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Contractors seeking legal advice over project delays

Contractors seeking legal advice over project delays

Source: Business Times
Article Date: 24 Mar 2020
Author: Siow Li Sen

One suggestion is for Parliament to enact emergency legislation to provide relief.

Increasingly more contractors worried about penalties for project delays have been contacting lawyers for advice.

While many projects are ongoing as there are still construction materials and the shortage of workers from China and Malaysia has not hit every contractor, the worries are mounting.

One radical suggestion is for Parliament to enact one-off targeted emergency legislation to declare Covid-19 grounds to excuse performance and to provide relief for the S$30 billion construction industry.

Lawyers contacted by The Business Times said they have received more requests for advice from contractors on seeking relief for expected delays.

Most construction contracts here in Singapore typically do not have specific clauses that clearly allow a contractor to seek relief, said Derek Loh, TSMP Law Corp partner.

"Practically all the standard form construction contracts in Singapore do not provide clear or express relief that is enforceable from the impact of the Covid-19-related travel bans and business disruptions in the construction industry," said Mr Loh.

That is why the Building and Construction Authority (BCA) could only send an advisory to the participants in the construction industry, he said.

TSMP has seen more contractors' requests for advice, he said.

The BCA has advised government agencies to take a sympathetic view of construction project delays and grant requests for extension of time for their completion, Parliament was told on March 4.

Further, the government has sought the support of the Real Estate Developers' Association of Singapore (Redas) for private sector developers to take the same view as well.

Redas has duly passed on BCA's request to its members. The association has yet to receive feedback from members on how they will handle delay requests due to the uncertainty of the situation.

Wong Partnership's Christopher Chuah said the firm is seeing more enquiries and currently assisting in about 20 private sector projects affected by Covid-19.

On whether the private sector owners are taking a sympathetic view on delays, Mr Chuah said there is "no firm anecdotal evidence thus far as applications are still being submitted for extensions of time".

The 20 private sector projects vary in value and size, added Mr Chuah who heads Wong Partnership's infrastructure, construction and engineering practice.

According to Simon Goh, Rajah & Tann Singapore partner, there has been a noticeable increase in enquiries from contractors to advise on claims about possible delays to their projects due to Covid-19.

"From those that I am aware of, these are private sector projects. So far, there is a sense of sympathy because claims for extensions of time for completing the projects appear acceptable," said Mr Goh.

Kenneth Loo, Straits Construction chief operating officer, said the current two-week Malaysian lockdown has bigger implications for the industry than the Chinese worker/materials shortage.

In terms of the supply chain, the immediate impact would be materials that come from Malaysia such are pre-cast and cement for finishing works, he said.

"Stock will be depleted very soon," said Mr Loo who is also the immediate past president of The Singapore Contractors Association Ltd (SCAL).

Pre-cast concrete is used in columns and walls while cement is needed for plastering.

"Pre-cast components are bespoke - manufactured for a particular project," said Mr Loo. If the components are not available, the project cannot move."

SCAL's approximately 3,000 members handle about 75 per cent of construction work in Singapore.

Mr Loo said while contractual obligation to finish a project on time is a major challenge, "cost is a bigger headache as overheads continue".

The irony of construction workers shortage is not lost on the industry, he said.

In early January, forecast for the construction industry output this year was a strong S$30 billion to S$32 billion. Construction output in 2019 was S$28 billion.

"Before Covid-19, construction was facing potential manpower shortage; but now with no materials, work will come to a stop," said Mr Loo.

But as major projects can take two to five years to complete, firms cannot just let workers go when there is no certainty how long Covid-19 will last, he said.

To be sure some contractors are still managing to work pretty much as usual.

Jackson Wong, J'Code project manager, said a five-month job which started last November for a full renovation at a luxury apartment in the Grange Road area is being delayed by about two weeks. The owner is "understanding and will not penalise for late handover", he said.

"We have no problems, workers didn't go back for Chinese New Year (CNY)," said Mr Wong. His company's four workers from China did not go back home for CNY, and he has found accommodation for his six Malaysian employees. J'Code also has five Bangladeshi workers.

For the luxury apartment job there was no shortage of materials as these were pre-ordered before CNY.

"So we have no issue with delay or shortage of workers nor materials," he said. "In fact on the supplier side, they still have stock in hand but there are already price increases of 10-15 per cent."

He accepts the increases as suppliers have limited stock, and the higher price move is to discourage contractors from stocking up, "like at the NTUC", referring to some consumers' panic buying at supermarkets.

But Mr Wong notes that sub-contractors he works with face greater problems.

Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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