You would be hard-pressed to have missed the coverage of the recent geopolitical tensions in the Middle East. Indeed, the instability is already causing repercussions far beyond the region itself: rising material prices, labour shortages, shipping disruption and sanction-related restrictions are all having a significant impact on global supply chains. For projects worldwide, this raises the important question for contractors and employers alike: how construction contracts respond to the fallout from external events that make performance more difficult — or even impossible?
The answer often lies in how the contract allocates risk for events outside the control of the parties.
Rising Costs and Supply Chain Pressure
Volatility in energy markets is already having knock-on effects across the construction sector. Increased fuel prices impacts not only transportation but also the manufacturing and delivery of materials such as steel, aluminium, cement and mechanical components.
Projects operating under fixed-price contracts may feel the pressure most acutely, as contractors absorb increased costs unless the contract allows for adjustments. Even where contractual relief mechanisms exist, entitlement to additional time or cost will depend entirely on the specific terms of the contract.
Supply chain disruption can also extend delivery lead times. When key materials or components are delayed, the impact can cascade across the programme, affecting sequencing, labour productivity and ultimately completion dates.
Contracts Matter — But So Does Timing
Standard construction contracts address these situations in different ways.
Under NEC contracts, certain unforeseen events may qualify as compensation events, potentially allowing both additional time and cost recovery. Under JCT contracts, similar circumstances may be treated as ‘force majeure’ which, although not specifically defined, generally allows an extension of time but not additional payment unless the contract has been amended.
However, one point remains consistent across most contracts: procedural requirements matter. Notices often need to be issued within strict timeframes, and failing to act early can mean losing rights that may otherwise have existed.
A Real Example from Project Delivery
The impact of global events is not theoretical. On a project currently supported by CCR Global, these recent geopolitical tensions affecting oil prices have led to a sharp increase in fuel costs in Portugal.
A transport provider involved in the works formally notified the project team that it would be forced to introduce an extraordinary 5% surcharge on transport services due to the rising fuel prices linked to instability in energy markets.
This increase affected not only material deliveries but also wider logistics activities supporting the works. As a result, an Early Warning Notice was issued so the situation could be identified, recorded and managed proactively under the contract.
Subject to the ongoing assessment of the impact, a Compensation Event may also be raised under Clause 60.1(19) relating to force majeure, as the circumstances have arisen from geopolitical developments outside the control of the parties.
While the situation continues to evolve, the key lesson is clear: identifying risks early and managing them contractually can significantly reduce uncertainty and protect project outcomes.
Preparing for a More Volatile World
The past few years have demonstrated how quickly global events can affect construction projects. From pandemics to conflicts and energy price shocks, the assumption of a stable operating environment is increasingly unrealistic. As a result, one may wish to consider:
- reviewing how contracts allocate geopolitical and supply-chain risks,
- clarifying definitions of compensation events or force majeure,
- and considering bespoke provisions that address sanctions, embargoes or extreme cost fluctuations.
Contracts drafted with yesterday’s assumptions may not fully address tomorrow’s risks.
How CCR Global Supports Project Teams
At CCR Global, we undertake targeted contract reviews at the outset of projects, focusing on key practical provisions to ensure these align with the client’s operational needs and project realities.
During project delivery, we support commercial and project teams in navigating complex contractual frameworks by identifying potential entitlement triggers, structuring submissions in line with contractual requirements, and helping teams respond effectively when external events begin to impact project performance.
By combining contract awareness, strong project records and practical commercial management, we help organisations preserve contractual rights and enhance the prospects of recovering both time and cost.
