Construction sector given guidance on contractual relief

07/04/2020
Dominic Browne

The Cabinet Office has released construction-specific guidance on its recently published Procurement Policy Note 2/20, which outlined how public sector clients can support the supply chain during the coronavirus crisis.

Prepared by its executive agency, the Crown Commercial Service, the guidance blocks companies from furloughing staff that are due to work under contracts subject to relief. 

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'Any supplier found to have acted fraudulently by claiming under the Coronavirus Job Retention Scheme (CJRS) (or other COVID-19 support schemes) for workers that are being paid under a public sector contract, may be excluded from future public contracts on grave professional misconduct grounds under regulation 57(8)(c) of the PCRs.'

It also blocks a supplier from claiming separate relief from another source of Government financial support on COVID-19, 'to the effect that the supplier gains an undue advantage by claiming relief twice for the same hardship'.

There is an exception 'where separate relief from the Government is in relation to recovery of costs, which are distinct from any other relief available under the PPN and have been properly incurred by the Contractor.

The new update includes model deeds of variation to provide a set of terms that contracting authorities can use for NEC3 and JCT standard forms of contracts.

The Cabinet Office said it would shortly be publishing Model Terms which will set out some examples of how JCT and NEC contracts may be varied to provide relief to suppliers.  

It also suggests that clients establish Project Bank Accounts for current projects to help with industry cashflow during the COVID-19 crisis. This system is already employed by Highways England.

Immediate cash flow issues seem to remain the focus of the relief for contractors, as opposed to also giving an extension of time.

However, the guidance does state that 'the authority should consider the supplier's request for relief as well as the various forms of relief available under PPN02/20 (whether or not these have been requested by the supplier) and what is the most appropriate relief to the relevant supplier, to enable the works to continue both during (if appropriate) and after the current COVID-19 outbreak'.

It adds that not all relief options will be necessary or appropriate for each supplier under each contract and the authority and the supplier 'will need to engage in discussions on a case-by-case basis to determine the most effective relief or combination of relief(s) and how these should be applied in the individual circumstances'.

Any relief granted will need to be accompanied by provisions around open book transparency and the provision by the supplier of supporting information to allow the authority to check that the commercial principles are complied with when relief is given.

This may include an ability to audit where savings are being applied during the period of relief.

Last week representatives from across the construction industry wrote to the government recommending public sector clients to release retentions to support cashflow in the sector.

The new guidance stops short of proposing this, instead it says that clients may consider doing so, but 'the premature release of retentions by an authority may result in the authority taking on significant risks which are not in its control and which are inappropriate for it to bear'.

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