Most of us will be aware of the problems builders are having in getting materials onto sites at reasonable times and costs.  This will have a consequential risk for design practices:  your Risk Management should be looking beyond the short term and thinking about the effect that these problems will have in the future.

If you had any doubt about the seriousness of these issues, take a look here:

These delays and costs have the potential to create problems, particularly in claims for fluctuations or cost increase claims, and extension of time claims.  We urge members to keep clients informed, and to encourage contractors to be open and transparent.  Good-faith negotiation should always be undertaken ahead of escalating competing views to the level of a dispute.  Whilst the contract terms may or may not “properly” allow for the contractor to recover the time or cost consequences of the current difficulties, the parties to a contract can always agree to a change in the contract terms, or one party can unilaterally waive some rights (for example, liquidated damages). 

Where such changes are contemplated, be sure to document them clearly and specifically, so that they do not create more problems than the original situation.  The beneficiary of the changes should be the project, not one or more of its participants.

These issues will impact on client/designer/builder/funder relationships.  The material cost changes of 5% to 25% in the past year or so are the harbinger of more upward movement.  Labour costs are being driven up by tight labour resources and contractors well booked into the future.  The supply chain problems are disrupting site progress, leading to project delays and pressure on contractors’ margins. 

The problems are not ours alone:  America and Europe are also troubled by shortages of materials and labour, slow and expensive shipping and varying lockdown measures.  Covid is driving up inflation generally, and the size of our economy (and construction industry) means we have ineffective leverage on material supplies.

Clients with projects at design stage may be unable to accommodate these costs and delays within their budgets.  Others will continue but with resentment adding stress to the project.  Still others will be looking to continue but with cost cuts which may compromise the design and add to design costs.  Procurement strategies may favour early contractor design involvement, movement away from lump sum contracts to an arrangement which redistributes the risk of delays and cost increases, staged consenting and contracting, and design-stage identification and ordering of items requiring long lead times.

Projects under construction will come under stress if builders cannot complete within the time and cost parameters understood when the project was priced.  If increased costs cannot be recovered, performance on site is at risk or perhaps may be abandoned.  Where costs can be recovered, they will not be welcomed by clients.  Arguments from delays beyond those directly related to Covid lockdowns will be unpleasant.  All of those circumstances represent increased risk to you:  both additional (and perhaps unrecoverable) attendances, and the potential for dispute and negligence claims.

In order to manage those risks, please take the time to assess how these issues will affect all the projects you have underway, in particular where reliance has been placed on pre-Covid cost/time estimates, and to communicate appropriately with each client.