Is Covid-19 Over?

by Tan Swee Im, International Arbitrator Member, 39 Essex Chambers, Kuala Lumpur

It’s December 2021 – the uncertainty and fears of March 2020 and the MCO seem like a dim, distant memory. And yet, it was not so long ago, and the effects of Covid-19 are far from over, as new variants pop up to haunt us. Our focus may have shifted to booster shots and breakthrough cases, but it remains an unquantifiable threat.

What this tells us, however, is that the event of Covid-19 is no longer an unforseen event. Therefore, the early arguments relying on events of force majeure and frustration no longer carry the same weight in the current environment. You enter into contracts today with your eyes open to Covid-19 and its effects known and unknown.

Most contracts have not kept up with changes of events and remain unchanged. What changes there are, tend to add provisions stating that the contractor acknowledges the event of Covid-19 and its consequences in entering the contract.

There are also the very real problems of increased prices of materials, shortage of labour, supply interruptions and lack of cashflow.

The result of all that is a time bomb for the contractor who does not take full cognisance of what he is walking into. But simply knowing the risks is no solution, if those risks are not priced, not actively managed and not written out of the contract. There is no one simple solution to such risks which evolve with time and change often – the bottom line is that Covid-19 is not over, and the effects are being felt in unexpected situations. One could say that these are unforeseen events; the problem however is that the root cause, Covid-19 is NOT unforeseen.

There are no magic solutions on offer here; they do not exist. Instead, this is an urgent alert – be alive to the risks you take on, or risk death by Covid-19.

It is a common refrain by contractors that there is “no choice” and they have to take what contracts come, and accept whatever conditions are put in front of them. Indeed, that there is no point reading the conditions of contract since they cannot change them. The hard truth is that there is always choice, but the choices may be very unpalatable such as walking away from a tender or a contract.

Life has to go on, and survival is key in these difficult times. The best reminder one can give as an independent observer, is for contractors to read the conditions, know the risks, assess the risks and rewards and properly understand what you are contracting into. Where you can negotiate amendments to mitigate risks, pursue that route vigorously and get whatever relief you can; something is better than nothing in these difficult times. Once you have done that then you need to actively manage your risks and protect the possible rewards.

Your crew on site are not naturally paper pushers – they are out there in the mud and dust trying to finish the work as quickly and as cheaply as possible, while managing the constant and often conflicting demands of their own bosses, the consultants, the client, not to mention their own subcontractors and suppliers. That is the reality of life on site.  Therefore, the recording in sufficient detail of the events of delay and events giving rise to possible claims are often not done. Even where there is a record, it often lacks sufficient precision to enable cause and effect to be established, in the manner required to sustain claims.

Therefore, support must be provided, and a system of sufficiently detailed and contemporary recording established. You cannot simply tell your project manager or site manager to “get on with it” and hope for the best. Hope on its own does not get you far – appropriate action is a much better bet.

Technology can assist greatly in this respect and there are numerous apps for smartphones and tablets which can greatly reduce the burden of keeping paper records and increasing the level of detail and efficiency. What may appear to be costly and difficult at first, almost always saves much more in the end. Remember that a bucket of water always costs more when the fire is raging.

On the same note, a more collaborative attitude is commended, so that the entire production team from main contractor all the way down the supply chain act in concert. An attitude of pushing risk down the line, focussing on making a margin on sub-contracting is a recipe for disaster. Of course, this would work so much better if that collaborative attitude were to include the employer, financiers and consultants; however perhaps that is a distant dream for now. But at least as contractors you can attempt to control what is within your power, and make it work for you.

• OPEN YOUR EYES, KNOW WHAT RISKS YOU ARE CONTRACTING INTO
• ACTIVELY MANAGE THOSE RISKS
• ESTABLISH TEAMS AND SYSTEMS TO MANAGE THOPSE RISKS, NOT JUST TALK ABOUT IT
• EMBRACE YOUR ENTIRE SUPPLY CHAIN INTO A SINGLE COORDINATED TEAM – UNITED WE STAND, DIVIDED WE FALL
• DISPUTE RESOLUTION IS OBJECTIVELY DETERMINED BY THE PROVISIONS OF THE CONTRACT, THE ACTIONS OF PEOPLE, AND WHAT THE LAW ALLOWS; REGARDLESS OF FAIRNESS FROM YOUR SUBJECTIVE POINT OF VIEW