1.
Indian Construction
Contracts & Covid19 : Way
Forward
SR. MANAGER (LEGAL), DIRECTORATE GENERAL OF HYDROCARBONS/ BHARAT
PETROLEUM CORPORATION LIMITED
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Views are personal
PROBLEMS & ISSUES

3.
Impact of Covid19 on Construction
Industry
 Cash flow
 Supply chain disruptions
 Time overrun: need for extension of time
 Cost overrun: need for increase in contract price
 Contractors: Substantial Increase in Cost of Performance
 Owners: Substantial decrease in Cost of Performance
 Manpower Issues
 Work resumption and other HSE issues
Views are personal

4.
Time Overrun: Some Issues
 Time lost due to Covid-19 lockdown
 Time lost due to Covid19 affecting/ impacting supplies/ services
even prior to lockdown
 Time lost due to demobilisation and remobilisation
 Extra time that would be required for carrying out works in a
restricted regime.
Views are personal

5.
Cost Overrun: Some Issues
 Idling charges
 Care of Facilities during Lockdown
 Demobilisation/ Remobilisation Costs
 Costs of paying labour wages during lockdown
 Price increase in raw materials & goods post-lockdown
 Mitigation plans in Project
 Suppliers/ Contractors claims including demurrage
 Other costs
Views are personal

6.
Government’s Role
 Perusal of various Circulars
 Proactive response from a policy angle.
 Pandemic is considered as force majeure
 But how force majeure will impact contract performance may depend
on case-to-case basis
Views are personal

7.
List of Government Notifications on
Covid19 as FM
 Impact of COVID-19 on foreign supply chains recognized as force majeure in government supply
contracts: Department of Expenditure, Ministry of Finance's OM dt. 19.02.2020
 DOE Notification dt. 13.05.2020 (time extensions)
 Time extension in scheduled commissioning of Renewable Energy projects considering foreign supply
chain disruptions: Ministry of New & Renewable Energy, OM dt. 20.03.2020
 MORTH Letter no. H-25016/01/2018-Toll dated 25th March 2020
 Ministry of Shipping, Guidelines to Major Ports dt. 31.03.2020
 Indian Railways (https://pib.gov.in/PressReleseDetail.aspx?PRID=1608603)
 DGS Order No. 08 of 2020 dt. 31.03.2020
 Ministry of Shipping order no. PD-13/33/2020-PPP/e-339106 dt. 20.03.2020
 Other Circulars
Views are personal

8.
Some Questions
 Whether force majeure or not?
 Obligations affected by force majeure and manner?
 Whether notice has been given in time?
 Whether change in Law?
 How should be the contract, especially terms relating to price and time, be re-
negotiated?
 Time and Cost Overrun and escalation?
 Non-applicability of LD/ claim for damages for delay.
 Genuine dispute: How to resolve?
 Prolonged force majeure and consequences
Views are personal

9.
Legal Issues & Problems
 Inability of parties
 to agree upon cost/ time overruns
 Inability of a general Contractor to perform
 The bleak prospect of disputes & the ability of the legal system to handle
it
 Inability to get proper advice on financial and legal aspects
 Government benefits: Awareness: Important role to be played by
construction associations, bodies like SCL and others.
 How to Proceed?
Views are personal

10.
Views are personal
WAY FORWARD

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“Breathing Space”
 How to deal with Construction Contracts Post-Covid19?
 Amicably Sort out Issues with the objective of completing projects
ASAP
 Provide for Amicable Dispute Resolution Solutions to make
construction contracts viable
 To bring to an end contracts made unviable post-Covid19
Views are personal

12.
Ways Forward
 Standard Operating Procedure for Construction Projects affected by Covid 19
 Enablers
 Way Forward: Formats & Checklists
 Awareness of Government Measures
 Dispute Resolution
SCL and other construction associations may take the lead
Views are personal

13.
SOP for Construction Projects affected by
Covid 19
 SOP on the Way Forward
 Invocation of Force Majeure/ Change in Law
 Cost Overruns
 Time Overruns
 Other Issues
 Discussions: in good faith & in interest of project completion
 Cash Flow
 Advance payments/ modification of contractual milestones
 Escrow accounts
Views are personal

14.
SOP for Construction Projects affected by
Covid 19 (contd.)
 Inability of the general Contractor to perform/ make payment-
direct payment between Client and Sub-Contractors & modalities
 Preliminary/ Interim Orders aimed at completion of project & at
the same time maintaining Contractor cash flows
 Dispute Resolution
 Conciliation/ Mediation
 Arbitration
 Stress on inexpensive, swift, virtual and decisive resolution of disputes.
Views are personal

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Enablers
 Templates/ Checklists/ Formats:
 Force majeure & change in law invocation & response templates
 Checklists on Impact
 Checklists on negotiations on Cost/ Time overruns
 Novation Agreement Formats
 Arbitration, Conciliation & Mediation Agreements Formats
 Settlement agreements Formats
 Compilation of Government schemes and judicial decisions in
construction sector for general awareness
Views are personal

16.
Accelerated Dispute Resolution
Drastic Times call for Drastic Measures
 Speed, Inexpensive and Effective dispute resolution
 Fixed time ~ 3 months & Fixed costs ~5- 6 lakhs
 Completely Virtual
 Construction Dispute Specific
 Neutral
 Interim Measures: Extension of BGs & Preservation- Completion of
Project should be the objective
 Three modes: Accelerated Conciliation, Mediation & Arbitration
 Checklists/ Formats for use in Dispute resolution to be fixed
Views are personal

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Accelerated Construction Conciliation
 Inability of the general contractor to perform/ make payment- direct payment between
Client and Sub-Contractors
 A finance, technical and a legal expert in each Panel
 Virtual & Time limit of three months
 No external counsels
 Specific disputes to be agreed between the parties and referred
 Common statement of facts and points of disagreement
 Proceedings to be confidential except as to costs
 In case of rejection of Settlement Proposal, costs of conciliation & subsequent legal
proceedings to be on Indemnity basis, if unsuccessful.
Views are personal

18.
Accelerated Construction Mediation
 Professional Mediator well-versed in Construction Disputes
 Virtual & Time limit of three months
 No external counsels
 Specific disputes to be agreed between the parties and referred
 Common statement of facts and points of disagreement
 Proceedings to be confidential except as to costs
 For party rejecting the last settlement offer, costs of mediation & subsequent legal
proceedings to be on Indemnity basis, if unsuccessful.
Views are personal

19.
Accelerated Construction Arbitration
 Fixed Costs: Not more than Rs. 5- 6 lakhs net
 A finance, technical and a legal expert in each Tribunal
 Time limit of three months
 Documents only/ Expedited (S. 29B ACA 1996)
 Specific disputes to be agreed between the parties and referred
 Common statement of facts and points of disagreement reg. facts/ law
 Power to decide on the basis of commercial sense, equity, etc.
 Strict implementation of Loser Pays principle for Costs
Views are personal

20.
Parting Thoughts
 Construction bodies may discuss with
stakeholders about measures suggested
 Multi-tier Dispute Resolution
 May enter into deals with Arbitral
institutions
 Need to Proceed quickly
 Statute on construction contracts
THANK YOU
Views are personal