Driver Trett Digest | Issue 20 - Magazine - Page 19
DIGEST | ISSUE 20
often have altered their working
practices based on public health
information rather than following
the directions of their client.
However, this will not always be
the case and an email from the
employer indicating such changes
are required may be sufficient to
qualify.
(ii) The type of variation that
may be instructed under the
contract
If the contractor can overcome the
first hurdle, it needs to consider
whether the change to its operating
procedures qualifies as a variation
under the contract. Variations are
sometimes defined as amounting
to only changes to the permanent
works.
Variations
and
Covid-19
Michael Sergeant, Partner, HFW
The starting point for contractors looking to
claim relief and compensation for the impact
of Covid-19 has been to look at their contract
provisions for Force Majeure and Change in
Law.
There will often be severe restrictions on a claim under
those clauses and so a contractor should also consider
the degree to which the variations clause may trigger
entitlements.
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The clause will normally be cited when there are
changes to the permanent works. For example,
where specified equipment is no longer available
because a supplier has been affected by the
pandemic. But the impact of Covid-19 has been
more especially felt in the way that sites have
changed how they operate. In particular, by being
required to introduce changed methods of working.
Such a claim needs to consider three issues: (i)
whether a valid instruction has been issued; (ii) the
type of variation that may be instructed under the
contract; and (iii) whether the change is outside the
contractor's risk.
(i) Whether a valid instruction has been
issued
Claims associated with changes to site procedures
will often fall at this initial hurdle. Construction
contracts almost always require the employer (or its
agent) to issue an instruction to trigger a variation
entitlement. During the pandemic, contractors will
The issue is illustrated by the 1997
Court of Appeal case, Strachan &
Henshaw v. Stein (1997) 87 BLR
52. S&H was employed to install
and commission generators at a
power station, being constructed
at St Neots in Cambridgeshire
within the UK. It initially based its
site facilities camp immediately
adjacent to where its operatives
were working. But then, shortly into
the project, S&H was instructed
to move the camp. This meant its
operatives ended up with a halfmile walk every time they wanted to
use the facilities. The change led to
a significant reduction in efficiency
and S&H brought a large claim for
the extra costs. For the purposes
of the case, it was assumed the
contract stipulated that the site
camp should be based in the original
location. But, despite this, the
contractor lost the case. The court
found that the variations clause did
not bite in this situation. The clause
stated that variations meant “any
alteration to the Works whether
by way of addition, modification or
omission”. Furthermore, the term
“Works” was defined as “work to
be done by the Contractor under
the Contract”. The Court of Appeal
therefore concluded that this
definition of “Works” did not
encompass the arrangements for
operatives to be transported to the
workplace as it only covered the
actual site construction work; i.e.
the permanent work.
This case usefully illustrates
the principles, although on this
occasion, the wording of the
variations clause was too narrow to
establish entitlement.
Fortunately, for most contractors,
the commonly used UK standard
forms contain wider definitions of
both the work-scope and variations,
than provided for in the contract of
the Strachan & Henshaw case. The
FIDIC Yellow Book 1999, defines
Variation as including any change
to the Employer’s Requirements or
the Works, which is in turn defined
as including both permanent works
and temporary works. The JCT
D&B 2016, defines “Change” to
include various alterations to the
way the work is organised on site,
including changes to site access
or limitations on working space or
hours. Under NEC4, Compensation
Events include an instruction
changing the Scope, which is
defined as information, which either
specifies and describes the work or
states any constraints on how the
Contractor provides them.
In short, therefore, most UK
contractors will be operating under
contracts that allow instructed
changes to site procedures to be
categorised as variations.
(iii) Whether the change is
outside the contractor’s risk
The final challenge for this type
of claim is to establishing that
the contractor’s new working
arrangements amount to a change
in its duties under its contract.
Take as an example the CLC’s Site
Operating Procedures (SOP).12
It seems to be generally recognised
that a contractor’s duty to
implement the SOPs arises as a
consequence of the Construction
(Design
and
Management)
Regulations
2015
(CDM
Regulations) which impose various
duties; e.g., a duty to manage the
works to ensure they are carried out
as safely as reasonably practicable
(Regulation 13). A contractor has an
underlying duty to comply with the
CDM Regulations and it takes the
burden of both the risk (and cost)
of doing so.11
A change to a contractor's scope
(even if allowed for under the
variations clause) will not qualify
as contract variation if it involves
something that is already part of
its underlying risk allocation. This
principle is worth considering in a
different context. If, for example,
it transpires that a specified item
of equipment is inadequate then a
design and build contractor cannot
claim extra. This is because the
contractor's
design
obligation
means that this is its risk. It cannot
amount to a variation even if the
employer
mistakenly
directed
it as one. The same issue may
prevent a contractor claiming
that compliance with SOPs is a
variation. If compliance with the
SOPs is an underlying duty under
its contractual obligation via the
CDM Regulations, then changes to
working operations to comply with
the SOPs cannot be a variation.
This is not to say that no changes
to working operations will qualify
as variations. Employers may well
impose alterations to the way in
which the contractor is required
to carry out the work or organise
its site, which go beyond the CDM
Regulations.
Finally, it should be remembered
that if a contractor can find a route
to claiming as a variation this will
give advantages over other claims.
A right to both time and money will
be triggered and compensation
will be based on prices rather than
cost, making entitlement easier
to establish and potentially more
lucrative.
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