Pandemic and pragmatism
Although unexpected events have always impacted construction projects, compounding the potential for full-scale disputes, the COVID-19 pandemic is an unprecedented global crisis affecting almost every single person on earth.
COVID-19 has had a tragic impact, but it has also resulted in positive changes, creating greater community and social engagement, and reinforcing Environmental, Social and Governance (ESG) principles. This is also true for the construction sector, where individual stakeholders in a project have developed deeper empathy for their business partners, particularly a recognition that contractors and sub-contractors have been hit especially hard by the events of 2020 and 2021 and that the supply chain requires support to ensure it remains in place for future projects.
"The construction industry is pretty resilient. I think it found ways to get on with projects and find sensible ways to deal with the issues collaboratively."
Adrian Bell, co-head of the Infrastructure, Construction and Energy (ICE) Disputes Group at CMS
Our research indicates that industry players have become more attuned to fiscal and operational constraints of business partners, showing a greater willingness to be reasonable, such as providing advance payments where requested. Adrian Bell adds:
"I think COVID-19 has initiated a more collaborative approach. I think employers have realised that if they're too heavy handed, then the contractors will become insolvent or fall away. So it's really a question of being more pragmatic and kind of nursing projects over the line."
Adrian Bell, co-head of the Infrastructure, Construction and Energy (ICE) Disputes Group at CMS
Government support in most developed economies has also helped to sustain the construction sector. Construction News reported in February 2021 that UK insolvencies in the sector were at their lowest for a decade in 2020.
"There are many ways for buyers to explore helping sub-contractors, including reinforcing advance payments. Nobody was really prepared for a black swan event like COVID-19."
William Zhang, Head of Legal and Contracts, Samsung C&T Corporation, Asia Pacific Regional Office
