FIDIC has published a new guidance document to assist the users of its construction contracts when dealing with the effects of inflation and shortages of labour and goods following the global pandemic and the war in Ukraine.
The guidance memorandum, FIDIC contracts guidance on the effects of inflation and unavailability of goods and labour following the global Covid-19 pandemic and the war in Ukraine, contains an outline of the provisions in FIDIC’s various general conditions of contract which can be relevant to help users deal with a number of scenarios which may arise when dealing with the above issues.
As the world was recovering from the global pandemic and countries opened their borders and resumed regular trade, this generated booming market demand in many sectors including the construction industry. As a result, the industry has been severely affected by a combination of increased costs inflation, including transport costs and the unavailability or scarcity of construction resources, such as goods and labour. In addition, 2022 was also impacted by the Russian invasion of Ukraine and by varying Covid-19 policies in different countries, some of which continued to apply a strict zero-Covid policy throughout 2022 with total lockdowns. All of the above resulted in severe disruption to the construction industry’s global supply chains.
The newly published guidance has been prepared to assist FIDIC contract users in understanding the contractual mechanisms that operate in the FIDIC standard forms of contract that may be relevant in dealing with the challenges like rising inflation, labour and goods shortages and other supply chain issues that could negatively impact on the running of a construction and infrastructure investment contract.
Commenting on the new guidance, FIDIC CEO Dr Nelson Ogunshakin said: “The FIDIC contracts committee has prepared this guidance memorandum to assist the industry, highlighting how parties to a construction project can navigate through the current challenging times with their FIDIC contract.
“We have adopted a hands-on approach to the guidance by highlighting various scenarios of events that may impact on a construction and infrastructure project and drawing up practical remedies that may be considered under the FIDIC contracts. The guidance does not provide advice specific to any project. The comments in the guidance memorandum are not exhaustive and they should not be relied upon for a specific issue or situation. As always, expert legal advice should be obtained whenever appropriate.”
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