How to mitigate the risk of a construction project overrunning into term time

Although 6 – 8 weeks seems a vast amount of time to parents and pupils, it is a relatively modest period for construction works, depending on the scale of the project. The usual worry for education providers and contractors working on projects on site at schools or campuses etc., is that the works overrun into term time when pupils and staff are back. This could result in the education provider needing to use the newly, or partly built accommodation before completion, and of course there are many health and safety issues too.

Sometimes, the reason for the overrun is outside the contractor’s control – it is not unusual to have heavy thunderstorms and flash flooding in August. The ongoing shortages with materials and labour also continue to affect the construction sector and can have an impact on tight timetables.

So what can you do to help mitigate the risk of a project overrunning?

Communicate, communicate, communicate

Be clear with the contractor about your deadlines from the outset and have regular, frank and open commercial discussions about progress and how realistic your proposed programme for the works really is. Such discussions are in the interests of all parties and can prove to be one of the most effective methods of ensuring the project meets its targets.

Some examples of discussions we have seen that benefit projects include:

• In return for agreeing to stomach some of the up-front expenditure on a project, especially items with long lead in times and which need to be imported, employers (the education providers) have worked with contractors to expedite the process and/or contain costs.
• Maintaining good communication throughout the entire length of a project – from concept to completion.
• Construction managers highlighting risks (such as potential labour shortages, for example due to taking holidays and/or childcare issues, over the summer break) as early as possible and managing those risks proactively.
• Contractors communicating cost changes and fluctuations in material delivery dates as soon as they become aware of such issues.

Most importantly, remember that trust is key.

Steer clear of poorly drafted contracts – every single word matters

In circumstances like this where time is very much of the essence, it is critical that all parties have a   clear understanding of what the contractual terms are, the strength of their bargaining position and their legal standpoint at the inception of the project and long before the works even commence – seeking legal advice is an invaluable step in that process. Often once a contract has been signed there is very little room for re-negotiations and generally relies on good will. Therefore, it is imperative to get things right before execution stage and below are just a few examples of how this can be achieved:

• Insurance – Insurance should be reasonable and proportionate. If this isn’t the case, there may be a push back from the contractor (and sub-contractors) especially on contracts that overstate the assumption of liability. Professional indemnity insurance continues to be increasingly expensive, so high levels of insurance are expensive both for the policy holder and for the employer as the cost will be passed on.  The level of cover requested should therefore be set proportionately and mindful of the level of anticipated losses should the relevant party fall in breach of contract.  Parties should be aware that insurers of new policies or on renewals will have discussions with them on their level of claims, contracts and the like, so good record keeping is essential.
• Consistency – From contracts with the employer all the way through to agreements entered with subcontractors, consistency throughout is critical. Clear details highlighting the responsibility of each party is paramount and failure to do so could result in a gap in cover and losses going forward. For example, if a fixed price is agreed with the employer, yet a price adjustment option is provided to subcontractors this could leave the contractor exposed. This could ultimately compromise the position of the project as cash flow is the life blood of construction projects.  Without cash flow the likelihood of the contractor facing insolvency increases, similarly the project faltering ultimately leading usually to this costing more for the employer.  Seeking legal advice at an early stage will help with this.
• Extension of time rights – Once again maintaining communication between parties is key:  the circumstances under the contract in relation to which the contractor may be entitled to an extension of time needs to be fully understood. The contractor and project manager should be required to keep good records of increases in price and/or shortages of materials, and any knock-on effects these cause to the programme. Also, of any inclement weather – how that is to be defined precisely in the contract and when that has occurred to avoid storing up problems for later.
• Flexibility – Changes inevitably do happen, so allowing contracts to be flexible can allow for the project to continue to move forward, preventing costly delays. Having this approach should inspire logical and sometimes innovative solutions which can save valuable resources. But again, this approach will need to be taken with caution and legal advice should be sought where necessary as the contract terms being too loose can also be a problem with the wrong contractor.

Last year, our Construction team advised a leading private school based in Cambridgeshire on two new projects including the refurbishment of buildings in the campus and the other a new build primary school. We also advised a Cambridge College on a major recreational facilities project for students which recently achieved practical completion having started during 2020 amongst all the problems of lockdown and restrictions on construction. We drafted the consultant appointments with the building contract and other construction documents for all these projects and more general construction advice throughout.

If you need help with a construction project whether at inception stage, tendering or later, please get in touch.