Encouraging as it is to see a surge in orders for materials, suppliers now appear to be struggling to keep up with demand. Shortages of key raw materials are now hitting the headlines. This will inevitably lead to difficult conversations as programmes start to slip.
CLC advises placing orders as early as possible and emphasises that collaboration throughout the supply chain is key. Good advice, but unless express contractual provision has been made, contractors may find it difficult to claim extensions of time for material shortages or delays - usually regarded as a contractor risk.
Brexit clauses were utilised to cater for delays caused by changes to laws, tariffs resulting from Brexit. These were followed by Covid clauses allocating risk caused by Covid related events. However, even though current shortages may be related to Covid, it does not necessarily follow that an existing Covid clause will help. It will all come down to the wording. Such clauses come in all shapes and sizes. Some are narrowly drafted and deal only with specific effects, such as staff availability and/or changes to working practices to comply with the (changing) Government Guidance; others are more widely drafted and may cover delays or non-delivery of materials. Even with a widely drafted clause, proving that a material shortage has been caused by Covid and has delayed completion may be challenging. To avoid costly and time consuming disputes, parties will need to find a pragmatic way to allocate the risk caused by delays to the supply of materials.
There may also be wider contractual repercussions. For example, most standard building contracts require a contractor to prevent delays, which begs the question as to how far that goes? Does it include a re-design to change materials under a design and build contract? If so how does that sit with the employer's requirements/specification and variation provisions?
We may see specific material shortages clauses enter into negotiations, possibly accompanied by fluctuation clauses to cater for price increases.
CLC issues further warning on escalating materials shortages