Compensable delays are those delays for which the Employer, or his agents are at risk. JBCC lists these delays under Clause 23.2. It denotes a delay caused by their actions, in-actions, or default in some way. For those circumstances, the Contractor is entitled to relief of penalties and compensation for time-related overheads.
Clause 23.3 allows for any circumstance beyond the control of the Contractor for which they could not reasonably have allowed for. The value adjustment is left up to the Principal Agent and follows the same principles laid down under 23.1 and 23.2. If the circumstance is due to the default, action or inaction of the Employer or one of their agents, it should also allow for a value adjustment.
The COVID-19 and related lockdown are both circumstances which were beyond the reasonable control of all parties under the contract. As a result, it should fall under clauses 23.1.5 or 23.1.6 which are excusable delays. If they should fall under clause 23.3, it is still not an adjustable claim as it’s no-one’s fault.
If that’s the case, why would it make difference if it’s Force Majeure or not?
I don’t actually know, I am as dumbfounded as you are but something suggests there may be insurance involved.
What if the Principal Agent issued us with an instruction to stop work?
Ah, clever Contractors, always the opportunists, or is it your clever commercial consultant?
Let’s first ask:
Is the Principal Agent under an obligation to issue an instruction due to COVID-19 or the lockdown?
The Contractor is obligated to comply with the law in terms of clause 2 of the JBCC.
Also note, there is no obligation on a Principal Agent to issue an instruction. Another well-known blunder made by overeager commentators who published opinions for professional bodies who ill-advised Contractors to demand an instruction from the Principal Agent before stopping work.
In terms of clause 17 of the JBCC Agreements the Principal Agent may issue contract instructions to the Contractor regarding a host of matters of which the compliance with the laws and regulations are but one. The Principal Agent cannot be forced to issue an instruction and has discretion on the matter.
The Contractor has an overarching statutory and contractual obligation to comply with the law. It is accordingly not required for the Principal Agent to issue a contract instruction regarding compliance with government’s regulations around the lockdown.
Back to the original question, what happens if you were issued with an instruction?
If the Principal Agent issued an instruction it can, under a strict interpretation of JBCC, become a Compensable Delay under clause 23.2.3. It allows for extension of time with cost for “Contract instructions not occasioned by the Contractor’s default”.
However, I would caution Contractors to think this is a strong case to claim adjustment of preliminaries. It creates some opportunity for dispute and we now venture into the “intention of the Agreement” territory here.
The crisp issues would be: A Contractor can only claim for delays caused by the instruction. One could argue the delay is not caused by the instruction itself, but rather dominantly by the change in law and the Contractor’s overarching statutory obligation or by the Force Majeure.
The same principle will apply if the Contractor needs to repair damage to the works where such risk is beyond the control of both parties. Under such a circumstance, the principal agent may also issue a contract instruction for such repair and said instruction would not be due to the contractor’s default. In other words, a contractor could technically also try to rely on clause 23.2.3 under this circumstance but it would defeat the purpose and certainly fall beyond the intention of the JBCC as clause 23.1.3 already deals with the circumstance and correctly apportions the risk.
I think ultimately in a dispute or litigation, the reasonable approach will follow the aforementioned intention of the JBCC and focus on that intention to apportion risk where no one is at fault. I doubt if any contractor would be successful in exploiting this caveat in order to claim an EOT with cost.
What about ancillary costs due to COVID-19 such as additional H&S costs, standing time etc.
Probably the most difficult question to answer as it can become complex depending on the unique circumstances of each case.
There are a few ways to deal with this depending on whether an instruction was issued or not. For instructions issued, the cost is to be handled according to clause 26.2 and the contract value is adjusted accordingly. See How To Get Paid for Change Instructions in JBCC
If no instruction was issued, the Contractor is still under an obligation to adhere to the law and in this circumstance may lodge a claim under clause 26.5. Clause 26.5 states that the Contractor shall give notice to the principal agent, within twenty (20) working days of becoming aware of expense and loss for which provision was not required in the contract sum.
The “additional expense and loss” clause (26.5) is not as clear as the “extension of time” clause (23) in its apportionment of risk. Nor does it give clear guidance to the Principal Agent to assess such a claim. It merely states the Principal Agent shall make a fair assessment of the claim.
Fair assessment in my view is to apportion such additional cost between the parties. This would be the solution most indicative of the spirit of the JBCC which is to apportion risk between the parties where no-one is at fault.
Although other people’s sense of fairness may certainly differ from mine, the accepted interpretation ultimately rests with and will be determined by our judiciary if required.
Until such time, let’s hope the parties in our industry can foster a spirit of reciprocal kindness and co-operation during these trying times.
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This post was compiled by Kobus le Roux for Le Roux Consulting, all rights reserved. Please contact us for your professional outsourced project scheduling, claims or adjudication assistance services or construction training courses in the heavy civil and building industry.
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