Contingency planning also covers access to critical spare parts and supplies both now and in the future - for example, a lift part. These parts will not generally be held by facility managers, who will be relying on supply chains.
It is highly likely that the services specification will contain a requirement for "emergency planning" or "disaster planning". ProjectCos are also subject to an express duty to prevent and mitigate in accordance with good industry practice as a condition precedent to many contractual relief mechanisms, as set out below.
Potential forms of relief
Force majeure
Force majeure events are those which it was anticipated were likely to have a catastrophic effect on the ability of either party, although usually the ProjectCo, to fulful its obligations under the project agreement. As neither party is likely to be in a better position that the other to manage either the occurrence or the effects of force majeure, and the events may continue for a long period of time, these events are treated differently from 'relief events' under the contract and the financial consequences are shared.
See our Out-Law Guide: Will Covid-19 trigger a force majeure clause?
The drafting of force majeure clauses in project agreements is based on catastrophic events which, at the time, were considered highly unlikely to occur: armed war, terrorism, nuclear contamination, chemical or biological contamination. This exhaustive list does not contain pandemics such as the Covid-19 virus.
Force majeure is not particularly helpful in relation to operational projects as deductions can still be applied. That said, the onus is on the public sector and private sector partners to work together to agree modifications to the project agreement to take the force majeure into account. If agreement can't be reached and the force majeure continues for a significant period, usually six months, then compensation on termination is payable.
Relief events
Relief events are generally events with an external cause which have a negative impact on the ProjectCo's ability to perform its obligations under the project agreement and which are beyond the control of the ProjectCo.
Examples of relief events which could potentially be relevant here include:
- failure by any statutory undertaker, utility company or local authority to carry out works or provide services;
- any lock-out, go-slow or similar generally affecting the building maintenance or facilities management industry or a significant sector of it;
- failure or shortage of power, fuel or transport.
Arguably, these examples would likely be limited to a 'doomsday'-style scenario, following an extreme intensification of Covid-19 effects across the UK.
Normally the only relief given in respect of one of these events is relief from termination, as these events should be insured and short-lived. Some projects will allow for relief from deductions, but this would need to be checked on a per-project basis.
Importantly, the project agreement will usually stipulate time frames within which any information in respect of the relief event must be provided. Depending on the drafting of these provisions, supplying the necessary information within these timescales may amount to a condition precedent to any claim. It is therefore possible that a failure by the party claiming the relief event to provide the necessary information within the specified timescale can result in that party losing its entitlement to claim relief.
The party affected by the relief event is generally under an obligation to take all reasonable steps to mitigate the consequences of the event on the performance of its duties under the contract, and to use all reasonable endeavours to remedy the failure to perform as soon as practicable.
Excusing causes
In the health sector, there is an excusing cause which applies to the effects of any outbreak of medical contamination. 'Medical contamination' is defined by reference to a "disease carrying agent" which cannot be prevented or substantially removed through cleaning or infection or contamination techniques which effectively results in the facility being unsafe to use for the purpose it was intended by patients or staff.
It is feasible that Covid-19 will be captured by the definition of medical contamination. This means that the ProjectCo may be able to claim an excusing cause to the extent that the pandemic adversely impacts on its ability to provide services under the contract.
Any potential claim for relief is subject to an express duty to prevent and mitigate in accordance with good industry practice. ProjectCo must therefore be able to effectively demonstrate that it has taken all appropriate prevention and mitigation measures against the consequences of Covid-19 that would reasonably be expected to be introduced by a skilled and experienced service provider in accordance with the project agreement. This duty to prevent and mitigate also applies to force majeure and relief events.