Contractual Risks in Modern Construction
8 hours ago
(0 Comments)
Posted by: Ernest Roper
 On 27 February 2026, the Association hosted a seminar with the theme “Towards a Sustainable Construction Industry – Building Accountability through Compliance!”. The topic of Construction Risks in Modern Construction was a hot topic of discussion.
The construction industry is evolving rapidly. We are seeing tighter margins, increased regulatory scrutiny, greater complexity in project delivery and heightened financial pressures across the supply chain. More importantly, there is more focus on the contract document. The contract document is no longer a legal technicality but is a strategic issue that affects cashflow, project viability and business sustainability. Therefore, managing the contract and treating it as a strategic matter is important.
During the panel discussion pertaining to Construction Risks in Modern Construction, the following were the key takeaway points:
1) Delayed payments are a critical issue that affects the entire value chain from the Contractor downwards. Non-payment by clients was discussed to be an issue of contractual integrity and / or conduct. Amongst the recommendations made was that the contract document lays the foundation for the project and must be followed. A distinction was made between late payments and non-payment. Whilst contractors were encouraged to treat late payments following a collaborative approach, non-payments should be treated according to the provisions of the contract, and contractors were encouraged to invoke their contractual rights before it is too late. 2) On the topic of Extension of Time Claims, it was discussed that construction contracts all have well developed extension of time clauses. The following advice was shared with contractors to proactively manage this matter: - Understand the exact scope of work at the outset and have a baseline programme in place.
- Use the scope of work and baseline programme to justify extensions of time due to additional scope of works.
- The contractor should provide as much supporting information as possible when making the claim and this includes, inter alia, site daily diaries, written instructions received with dates and revised programme with impact to the critical path demonstrated.
- The supporting information is important since on the matter of Extension of Time, the onus of proof is with the Contractor.
- Contractors should take note of time barring provisions in the extension of time clauses and understand that in most cases the time barring provisions commence when the Contractor should have known there was a problem and not when they actually become aware that there was a problem.
- It was strongly recommended that contractors have a resource on site that understands the contract and is capable of administering it.
|
3) Contract administration was equated to risk administration. It is common cause that the contract serves as a risk allocation tool. The parties to a contract must understand the risk allocation and manage it. Parties to a construction contract were encouraged to manage cashflow and monthly payment certificates more aggressively.
4) The issue of contract amendments was discussed. Issues often arise from half-baked changes or changes to the contract that were not properly thought out. The common change to the payment clauses of a contract to include a pay-when-paid provision was discussed. Whilst it was discussed that these clauses are legal, main contractors were cautioned that they cannot sit back and do nothing when they are not paid. Main Contractors have to take steps to receive the money owed from their clients and make payment to subcontractors.
It was established that contractual risk in modern construction contracts is not merely about drafting contracts, it is about awareness, proper administration, financial discipline and industry culture. To move forward, the sector must move towards fairness, transparency and accountability.
Bilaal Dawood | Head: Membership Services
|
Email to a Friend