Pandemic Delays & Supply Chain Cost Increases

4 August 2022

The member-only special conditions available below are designed to be incorporated into Schedule 2a of ABIC contracts. They deal with construction delays resulting from the COVID pandemic, and increases in the costs of certain building materials.

Moray & Agnew has developed the following special conditions for ABIC contracts on behalf of the ACA. These special conditions are designed to deal with two specific issues: construction delays resulting from the COVID pandemic, and increases in the costs of certain building materials well beyond those that a contractor could reasonably be expected to factor into their contract price. In its unamended form, the ABIC contracts do not deal with either of these issues and this can lead to quite harsh outcomes for contractors, including liability for liquidated damages and insolvency.

Once incorporated into the ABIC contracts, the special conditions will effectively transfer risk for pandemic-related delay and supply chain cost increases from the contractor to the owner, so architects should discuss these risk issues with their clients before proceeding. That said, many contractors are unwilling to proceed with unamended ABIC contracts given the potential for the harsh outcomes mentioned above.

The Special Conditions are structured to do the following:

  • introduce the concept of a Pandemic Relief Event
  • allow the contractor to claim time (but no money) where it is delayed by a Pandemic Relief Event, and oblige the contractor to create and implement a Pandemic Relief Plan
  • introduce the concept of a Supply Cost Relief Event
  • allow the contractor to claim those increased supply costs it can prove on an open-book basis in relation to certain identified classes of Affected Materials
  • allow the architect to take advice from a quantity surveyor or other professional cost consultant in assessing the contractor’s entitlements to recover increased supply costs
  • introduce an optional mechanism by which the contractor may ask the owner to purchase materials directly if, for instance, the price of those materials is about to rise but the contractor does not have the cash-flow necessary to make that purchase at that time.

One alternative approach to deal with supply chain cost increases that we considered was the incorporation of rise-and-fall special conditions of the type that were once common in construction contracts. However, rise-and-fall indices are published only quarterly in arrears and a view was taken that they do not capture the speed or extent of the relevant cost increases.

These Special Conditions work with all of the forms of the ABIC contract. They may not be used with any other form of contract.

NOTE: Member Only Content

These Special Conditions were initiated and funded by ACA – NSW/ACT.