On Monday night, in response to the increasing rates of COVID-19, the Victorian Government announced a two week shutdown of the construction industry from 21 September 2021 to 4 October 2021 (Shutdown Period) in metropolitan Melbourne, the City of Ballarat, the City of Greater Geelong, the Surf Coast Shire and the Mitchell Shire (Restricted Areas).
The shutdown gives rise to a number of issues for participants of the construction industry. Some of the immediate issues that require attention include:
- contractual extensions of time, delay and disruption issues;
- suspension, force majeure and site safety arrangements;
- engagement with stakeholders and supply chains;
- payment obligations, cash flow and solvency risks; and
- employment issues.
Having a strategy to get through the shutdown in relation to these matters is critical.
What you need to know
- (Site shutdown) – from 12:01am on 20 September 2021, all construction work in the Restricted Areas must stop. Workers are only able to attend sites to respond to an emergency or perform urgent and essential work to protect health and safety.
- (Site / safety) - arrangements should be made as soon as possible to ensure all construction sites in the Restricted Areas are made safe and secure, staff are informed and deliveries are postponed, redirected or stopped.
- (Vaccinations) – all construction workers attending site after 23 September 2021 must have at least their first COVID-19 vaccination unless medically exempt (on very limited grounds). Similarly, all construction workers returning to site from 5 October 2021 must have received at least their first COVID-19 vaccination unless medically exempt. Sites will be required to demonstrate compliance prior to reopening.
- (Contracts) - all construction industry participants who work in the Restricted Areas should immediately conduct a review of their contracts and seek appropriate time and cost relief (where permitted). Consideration also needs to be given to any force majeure arrangements, suspension and demobilisation costs and existing payment obligations under the contract.
- (Workforce) - directors and management of impacted businesses should consider seeking advice about how to manage their workforce. Options may include redeployment to alternate roles, paid or unpaid leave, negotiating reduced hours, stand down directions or the termination of employment.
- (Benefits) - impacted businesses should apply for the COVID-19 disaster payment to assist in minimising the financial impact of the Shutdown Period.
Immediate site and vaccination issues
From 12:01am on 20 September 2021, all construction work in Restricted Areas must end. The only permitted works are strictly limited to works to respond to an emergency or works that are urgent and essential to protect health and safety. No clear guidance appears to have been given by the Victorian Government around the type of works that will be included however securing any site is important from a work, health and safety perspective (particularly if you are appointed the “principal contractor” for the site).
Importantly, from 23 September 2021, any construction worker attending site must have had at least their first COVID-19 vaccine unless a medical exemption applies. Similarly, all construction workers returning to site from 5 October 2021 must have received at least their first COVID-19 vaccination unless a medical exemption applies.
The “operator” of a construction site will be responsible for on site compliance. An operator is the “principal contractor” for the construction site determined in accordance with the Occupational Health and Safety Regulations 2017 (Vic). Industry participants will need to accurately identify the operator of the relevant construction site to understand their respective obligations.
Furthermore, in particular, construction industry participants will need to carefully manage the following issues:
- notifying workers of COVID-19 vaccination requirements;
- verifying that a worker has received at least one dose of a COVID-19 vaccine or is exempt;
- taking ‘reasonable steps’ to ensure workers do not enter the site or remain on site if they have not received at least one dose of the vaccine; and
- keeping records that demonstrate a workers compliance with the first dose mandatory vaccination requirement.
Construction industry participants will also need to appropriately engage with stakeholders and supply chains with respect to site issues and which works must pause and which works can continue.
The Shutdown Period gives rise to a number of contractual issues for all construction industry participants (including all contractors, sub-constructions, head-contractors, owners and project managers operating in the Restricted Areas). These issues are briefly explored below.
Extensions of time and delay costs
The Shutdown Period may give rise to time and cost issues under construction contracts. Contractors need to ensure they are claiming any extensions of time (EOT) available as well as any permitted delay costs under their construction contract(s).
A party claiming an EOT or delay costs under a construction contract needs to ensure that the notice complies with the time and notice requirements under the construction contract. This needs to be actioned as soon as possible as some contracts include time bars for the submission of notices in relation to time and cost claims.
Principals will also need to ensure that they are managing and evaluating EOT and cost claims appropriately and in accordance with the terms of their contract(s).
Suspension and site safety costs
The Shutdown Period may give rise to suspension and demobilisation/site safety costs under the relevant construction contract.
Principals will need to review their contract(s) to see if they are entitled to suspend works as a result of the shutdown. Similarly, contractors and subcontractors will need to determine whether they are able to claim any site demobilisation/safety costs under the relevant construction contract(s).
Principals will need to appropriately manage any suspension and demobilisation/site safety costs claims in accordance with the terms of their contract(s).
Force majeure arrangements
A force majeure clause in a construction contract will relieve parties (whether temporarily or permanently) of their obligations to perform their contractual obligations where a specific event occurs which is typically not foreseeable and was beyond the control of either party.
Where the relevant construction contract contains a force majeure clause, principals and contractors will need to consider whether any of the force majeure events capture the current COVID-19 shutdown.
Payment, cash flow and solvency
Despite construction being shutdown in Restricted Areas, contractors and sub-contractors may still be able to submit payment claims for work completed prior to the Shutdown Period. Where this is the case, principals and head contractors will still have payment obligations under the contract and the Victorian Building and Construction Industry Security of Payment Act 2002 (SOPA).
Principals, head contractors, subcontractors and consultants should be immediately reviewing their contracts to ensure they are aware of their payment obligations. This includes obligations relating to both submitting payment claims and responding to payment claims. During the Shutdown Period, construction industry participants should ensure there is adequate staff for receiving, paying and/or responding to payment claims.
Construction industry participants will also need to be extra vigilant with payment claims as the shutdown may give rise to extra payment claims on projects. Separately, construction industry participants will also need to carefully manage any solvency issues within their supply chain.
What you need to do next
Moving forward, construction industry participants will need to carry out the following:
- need to appropriately demobilise and secure construction sites;
- ensure that work is only occurring during the Shutdown Period on site is where it is urgent or for the purpose of work health or safety;
- in the case of contractors, review construction contracts to ensure compliance and to otherwise claim any appropriate EOT and delay costs;
- in the case of principals, appropriately respond to any contractors claims arising from the shut down;
- be on the lookout for any payment claims under SOPA;
- appropriately engage with stakeholders and supply chains; and
- you need to carefully manage vaccination issues.