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15/04/20

Global Coronavirus pandemic: Disruption to projects – loss of productivity: A Canadian perspective

Global Coronavirus pandemic: Disruption to projects – loss of productivity: A Canadian perspective

As the local and global threat to human health continues to have tragic consequences, we hope that you, your family, friends and colleagues are staying safe.

The coronavirus pandemic continues to have a profound impact on the economy and it is expected to have a significant negative effect on the construction sector in Canada.

The Canadian Construction Association has issued standard protocols to the construction industry to help tackle the spread of the virus:

https://www.cca-acc.com/wp-content/uploads/2020/04/CCA-COVID-19-Standardized-Protocols-for-Canadian-Construction-Sites-03-30-20.pdf

The main measures extend to:

  1. Physical distancing
  2. Personal hygiene
  3. Hygiene of frequently touched surfaces
  4. Hygiene of work equipment (especially shared equipment)
  5. Transportation restrictions; aimed at promoting social distancing for workers.

A number of our clients are concerned about the likely disruption and loss of efficiency arising from these protocols.

WHAT IS DISRUPTION?

Disruption (as opposed to Delay) may be defined as an interruption to the flow, continuity or sequence of planned work; a bringing of disorder to an activity or project.

Disruption is also described as a disturbance, hindrance or interruption to a Contractor’s normal working methods, resulting in lower efficiency.

Disruption may be a cause of delay, and delay may be a cause of disruption, but they are not one and the same.

Where disruption affects non-critical activities, the contractor may well not have a claim for an extension of time, but rather a claim for the related costs of the reduced efficiency of labour and plant resources.

As this event is outside the control of the contractor, it might give rise to a right to compensation under the contract, due to the contractor having to expend additional effort in order to maintain productivity (e.g. Changes in working conditions / restricted working hours, increasing the number of workers, accelerated working, etc.)

Regarding contractual entitlement to seek reimbursement of additional costs associated with disruption; as each construction contract differs in terms of content and the risk allocation between the parties, it is recommended that contractors undertake a detailed and thorough review of their contract(s) to establish their entitlement to claim.

EFFECTIVE DISRUPTION ANALYSIS

Establishing the level or the loss due to disruption may be dependent on expert evidence if there is no agreed model or method for quantifying the effects of those factors in advance. However, a number of industry recognised approaches and disruption analysis methods are in use for calculation productivity losses. Some productivity-based methods include:

  1. The measured mile;
  2. Earned Value analysis;
  3. Programme analysis;
  4. Work or trade sampling; and
  5. Systems dynamic modelling.

The measured mile is often considered the most widely accepted method of calculating lost productivity.

The technique involves comparing work performed in one period not impacted by events or factors causing loss of productivity with the same, or similar, work performed in another period that was impacted by the disruptive event or factors.

The selection of the most appropriate technique will also likely be influenced by the nature, type and extent of site records maintained by a contractor.

RECORDS

Records, records, records…! The robustness of any disruption analysis approach will be dependent on the accuracy, consistency and completeness of the source data.

When it comes to claiming for disruption, it is important that adequate contemporaneous records are maintained by the contractor during (and before) the period of disruption.

For a claim to succeed, a contractor needs to adequately establish entitlement and causation (i.e. the cause-effect nexus), and demonstrate the damages claimed are a direct result of the disruption event.

Contractors need to ensure internal systems and processes are in place (if not already), to ensure records are created with skill and care and the appropriate claim notice(s) and procedures are adhered to (on time).

SUMMARY

Even with the best planning, circumstances will change due to the impact of unforeseen events. Therefore, it is important that contractors ensure they have (1) the necessary resources in place to review and administrate the contract(s), and (2) the systems and personnel in place to capture the contemporaneous records to protect and safe guard their commercial interests which will (3) enable a fair and reasonable assessment of the damages to take place.

We have interactive training sessions that can be delivered remotely to head office staff, or site-based contractor and sub-contractor teams. Please feel free to give us a call (1 587 434 9892) or email us at canada@driver-group.com if you are interested in receiving more information on these training sessions or if you would like to discuss any related issues.

This article is intended to provide guidance only and does not represent legal advice.  The Covid-19 situation is constantly evolving, and every contract is different.  Please ensure that you check your contract terms carefully.

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