Lessons Learned: The Impact of COVID-19 on the Construction Industry and the JCT 2024 Response

Sophie Bennett, Associate at Holmes & Hills, discusses the lessons learned from the COVID-19 pandemic and how the JCT 2024 suite of contracts has responded to the construction industry's experience of unprecedented disruption.

The COVID-19 pandemic was arguably the most significant disruption to the global construction industry in living memory. From nationwide lockdowns and supply chain collapse to labour shortages and increasing material costs, few projects escaped unscathed. In the years since, the industry has reflected on the contractual mechanisms that were (and were not!) adequate to deal with such an event. The JCT 2024 suite of contracts represents the first major revision of the JCT standard forms since the pandemic, and its introduction of an express epidemic and pandemic Relevant Event is one of the most noteworthy developments.

The Impact of COVID-19 on the Construction Industry

When the UK Government announced the first national lockdown in March 2020, the construction industry was plunged into uncertainty. While construction was never formally ordered to cease, many sites closed voluntarily or became unworkable due to social distancing requirements, the unavailability of key workers, and the closure of material suppliers.

The consequences were far-reaching:

• Programme delays: Projects across the country experienced significant delays. Even after sites reopened, reduced productivity caused by social distancing measures, staggered shift patterns, and enhanced hygiene protocols meant that pre-pandemic programmes were difficult, if not impossible, to achieve.
• Supply chain disruption: Global manufacturing shutdowns led to severe shortages of key materials such as steel, timber, plasterboard, and mechanical and electrical components. Lead times and prices increased dramatically.
• Labour shortages: Travel restrictions, self-isolation requirements, and the furlough scheme all contributed to a reduced and unpredictable workforce.
• Costs: The combined effect of supply shortages and increased on-site costs created significant budget pressures.

The Contractual Challenge Under JCT Design and Build 2016

Under the JCT Design and Build Contract 2016, parties seeking to claim extensions of time for pandemic-related delay were forced to rely on Relevant Events that had not been drafted with a public health emergency in mind. The most commonly invoked grounds included:

• Force majeure. A notoriously undefined term in English law, the scope of which was, and is, uncertain.
• The exercise of statutory powers. This arguably captured government restrictions, but not comfortably.

The absence of an express pandemic or epidemic clause left both employers and contractors in an unsatisfactory position, reliant on contractual interpretation and, in many cases, negotiated ad-hoc solutions.

The JCT 2024 Response: A New Relevant Event

Recognising these shortcomings, the JCT 2024 suite introduces an express Relevant Event for epidemics and pandemics. This new clause entitles the Contractor to an extension of time where the progress of the Works is delayed by the effects of an epidemic limiting the availability or use of labour or the securing of goods or materials necessary for the carrying out of the works.

This is a significant and welcome development for several reasons:

1. Clarity. Parties no longer need to shoehorn a public health emergency into ill-fitting categories such as force majeure. The new clause provides a clear and direct basis for a claim.
2. Foreseeability. By expressly identifying epidemics and pandemics as a recognised risk, the contract encourages parties to consider and allocate that risk at the outset, rather than grappling with it after the event.
3. Scope. The clause captures not only the biological event itself but also the consequential response which may include lockdowns, travel bans, mandatory closures. During COVID-19, these often caused more disruption than the virus itself.

It should be noted, however, that the new Relevant Event provides for time relief only. Consistent with the existing structure of the JCT delay provisions, an epidemic or pandemic is not listed as a Relevant Matter entitling the Contractor to loss and expense. The financial risk of such events therefore remains with the Contractor.

Practical Considerations

Despite the improved drafting, parties should not regard the new clause as a complete solution. Key points include:

• Notice and particulars. The standard EOT notice requirements continue to apply. Contractors must give prompt notice, identify the Relevant Event, and provide supporting particulars.
• Mitigation. Contractors will still be expected to take reasonable steps to mitigate the impact of delay, which during a pandemic may include adopting alternative working methods, sourcing materials from alternative suppliers, or reorganising the programme.
• Concurrent delay. As with other Relevant Events, the JCT 2024 does not contain an express concurrent delay provision. Where pandemic-related delay runs alongside a Contractor-caused delay, disputes over entitlement may still arise.
• Bespoke amendments. Parties may wish to consider whether the standard allocation of risk is appropriate for their project and, in particular, whether to extend financial relief to the Contractor in pandemic scenarios.

Conclusion

COVID-19 exposed significant gaps in the standard form construction contracts that had served the industry for decades. The JCT 2024 introduction of an express epidemic and pandemic Relevant Event is a direct and practical response to that experience. While it does not resolve every issue, it provides a stronger foundation for managing delay in the event of a future public health emergency.