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Building project delays may spark 'rise in disputes'

The impact of Covid-19 on construction productivity could cause problems for many

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Mitchell McDermott's note added that it would take some time to understand the productivity impact as contractors return to site (stock photo)

Mitchell McDermott's note added that it would take some time to understand the productivity impact as contractors return to site (stock photo)

Mitchell McDermott's note added that it would take some time to understand the productivity impact as contractors return to site (stock photo)

Mitchell McDermott, a Dublin-based construction consultancy, has warned about the potential for disputes over construction sector productivity as Covid-19 delays progress on sites.

The company said in a weekly note on the sector to its clients that the next few months are going to "prove very challenging" from a contractual perspective as to how the productivity issue is dealt with. It said the successful basis for a time and money claim for Covid-19 in a standard contract is not clear.

Mitchell McDermott's note further added that it would take some time to understand the productivity impact as contractors return to site.

"The grey contractual basis for claims could give rise to more disputes than normal and, as mentioned last week, one of the most important tools to have in your arsenal, is contemporaneous records," the note said.

Anthony McDermott, a director of Mitchell McDermott, said that several issues were facing the construction sector, with productivity set to be a key problem in the months ahead.

"Productivity is a huge one, and that will be the keyword for the next 12 months," he said. "It will cause [contract disputes]. There will be delay disputes in terms of taking longer to build and cost disputes in terms of it costing the contractors more to build.

"When two parties enter into a contract, they share the risk. If you were building a hotel, they wouldn't have their room rates for another year-and-a-half or two years, so they will be hurting as well. They will have to share the risk."

McDermott, whose consultancy recently launched a new app that allows clients to review costs and the state of the sector generally, added that he wasn't aware of any disputes as of yet. But he believed that contractors were making it clear that productivity would be affected.

"This is all unprecedented. Contractors are putting forward their position on some projects in terms of costs. But nothing has been resolved yet," he said. "The best way forward is for both sides to engage early in an amicable fashion rather than stick your head in the sand."

An industry source agreed that productivity was set to be a big concern for projects. "This is going to be a big challenge, particularly on the big projects like Grangegorman or the children's hospital, you are going to be faced with various lengthy delays if this is the new normal. How does that impact on costs? Who knows, I can't see it being good."

Mitchell McDermott's note also pointed out that product supply is "somewhat patchy" and could take time to work out, particularly in regards to sourcing stone products from Spain or electrical equipment from Italy.

Sunday Indo Business