Singapore’s Extraordinary Legislative Measures to Assist the Construction Industry during COVID-19


Introduction

1. Singapore’s construction industry faced unprecedented challenges due to the COVID-19 pandemic, particularly as it relied heavily on external sources for its supply chain and manpower. With various countries closing their borders almost overnight and imposing “circuit breakers” or “lockdowns”, the construction industry was almost brought to a standstill.


2. In light of the above, the Singapore Government took decisive steps to assist the construction industry by enacting the Covid-19 (Temporary Measures) Act 2020 (“COTMA”) in April 2020. This article sets out an overview of the various reliefs provided to the construction industry through this extraordinary legislation.


3. As an overview, COTMA provides extraordinary and temporary relief to the construction industry, by providing a “legal circuit breaker”, as well as intervening in specified construction contracts, with the intent for all parties to equitably bear the unexpected costs arising from the COVID-19 pandemic.


4. COTMA provides 3 reliefs that are particularly relevant to Singapore’s construction industry:


4.1.First, providing a stay of legal proceedings and statutory defences for any inability to complete ongoing construction works;


4.2.Second, providing a universal extension of time of 122 days for ongoing construction works;


4.3.Third, adjusting contracts sums to reflect (a) increased foreign manpower costs; and (b) certain miscellaneous costs.


Stay of proceedings and statutory defences


5.The stay of proceedings and statutory defences are set out in Part 2 of the COTMA.


5.1.Broadly, if certain conditions were met, parties could stay legal proceedings, calls on performance guarantees/bonds or enforcement action until the end of the prescribed period. This would broadly apply to construction parties who entered into contracts before 25 March 2020, and had ongoing contractual obligations as of 1 February 2020.


5.2. Additionally, such construction parties would be provided with a statutory defence against liquidated damages or other damages, if they were unable to carry out their contractual obligation as of 1 February 2020.


5.3.The COTMA also made provision for assessors to determine any issues between a contractor claiming relief under Part 2 of the COTMA against another party who claimed that there was no such entitlement.


5.4.The stays of proceedings and statutory defences have been presently extended to 28 February 2022. Singapore’s Building and Construction Authority has indicated that there will not be a further extension of this relief, indicating that the COVID-19 pandemic’s impact on the construction industry might be ending.


6. The stay of such legal proceedings and statutory defences provided a critical lifeline to parties in the construction industry. Given the severe impact caused by COVID-19, most in the construction industry would not be able to muster adequate resources to defend against legal proceedings for breaches of contractual obligations during that critical period.


Universal extension of time of 122 days


7.A second feature of the COTMA was the statutory provision of 122 days of “universal” extension of time for the construction industry between 7 April 2020 to 6 August 2020 (set out under Part 8A of the COTMA).

8.Again, there were certain prerequisites that had to be met, including no double-counting of extension of time (if the parties had already agreed to provide such extension of time during the statutory period).

9.This “universal” extension of time was again welcome news to the construction industry, given that this removed the need for contractors to spend time and resources in negotiating with the other party to obtain time.

10.Additionally, this “universal” extension of time implicitly included a compromise between the parties. The COTMA made no provision for the contractor’s costs incurred as a result of adding 122 days to the project duration. As such, it seemed that while contractors would be provided with more time, they would have to bear these additional costs associated with the increased project duration.


Adjusting contracts sums for increased foreign manpower costs


11.The last feature of the COTMA allowed contractors to adjust contracts sums for the increased foreign manpower costs (set out in Part 10A of the COTMA).

11.1.A contractor could adjust and increase the contract sum for the increased foreign manpower costs incurred between 1 October 2020 to 31 December 2021, provided the contractor complied with certain requirements.

11.2.This provision was powerful, as it superseded contractual provisions to the contrary and would require the contractor’s paymaster to bear this increased cost. Typically, contractual provisions would prevent any such claims for increased costs even for unexpected events.

11.3.If parties were unable to reach an agreement with each other, they could seek an assessor to determine the increased foreign manpower costs.


1.An earlier feature of the COTMA also allowed contractors to seek a sharing of certain miscellaneous costs that were incurred between 7 April 2020 to 31 December 2021 (set out in Part 8B of the COTMA). However, this was limited in nature, as the miscellaneous costs were capped at 1.8% of the contract sum and were limited in scope. In contrast, Part 10A of the COTMA allows for parties to seek a sharing of (potentially) the whole of the increased foreign manpower cost.

Conclusion

2.As set out above, the Singapore Government’s actions have been decisive and provided significant legislative support to the construction industry.

3.However, an end to the pandemic may be in sight, given the signals by the authorities that the reliefs provided to the construction industry may end on 28 February 2022. In light of the above, it is hoped that the construction industry will be able to fully recover from this pandemic in 2022.

 

#lawfirmstrategy#lawfirmmarketing#lawfirmmanagement#lawfirmgrowth#lawfirmleadership#legaltech#legalindustry#legal#legalmanager#legalknowledge#legalmarketing#legaleducation#legaladvice#legalcommunity#legalmatters#legalcounsel#legaldocuments#legalconsulting#legalai#legalcloud#lawtech#lawyers#lawpractice#lawupdates#laws#lawnews#lawenforcement

 

Follow LexTalk World for more news and updates from International Legal Industry.

 



14 views