Managing Construction Risk in Uncertain Times: Practical Guidance for Contractors and Stakeholders

The construction industry continues to operate amid heightened uncertainty. Regional geopolitical tensions, fluctuating material prices, tightening liquidity in certain markets, evolving regulatory regimes, and global supply‑chain fragility all present challenges that stakeholders must proactively manage.

Regardless of whether contracts expressly allocate these risks, there are practical steps and commercial strategies to implement to protect project delivery and financial outcomes. The following key areas merit close attention.

1. Identifying Disruption-Driven Events

The ability to recover time or cost often depends on clearly demonstrating the cause-and-effect relationship between disruptive events and project impacts. Events such as border closures, material shortages, currency fluctuations, armed conflict, and sanctions may trigger contractual relief.

Stakeholders should ensure that:

• Project controls and reporting systems identify the specific cause of delay or additional cost and track its impact.
• Daily records document lost productivity, resource shortages, or supplier failures in detail.
• Historical data is maintained to evidence performance prior to the disruptive event.
• Partners and subcontractors maintain comparable records, or assistance is provided to standardise data collection.
• Cost records isolate additional expenses directly attributable to the disruption.
• Formal communications are maintained, ensuring counterparties are notified of impacts, mitigation steps, and ongoing developments in accordance with contractual requirements.

2. Suspension or Termination of Work

Periods of uncertainty may increase the likelihood of suspension orders, funding delays, or termination events.

Parties should understand:

• Suspension and termination rights across the supply chain.
• Whether notices have been issued correctly, in strict compliance with contractual procedures.
• Upstream requirements, particularly where concession agreements or developer obligations may override project-level arrangements.
• Whether doctrines such as frustration (or the local legal equivalents) may apply in extreme circumstances.
• Obligations following suspension or termination, such as demobilisation, protection of works, and continued record keeping.

3. Securing Your Supply Chain

How robust is your plan for managing supply‑chain disruptions?

The construction sector remains heavily dependent on imported materials, equipment, and specialist labour. Recent events, from transport bottlenecks on global shipping routes to sanctions-related restrictions and commodity price volatility, have reinforced the fragility of international supply chains.

Stakeholders should assess:

• Origin of major materials and equipment and whether those jurisdictions are affected by political instability, trade restrictions, or logistical slowdowns.
• Availability of alternative suppliers and whether products meeting project specifications can be sourced regionally or through diversified supply networks.
• Flexibility in specifications, including whether substitute materials or equivalent products can be contractually agreed upon.
• Public procurement constraints, particularly on government‑funded projects where supplier approval processes may be lengthy.
• Allocation of scarce materials across multiple projects, including strategic prioritisation where delays could result in liquidated damages or reputational risk.

4. Health, Safety, and Site Resilience

Site-based risk management remains crucial, particularly in regions where heat stress, security concerns, or labour‑camp conditions can be affected by ongoing instability or regulatory change.

Review and update site procedures to:

• Account for changing regulatory or security obligations.
• Ensure appropriate training and provision of personal protective equipment.
• Maintain protocols for rapid response in the event of site-wide disruption, evacuation, or workforce shortages.

5. Reviewing Insurance Coverage

While many assume that disruptions arising from political instability or supply chain failures are uninsured, policy wording varies significantly.

You should:

• Review all relevant insurance policies, including delay in start-up, business interruption, political risk, and contract works.
• Notify insurers promptly whenever coverage may be available.
• Reserve rights and maintain detailed supporting documentation, as well-evidenced claims tend to be prioritised.

6. Negotiating New Contracts

New contracts executed in today’s climate must reflect heightened and evolving market risks. Contractors should carefully consider:

• How will future disruptive events be treated? Whether as force majeure, relevant events, compensation events, or separately negotiated risk categories.
• Will certain risks now be considered foreseeable? Will different allocation or pricing be required?
• How will notices be served? Will electronic communications be accepted if access to the site or offices is restricted?
• Dispute-resolution mechanisms: Could virtual hearings or online document exchanges be employed?
• Insurance expectations – what are the specific requirements for coverage relating to political risks, supply‑chain failure, or material price escalation?
• Warranty, indemnity, and liability caps – ensuring they reflect the level of risk inherent in current market conditions.
• Practical project‑management impacts – including remote witness testing, virtual inspections, or limitations on travel for specialist personnel.

Conclusion

In times of uncertainty, whether driven by geopolitical tensions, global logistics challenges, or economic volatility, contractors and subcontractors must take proactive steps to manage their exposure. Careful record‑keeping, thoughtful contract negotiation, rigorous supply‑chain planning, and strong communication with project stakeholders can significantly mitigate risk.

The considerations above offer a foundation for strengthening resilience in construction markets during periods of uncertainty.

About the Author

Scott is an experienced quantity surveyor and Fellow of the Chartered Institute of Arbitrators with more than 30 years in the construction industry. He has been appointed as an independent quantum expert in arbitration and Dispute Adjudication Board proceedings, and has been cross-examined as an expert witness on multiple occasions. Scott has also supported expert witnesses and legal teams by providing claims advice, commercial and contract management, and dispute resolution services. His international experience spans sectors including power and industrial, buildings, transportation, infrastructure, and natural resources.