CLC urges inclusion of fluctuations provisions in contracts
Contents |
[edit] Introduction
On 7 July 2021, the Construction Leadership Council (CLC) called on those responsible for developing, agreeing and managing construction contracts to adopt fluctuations provisions to combat significant volatility in the market.
[edit] Recommendations
In an open letter to the industry, CLC co-chair Andy Mitchell said that following the challenges of COVID-19 in 2020/2021, the industry faced more obstacles in the form of the availability and pricing volatility of labour and materials.
He cited a range of factors coming together at the same time to present an "escalating challenge" to the sector, including: rising freight costs; a shortage of materials; a shortage of hauliers; transitioning from CE to UKCA marking with insufficient product testing capacity; and new EU-related immigration rules.
[edit] Time of transition
Mitchell said, "This volatility is likely to be something we must live with for a while to come and could have a significant impact on the time frames and delivery costs of many projects.
"Most forms of construction contract have standard provisions for managing volatility without the need to make contract amendments. These provisions, such as fluctuations provisions in JCT and NEC 4 Secondary X1, provide a means of collaboratively sharing the risks associated with this volatility. We have been fortunate enough to operate in a stable environment for a long time and these clauses have been seldom used. However, they are ideally suited to providing a means for managing the volatile period we are entering and therefore CLC strongly urge those responsible for developing, agreeing and managing contracts, existing and new, to consider adopting these provisions in their contracts."
He also noted that design changes were likely to be necessary as a result of product availability, creating contractual challenges in the process.
He added, "Again, the CLC would encourage a collaborative approach to be taken to managing these risks by considering actions such as allowing longer mobilisation and lead-in periods for contracts and including up-front ordering and payment to suppliers in order to secure manufacture and delivery slots for critical material resources.
"We know that we perform better as an industry when a collaborative and team-based approach is adopted. We also know that our industry is strong and is growing right now. We would therefore encourage you to consider this message and find ways to work together so that this growth opportunity is maximised, and a sustainable industry supply chain is maintained."
This article originally appeared on the CIAT website under the headline, 'CLC calls for adoption of fluctuations provisions in contracts'. It was published on 7 July 2021.
--CIAT
[edit] Related articles on Designing Buildings
- Alternative dispute resolution for construction ADR.
- CE marking in the construction industry.
- CIAT articles.
- CLC publishes guidance on COVID-19 impact for NEC4.
- Construction Leadership Council CLC.
- Extension of time EOT in construction contracts.
- Examining the 2021 construction materials shortage.
- Fluctuations in construction contracts.
- JCT.
- Materials shortage prompts extra planning,
- NEC 4.
- Onerous contract.
- Supply chains in construction.
- UKCA mark transition extension for construction products requested.
- What is causing the rise in steel prices?
[edit] External resources
Featured articles and news
COP28 and the Path Ahead for Industry
The last few days, but action needed over the next decade.
Finalists for 2024 CIOB Awards revealed
80 construction leaders and companies from across the UK.
Promoting the importance of building and fire safety.
Health and Safety Training for Construction Employers
A brief run through essential training tips from a user.
3D Laser Scanning in Building Construction
A comprehensive guide from a Cohesive BIM wiki user.
BIM for structural reinforcement modelling
From the basics to the future from our Cohesive BIM wiki.
ECA skills recharge at the House of Commons
As electrical sector feels skills shortage bite.
The impact of pandemic and new legislation on courses
CIOB Academy’s course take-up inked to external factors.
An artist, philanthropist and ex-Army helicopter pilot
Q and A with self-representing artist, Hannah Shergold.
Building Safety Regulator appoints permanent director
And publishes three-year strategic plan.
Update on the Energy Savings Opportunity Scheme (ESOS)
Introducing changes to make it more effective from 2024.
2023 CIOB photography competition
Shortlist announced for 2023 public choice award vote.
The last of the Victorians. Book review.
Grimsby's Kasbah: where’s that?
An exotic name that is shrouded in mystery.
This weeks guest editor, Ankita Dwivedi of Firstplanit.
From practice to research and the business of materials.