Beyond the New Normal – contracting in a post pandemic world


At the time of writing, the rate of coronavirus infection across Scotland sadly seems to be increasing. While it may take an effective vaccine to allow life to get back to what it was prior to the pandemic, clients and contractors should be applauded for their efforts to keep both existing projects on track and facilitate the commencement of new projects as best they can in extremely difficult circumstances.

Unsurprisingly, the typical terms and protective measures around how parties contract for and administer construction projects have changed during this “New Normal” period, however it is likely that some of these recent changes will impact on construction projects and the procurement of such for some time to come, including once life does get back to normal. We have outlined the more significant changes below.

Force majeure

Much has been written and said about whether the outbreak of the pandemic should constitute a "force majeure” event which could lead to a time and/or money adjustment for contractors under their relevant contracts. In the short term, parties will obviously be live to the possibility of further restrictions and may make specific contractual provision in such respect. Longer term however, it is likely that parties will generally give more scrutiny as to the contractual treatment of unforeseeable events such as a pandemic. If proactive lockdown type initial measures become commonplace to tackle future outbreaks of infectious diseases, then this will slightly increase the overall risk profile for the party who bears such a risk.

Contract administration

With the personnel employed by both clients and contractors having been confined to their homes for a large part of 2020, complications have arisen for even the most simple of administrative tasks including signing and printing of documents. There has been a notable increase in the use of software platforms such as DocuSign to effect the electronic signing of contracts. Despite the fact that signing contracts in such a manner will still not give contracts "self proving” status and thus making such contracts challengeable as to whether the purported signatories are the actual signatories, there are clear benefits of using an electronic system to facilitate both the signing and administration of construction contracts, particularly given that they are often very large in size. It is likely that electronic systems will continue to play an ever more significant role in the administration of construction contracts in the years to come and indeed this is provided for already in the provisions of the NEC4 suite of contracts relating to use of the “communication system”.

Bonds and insurance

The outbreak of the pandemic has exacerbated the hardening of the performance bond market both in terms of availability and affordability. Given the uncertain current economic climate and with Brexit yet to come, it is conceivable that the availability of performance bonds may continue to be an issue for many contractors for the foreseeable future. This may lead to clients either carrying out enhanced financial due diligence in their procurement processes, or, where performance bonds are unable to be obtained, more advantageous payment terms for clients which offer some protection in lieu of a performance bond.

There has also been a hardening in the construction insurance market in recent years, particularly in relation to professional indemnity insurance. As with the "force majeure" provisions, it is likely that parties will now be a lot more conscientious in relation to insurance arrangements. For example, clients may now be more likely to consider the potential benefits of delay in start up insurance (with appropriate coverage extensions), where that continues to be affordable and available on suitable terms. However, it is certainly likely that in the short to medium term, insurers will adopt a very cautious approach in respect of what risks they will cover and this cautious approach will also manifest itself in increased premiums.


The Scottish Government’s consultation on the practice of cash retentions under construction contracts closed earlier this year. Leaving aside the possibility of statutory measures being introduced to protect against the some of the abuse and misuse of cash retentions in the construction industry, there may continue to be a trend away from parties using traditional retention provisions in their contracts. Maintaining a good cashflow will obviously be an important issue for many contractors during this time of economic uncertainty so contractors will be keen to minimise (and avoid where possible) clients applying retention. Most clients will however still require some protection in lieu of retention. The use of a retention bond is often championed as a potential alternative, however it is likely that the cost of such bonds will continue to increase given the hardening of the bond market.


Again as a result of the uncertain economic climate, increased scrutiny will be given to the speed with which payment makes it way down the supply chain. The 30 day period mandated for Scottish Government contracts still generally tends to be better than is frequently available outside of the public sector. There is however an alarming inevitability that cashflow issues tend to be a predominant cause of contractor insolvencies during a period of recession. It is likely that many contractors will begin to insist on more favourable payment terms than they would previously and we may also see an increase in the popularity of project bank accounts, which are another fair payment measure that has been championed by the Scottish Government.