Six months ago, Construction+ interviewed construction lawyer, Chan Kheng Hoe, to discuss about the risks and challenges that contractors would face after the pandemic started to destabilise the built environment sector. Drawing from PAM’s (Malaysian Institute of Architects) Standard Form 2018, Chan believed that a contractor would be entitled to apply for an extension of time due to force majeure, but the same cannot be said for claims for loss and expense.
In July 2020, Singapore’s Building and Construction Authority issued the Public Sector Standard Conditions of Contract (PSSCOC) 2020 as well as the PSSCOC List of Amendments (from the old version PSSCOC 2014). The new standards in Singapore has now factored in new challenges arising from the COVID-19 pandemic. In the BuildTech Asia: Digital Series held on 14 October 2020, Donna Er, Singapore Institute of Building Limited (SIBL), shared with the audience the key clauses to look out for in PSSCOC 2020.
In a nutshell, Er’s comments on the new standards are similar to Chan’s, that in light of the pandemic, contractors could be entitled to an extension of time, but not to loss and expense claims. For further details, below are the key points summarised from Er’s presentation, but do take them with caution and seek legal advice from professionals for elaborate definitions.
PANDEMIC AS FORCE MAJEURE
PSSCOC Clause 14.2 specifies the extension of the time for completion after all due diligence and the taking of all reasonable steps by the contractor to avoid or reduce delays. In the previous version, PSSCOC 2014, force majeure was undefined. PSSCOC 2020 clarifies this, stating that force majeure is an event beyond the contractor’s reasonable control. Epidemics or pandemics have now been added as grounds for extension of time.
This also extends to shortages of labour, goods, materials or equipment required for the works (impacted by epidemics or pandemics). However, it remains to be seen how the amendments will affect the interpretation of the clause for an extension of time for current projects that are governed by past versions of the PSSCOC.
PANDEMIC LOSS AND EXPENSE CLAIM
PSSCOC 2020 clause 22.1 outlines the reasons for loss and expense claim, such as a disruption to the completion of works or any phase/part of the works, prolonged or materially affected by the issue of an instruction for a variation; the suspension by the Superintending Officer (SO); unforeseeable adverse physical conditions, etc.
In general, there is no change in grounds for loss and expense claims from PSSCOC 2014. The new grounds on loss and expense claim because of pandemics have not been added to clause 22.1. In other words, it’s likely that the contractor will get time but not financial compensation unless there is a document supporting the claim or if such claim is supported by a certificate or document required by the contract.
THE ISSUANCE OF FINAL COMPLETION CERTIFICATE
As stipulated in Clause 34.1, within 30 days after the expiration of the defects liability period and nothing else is problematic, the SO will issue to the contractor, with a copy to the employer, a final completion certificate. If the contractor submits payment claims after the final certificate is issued by the SO, this will not be valid. The SO becomes functus officio and no longer has the power to issue payment certificates that become a condition precedent to the contractor’s right to receive any progress payment.
Clause 32.1 says that within 21 days of receiving the final payment claim, the SO will provide the contractor an interim final account. Payment claims can still be submitted between the project completion and the issuance of this interim final account. However, whether or not a payment claim can still be submitted between the issuance of interim final account and the actual final account certificate remains uncertain.
CLAIMS FOR LIQUIDATED DAMAGES
There is no change from PSSCOC 2014 about liquidated damages. Clause 16.1 states that if the works are not completed within the time frame or after extension, the contractor will pay liquidated damages to the employer; and such payment or deduction of damages will not relieve the contractor from their obligation to complete the works or from any other of his obligations and liabilities under the contract.
However, any claims to liquidated damages, according to section 17(2A) of Security of Payment Act (SOPA), can only be made if there are documents showing that parties have agreed the quantum of liquidated damages or certificate required to be issued under the contract. Without them, the employer would have to make claims for liquidated damages via litigation or arbitration.
WHAT’S NEXT?
BCA is currently developing collaborative contracting clauses together with associations and government agencies in order to create more mutual trust. These aim to reduce project cost, variations and completion time; support early risk identification and joint problem solving; stimulate information sharing, communication and innovation; as well as avoid disputes and encourage early dispute resolution. The collaborative contract provisions are currently being piloted in selected public sector projects.
Such collaborative clauses, when finally available, would definitely ease contract administration in ‘the post-COVID world’. Until then, stakeholders could foster the cooperation among themselves, with the understanding that for projects impacted by the COVID-19 pandemic, as per Chan Kheng Hoe, the focus may be more on minimising the risks of transmission and sustaining operations, rather than maximising profits.– Anisa Pinatih, Construction+ Online
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