Protecting entitlements during the Covid-19 pandemic – the benefits of good record keeping

In this jointly-authored note between Wright Hassall LLP and Commercial Risk Management Limited, we look ahead to some possible issues that contractors and sub-contractors will face down-the-line as a result of events that are occurring right now, and how to prepare for those events.

We have already seen that the impact on cashflow through some projects caused by Covid-19, whether it is literal/actual or simply just feared, is having an effect on progress, valuation and payments, all of which could well lead to disputes. 

Adjudication is a mechanism of dispute resolution available to the vast majority of construction project participants, even where there are no adjudication clauses written into the contract (or indeed even where there is no contract). Adjudication provides a quick resolution to disputes, with a decision within 28 days of the dispute being referred being the standard timescale. This means that any disputes referred to adjudication now will be dealt with within the current atmosphere and understanding, including all of the difficulties, uncertainty and changing guidance, of the way that Covid-19, for instance, may have impacted that particular project. 

The recent case of MillChris Developments Ltd v Waters, where a party unsuccessfully tried to put a halt on adjudication proceedings due to the logistical difficulties caused by Covid-19, confirms that adjudication as a process will still be supported even in these current times of ‘lockdown’.

But what of arbitration and court proceedings? These processes take considerably longer than adjudication and in terms of getting in front of a tribunal and having the case heard, realistically many matters could have to wait 18-24 months or so (with court timetables themselves potentially also being delayed by the ongoing impacts of Covid-19).

There has been considerable talk throughout late March and April 2020 about co-operation and ‘doing the right thing’ during these unprecedented times, but it is unfeasible to think of a situation which is ‘right’ for everyone throughout an entire project. Disputes are bound to arise and actions that have already been taken and are being taken might well be questioned or attacked in the future, even if there appears to be general consensus that those same decisions are reasonable and sensible now. 

There has also been a great deal of belief that on public policy grounds, there is likely to be some sympathy/leniency afforded to those affected by the impacts of Covid-19 on their projects, so some parties are taking the view that their position is surely going to prevail if the dispute is ultimately determined by a third party tribunal.

It is, however highly likely that in 18-24 months’ time, the project participants, the media and judges/arbitrators will:

• remember/portray events differently; and/or
• ignore some or all elements of the current predicament and focus instead on the strict requirements of the contract and the usual burdens of proof

What is obvious is that not every project participant can ‘win’, and not everyone can have their own view of what a reasonable (let alone favourable) outcome could be, upheld. So whatever the current ‘mood-music’ / informal understanding / ethos is, or appears to be on a project, the reality is that in many cases it will still be true that the age-old mantra “records, records, records” will be as important as it always has been. 

The Essential Purpose of Good Record Keeping in Construction Projects

It may seem obvious that accessible, reliable, well-organised and complete information facilitates better management of construction projects, which are normally complex, involve multiple participants and have long duration. However, a common criticism by those who advise clients, consultants, and contractors, especially when a conflict or dispute has arisen, is that often, poor quality record keeping undermines good project management, exacerbates the extent and impact of disagreement, and impedes resolution

High-Performing contractors and consultants see the benefits of good record keeping, which contributes to enhanced project outcomes – better performance against programme, closer alignment of Final Account and client budget, and reduced disagreement about quality and scope.

Good record keeping leads to:

• Better project management
• Greater understanding of progress against programme
• Improved communication
• More informed decision making about choices and interventions
• Earlier identification of causes, consequences and corrections regarding disagreement
• Reduced need for, and improved chances of success in, dispute resolution

What record keeping is appropriate?

The specific, contemporaneous data and information that should be captured, recorded, catalogued, and stored, in an accessible, secure, central repository includes:

• Pre-Construction Agreements and other Pre-Construction Documentation
• Contractual Arrangements and amendments
• Contract Change Orders/Amendments
• Contract Drawings and Revisions
• Architect’s Instructions (information received from design team)
• Requests for Information to the design team and responses sent to the designers and client
• All pertinent correspondence (internal and external)
• Memoranda and informal communication (‘What’s App’, ‘Zoom’ or ‘Teams’ meeting notes)
• Progress photographs
• Site Journal/Diary/Daily Reports
• E-mails
• Any other electronic job-related documents

A properly administered contract is evidenced by, and will entail, all communications between the parties being made in writing, logged, catalogued and stored.

If your organisation suffers from ‘less than ideal’ record keeping procedures and protocols, with associated consequences, Wright Hassall ([email protected]) and CRM ([email protected]) can provide excellent guidance towards ‘best practise’.