Updated: Sep 30
When it comes to Covid-19 government shutdown, NZS3910 empowers the Engineer with the responsibility to suspend the contract works per 6.7.1., because it has "become necessary". Thereafter the Contractor shall properly secure and protect the works 6.7.2 then throw consecutive doubles to advance their token to Variations 6.7.3 and Extensions of Time 10.3.1 (a), collect 80% of £200 if they pass GO, on the way to Free Parking.
NZS3910:2013 6.7.1 If suspension of the whole or part of the Contract Works becomes necessary, the Engineer shall instruct….
Arguments that the lock-down effect is a change in legislation are challengeable.
Adding COVID-19 to the infectious disease register is a change in legislation, but that did not mean there would be a pandemic and government shut down. Change in legislation is not an option if a pandemic caused shutdown resulted from an infectious disease already on the register when tendering the project. The act of adding COVID-19 to the infectious disease register is simply evidence the pandemic caused shutdown in this case was not foreseeable. Until we reached level 4 you could have your pandemic and eat your construction project too. It was the activation of Level 4 that necessitated a suspension (part or all) of some (but not essential) construction projects.
Arguments that the lock-down effect is an EOT only event are challengeable.
Some Engineer's to the Contract have ruled it is an EOT event not a variation per 10.3.1 (f) any circumstances not reasonably foreseeable by an experienced contractor at the time of tender and not due to the fault of the Contractor. This falls over because the evidence of unforeseeability is a change in legislation 5.11.10 which is a variation.
When you look at all the angles, when suspension of the works becomes necessary, there is only one proper course of action. When reading the Contract, you cannot simply discard what you do not like and elevate an alternative preference to first place. That is being subjective. The objective approach is to weigh up each seemingly competing view and harmonise, attempt to give each a meaning in context that allows the other to coexist happily. Yes, there is a change in legislation, yes it was unforeseeable, and yes it was necessary to suspend the works.
If the Engineer has not instructed the Contractor to suspend the works or leave the site, why have all the Contractors done so?
A – 1.4.1 The Contract shall be governed by New Zealand law. And it would be unlawful for the Contractor to not suspend the works and leave the site as instructed by the NZ Government;
B – The Contractor has abandoned the Contract risking termination 14.2.1 (c);
C – The Principal has failed to pay a payment Schedule 14.3.1 (b) and this has continued for 10 working days 14.3.3 and the Contractor has asked the Engineer to suspend the works 14.3.3 & 6.7 then left the site.
In the case of Covid-19
In this case the lock-down effect is both a Change in legislation claim and Suspension of site claim. Both apply concurrently, giving rise to two separate basis for EoT's. Change in legislation is the broader reaching gambit that covers the shutdown effect and any other level restrictions that may not require suspension of the works but do require alternative working structures and additional health and safety costs that can only be recovered with a change in legislation claim. These other than level 4 restrictions may occur before, during and after any period of level 4 shutdown.
The Engineer to the Contract still has to instruct the suspension of the works for Level 4. It is the proper course of action that applies with or without a change in legislation, because it is necessary. The evidence for a Variation & EoT claim is simpler to identify for the effects of level 4 suspension than level 3 disruption events. It is better to deal with each separately on their merits to simplify the process.
If the lock-down effect occurred for a infectious disease already on the list, delays outside of the lock-down period would likely fall under "10.3.1 (f) any circumstances not reasonably foreseeable", allowing the recovery of time but not money, but the portion subject to the lock-down effect is subject to Variation under 6.7.1 allowing the recovery of time AND money during the Lock-down period.
Dentons Kensington Swan have published their common sense position on the key considerations of how NZS3910 based construction contracts may respond to the present (and possible future) Covid-19 circumstances. [PDF Link]
By Matthew Ensoll
Life Member NZIQS Reg.QS.
Editor, The New Zealand Building Economist (NZBE).