In March 2020 at the peak of the Coronavirus (COVID-19) outbreak in the UK, construction sites closed down with little time to prepare, and our hands-on industry was forced to try and work remotely. Costs continued to accrue but in many cases the Employer (main client) was not obliged to support Contractors financially.
Construction Insurance

With slight easing of restrictions now, Contractors and teams are allowed back on site and building works are gradually resuming. However, it’s not business as usual by a long stretch. COVID-19 is still a public health emergency.

It’s unlikely that the majority of business continuity plans were pandemic-proof to the unprecedented levels experienced; the true impact on the construction industry is as yet unknown. We anticipate insolvencies and redundancies for SMEs and multinationals alike. To move forward, Contractors need to ensure their supply chain is COVID-secure, not just in terms of health & safety, but also in terms of re-evaluating risks to mitigate losses and maximise profitability in the ‘new normal’.

Managing risks on site to protect the labour force

Labour supplies are an integral part of the supply chain and the industry already faces labour shortages. A healthy workforce should be the first priority for ethical and diligent Contractors, allowing them to continue building the nation safely. Workplaces, including outdoor environments, need to be COVID-secure, and companies who fail in their duties face prosecution.

Key actions which employers must take to help ensure workplaces are COVID-secure include:

  • Carrying out a COVID-19 risk assessment
  • sharing the result with staff and people who work on site (and online for organisations of over 50) and;
  • displaying an official notice (available on government website) to confirm they have made the workplace COVID-secure

Onerous as it may sound, a COVID-19 risk assessment (RA) will help you identify sensible measures to control the risks in your workplace. By tracking employees’ ‘fitness to work’ (including reported symptoms, any test/antigen/antibody results, self-isolation taken and even their mental health) drives proactive and safe workforce management.

Compliance throughout the supply chain is critical. As a Contractor, your duty to protect workers extends to ensuring other teams on site know the protocols and measures in place – through clear communications and signage for example. Challenging as it is, Contactors should be looking for evidence that sub-contractors and suppliers are committed to working safely and co-operating with your risk assessment. COVID-secure practices extend to moving around site, meetings and dealing with accidents/incidents, where measures should also be place, for example using workplace ‘bubbles’ to minimise cross-workforce contact.

As well as securing labour, a COVID-secure supply chain optimises delivery of materials and resources. If you’re unable to get supplies to site on schedule, you risk contractual breaches and ongoing costs, without revenue to pay for them. Deliveries are also subject to COVID-secure planning and therefore extra time should be factored in. Measures include:

  • Minimising paperwork/physical contact in favour of electronic proof of delivery
  • One-way systems with drivers remaining in vehicles
  • Less frequent, larger deliveries instead of many small deliveries
  • Social distancing or fewer people on site

HSE and local authority spot checks are in place and failure to comply with legislation and guidance could result in the site being shut down – something we all want to avoid. Failure to complete a risk assessment which takes into account COVID-19 could constitute a breach of health & safety law, with serious breaches constituting a criminal offence. These measures are therefore key to a healthy supply chain that delivers contractually.

Strategies for resilient supply chain management

  • freely access sub-contractors, who work in compliance with COVID-19 guidelines and are adequately insured, resourced and qualified
  • maintain productivity safely (meeting the contractual obligations of the Client) through supply chain visibility and transparency
  • spread risk and cost equitably throughout the supply chain. The traditional lump sum contract doesn’t evaluate risk fairly throughout the supply chain. A better approach would be to spread the risk to ensure that one party isn’t burdened unfairly (i.e. liability up to a certain threshold), a much more collaborative way of working.

Supply chain resilience, particularly in the face of COVID-19, is essential for business continuity. A resilient supply chain is one that is based on visibility to manage the many risks involved in a long chain of subcontractors and suppliers. Lack of transparency throughout the construction supply chain is common, but can greatly compromise risk, cashflow and viability.

Just a few considerations for Contractors include:

  • Securing essential resources across the entire supply chain and its layers (bearing in mind there may be price increases and/or limited availability). Transparency and visibility will reveal all possible points of failure, gaps and vulnerabilities
  • Descoping works or carrying out further risk assessments to mitigate impact to the programme whilst working compliantly
  • Reviewing existing relevant contract clauses covering insurances, payment and frustration
  • Working towards more transparent supplier relationships to improve service and payment (cash flow) and reduce risk
  • Plans for delivering/receiving of goods safely under unusual circumstances (reduced traffic flows/deliveries, restricted site opening hours, fewer workers etc.)
  • ‘Smart’ supply chain management via cloud-based analytics systems, to inform and predict events. This leads to a more proactive and agile way of working for the future.

Despite the incredibly negative impact of the COVID-19 pandemic on the construction industry, there are likely to be beneficial outcomes too. The pandemic has incited savvy Contractors to think more innovatively about the future supply chain in building the nation, safely. A more intelligence-led, transparent approach will benefit all parties including Contractors, sub-contractors and indeed the Client. Hopefully the sector will be on the road to recovery in the not too distant future. Achieving a COVID-secure, resilient supply chain will be key for the ‘new normal’ and beyond.

This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note we have relied on information sourced from third parties and we make no claims as to the completeness or accuracy of the information contained herein. It reflects our understanding as at 01.12.2020, but you will recognise that matters concerning COVID-19 are fast changing across the world. You should not act upon information in this bulletin nor determine not to act, without first seeking specific legal and/or specialist advice. Our advice to our clients is as an insurance broker and is provided subject to specific terms and conditions, the terms of which take precedence over any representations in this document. No third party to whom this is passed can rely on it. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to fullest extent permitted by law. Should you require advice about your specific insurance arrangements or specific claim circumstances, please get in touch with your usual contact at Gallagher.