In the first lockdown, parties to construction contracts were called on to collaborate and act proactively to resolve project issues. This approach worked to some degree alongside government measures such as furlough, business loans and bans on winding-up orders. However, with a third lockdown in full force and continuing economic uncertainty, the likelihood of disputes is increasing.

The Construction Leadership Council (CLC)'s Contractual Practices Working Group (CPWG) recently researched the impacts of COVID-19 and the potential nature and volume of construction disputes. Its summary, set out in CLC COVID-19 Claims and Disputes in Construction, contains few surprises. Claims to recover cash owed on legacy projects to increase cash reserves are increasing throughout the supply chain. Parties are arguing about entitlement for time and potential liability for delay or loss, as well as valuations and variations, change in law and force majeure, and then moving on to dispute quantum (time and/or money).

Parties are settling claims for more time, but not, generally, claims for financial loss, costs and expenses or those involving complex issues. They might have collaborated early on, but commercial behaviour is "hardening throughout the supply chain". This harder approach can be seen in increased tender lists, "sub-economic pricing, increasing insolvencies and hard negotiated risk allocation in new contracts".

Goodwill is running out in the face of multiple pressures: the effects of Brexit; government support schemes ending; the start of final account negotiations on projects that started pre-pandemic; sustained economic pressure; and year-end accounting demands. New contracts are being "future proofed" against pandemics and parties are transferring risk, but not necessarily to those most able to manage it effectively.

The CLC's latest call to collaborate "to preserve the industry's competence, capability and capacity" to meet 2021's challenges could not be more necessary or urgent. However, people tend to tune out from often-repeated warnings, especially when dealing with commercial and personal challenges. Acting fairly and responsibly to preserve liquidity and meet contractual obligations takes effort, funds, pragmatism, ingenuity and personal resilience – all of which are in short supply. Inevitably, some disagreements will crystallise into formal disputes and bring inevitable disruption to projects and daily lives.

Now is the time, therefore, to remind the supply chain that ADR processes like mediation and expert determination can be used as tools to prevent disputes as well as resolve them, a point recognised in The Civil Mediation Council (CMC)'s response to the All Party Parliamentary Group for ADR's report on securing the UK's position as a global disputes hub. Mediation enables disputes to be facilitated and negotiated with the help of a neutral third party who can be selected for their specific expertise. It gives parties "the opportunity to find creative and, importantly, often constructive resolutions". Importantly, it is "not just a process which is only suitable once the parties are in or have threatened litigation".

Early use of ADR processes, mid-project, is not the sole preserve of large projects with established dispute boards. Various ADR bodies and professionals offer reasonably and/or fixed-priced options which could help parties see matters differently and explore practical solutions before their positions entrench. Early action is key: do not wait until the dispute crystallises or proceedings commence.

This article was first published by Construction Law on 1 March 2021. You can sign up to receive Construction Law's newsletter here.