We have witnessed for over a year how the coronavirus has had an enormous impact on the construction industry. From disruptions in the supply and production, to suspensions and closures of sites during lockdowns,
For projects to progress smoothly and on time, a reliable and well-organized supply chain is essential.
Construction businesses can become embroiled in disputes over procurement. These can arise from a variety of reasons, including the inability or unwillingness to finish work or to pay for additional supplies and materials.
There are some things businesses can do to help avoid costly disputes in the construction industry.
A recent ConstructionOnline consultation with over 4,000 UK construction businesses uncovered that almost a quarter (23 per cent) of those surveyed said they would benefit from shorter payment terms. Shorter payment terms can help suppliers make more sales by allowing them to have better cashflow. This would benefit both buyers and reduce delays in construction projects.
It was also discovered that project deadlines could be relaxed to reduce potential supply and procurement delays. The potential for delays is minimized, so that a supplier can meet their obligations and the project can move forward. This flexibility helps to maintain good relations between the main contractor, consultants, the supplier and manufacturer.
It is important to take into account the nature of the supply chains. Supply chains are becoming more complex and include more sub-contracting. The potential for delays increases with each additional level in the supply chain. In this case, factoring in possible delays will ensure a reliable supply and limit the impact on the overall progress of the project.
It is important for firms to review the terms and conditions of contracts. These terms are often less burdensome for sub-contractors at lower levels. Being aware of these obligations allows for contingency planning as well as assessment of the likelihood of delays.
A coherent framework regarding delivery and supply is another important factor in supply contracts. In cases like the coronavirus where major disruptions are caused by factors beyond their control, increasing flexibility in contracts can help to reduce disruptions to supply. It may also help to avoid disputes and damage to key relationships.
Builders and developers should look at ways to strengthen their relationships with smaller suppliers. Buyers can strengthen relationships and improve communication to reduce delays. This will also help minimize the possibility of supply-related disputes. It will also ensure that any delay does not occur in a collaborative way.
The UK Government’s Construction Playbook, published in December 2020, supports a collaborative approach to avoiding conflict. Collaboration has many benefits. It promotes problem-solving innovation, the adoption of common standards and early intervention when problems arise. It also improves relations between parties. Collaboration is a key tool for reducing disputes in the supply chain.
It is important that you remember that building a collaborative approach in construction procurement does NOT mean that the hierarchy within the supply chain is irrelevant. Each party must be aware of their points and know who they are directly accountable to. Clear communication will improve communications and prevent minor issues from causing serious delays.
While we aren’t yet out of the woods with coronavirus, we have improved our ability to adapt to its challenges and put in place processes to minimize their impact. A few small changes to procurement procedures could make a difference in the construction industry and reduce the likelihood of a dispute.
