Knowledge Highlights 18 January 2023
Extension of relief period under Covid-19 (Temporary Measures) Act for relevant contracts in Built Environment sector
Knowledge Highlights 27 January 2022
On 27 December 2021, the Building and Construction Authority (“BCA”) issued a circular titled “Extension of relief period under the Covid-19 (Temporary Measures) Act for relevant contracts in the Built Environment sector”. This circular informs the Built Environment (“BE”) sector of the extension of prescribed periods for legislative relief (“relief period”) related to the BE sector in the Covid-19 (Temporary Measures) Act (“COTMA”) - Part 2 on temporary relief for the inability to perform contracts, Part 8B on temporary measures for cost-sharing in construction contracts, and Part 10A on reliefs for construction contracts affected by increase in foreign manpower salary costs - from the end date of 31 December 2021 to 28 February 2022 (for Parts 2 and 8B) and to 31 March 2022 (for Part 10A) respectively.
Prior to the circular on the extension of the relief period, BCA on 23 December 2021 issued a circular titled “Circular on adopting pandemic resilient contracting practices for public sector consultancy agreements”. This circular informs the BE sector that the public sector will be adopting several contracting practices for pandemic resilience contracting. Specifically, the public sector Standard Consultancy Agreement (SCA) has been amended to allow for the following: (1) remuneration for project prolongation, (2) remuneration for additional services rendered during project prolongation, (3) provision of provisional sum for cost items that can be anticipated and co-sharing of unknown cost items, and (4) clarification on computation of the equal monthly payment during the construction stage due to project prolongation, arising from a pandemic outbreak.
Details on the extension of the relief period related to the BE sector are set out below.
Further extension of COTMA relief periods
The extension of Part 2 and Part 8B relief period for an additional two months takes into the consideration that the BE sector is recovering. During this period, firms should prepare for the tapering of reliefs under these Parts of COTMA.
Firms in the BE sector are still facing manpower shortage and elevated costs. A longer three-month extension for Part 10A is to give contractors continued help in managing the higher foreign manpower salary costs. It will also complement the extension of S$250 Foreign Worker Levy rebates (announced by the Ministry of Manpower on 21 December 2021) for the same duration.
Extension of relief period for Part 2 and Part 8B by two months to 28 February 2022
Part 2 seeks to offer temporary relief for a prescribed period, upon service of a Notification for Relief (“NFR”), from the stipulated types of legal and enforcement actions due to inability to perform contractual obligations arising from Covid-19. In addition, for construction and supply contracts, the following reliefs apply upon service of an NFR if the conditions under COTMA are met:
- First, defaulting parties are provided with a defence against any claims for breach of contract in respect of their inability to supply goods or services in accordance with the terms of their contract if that inability is due to a Covid-19 event and occurs between 1 February 2020 and 28 February 2022
(both dates inclusive).
- Second, any period during which the defaulting party is unable to perform a contractual obligation due to Covid-19 and which falls between 1 February 2020 and 28 February 2022 (both dates inclusive) will be disregarded in calculating any liquidated damages (or other types of damages) payable.
These two additional reliefs continue to apply after the expiry of the prescribed period (on 28 February 2022) provided the NFR was served during the prescribed period.
- Third, during the prescribed period, the non-defaulting party may not call upon a performance bond in relation to the defaulting party’s inability to perform a contractual obligation due to Covid-19 at any time earlier than seven days before the date of expiry of the performance bond.
BE sector firms affected by Covid-19 can seek temporary relief from legal and enforcement actions by serving an NFR at the Ministry of Law Service via the Electronic System webpage by 28 February 2022 (two-month extension). If an agreement cannot be reached or there is a dispute as to whether the relief triggered by the NFR applies, either party may submit an application for an assessor’s determination up to two months after the end of the relief period, i.e. latest by 30 April 2022.
Part 8B provides cost-sharing of additional non-manpower qualifying costs - rental of plant or equipment, cost for maintaining the construction site by third parties, cost for extending insurance or bond and rent for premises in Singapore for storage - between contracting parties due to delays caused by Covid-19.
Cost-sharing relief will apply to non-manpower qualifying costs, which arise due to delays caused by Covid-19 during the period from 7 April 2020 to 28 February 2022 (two-month extension). The cost-sharing percentage remains at 50% of the qualifying costs, subject to a monthly cap of 0.2% of contract sum per month and a total 1.8% of the contract sum. There is no change to the monthly cap of 0.2% and overall cap of 1.8%.
Barring any unforeseen circumstances, BCA states that this will be the final extension of the Part 2 and Part 8B relief period and contractual parties in the BE sector with contracts signed pre-Covid should continue to negotiate in good faith and agree on amicable outcomes for their contracts.
Extension of relief period for Part 10A by three months to 31 March 2022
Contractors can apply for an assessor to seek a determination to adjust the contract sum for the increase in foreign manpower salary costs, in respect of work permit holders (“WPHs”), due to Covid-19 during the period from 1 October 2020 to 31 March 2022 (three-month extension), if contracting parties are unable to reach an amicable outcome. Contractors may submit an application for an assessor’s determination up to two months after the end of the relief period, i.e. latest by 31 May 2022. The application for an assessor’s determination can be made at the BCA Covid-19 (Temporary Measures) Act (COTMA) Part 10A Application webpage.
To ensure the safe inflow of workers while minimising importation risk, firms are encouraged to continue to tap on the two viable and safe entry lanes for construction WPHs to bring in workers to meet their immediate needs - the tightened end-to-end process led by the industry, and the Work Pass Holder General lane.
The following materials are available from the BCA website www.bca.gov.sg and the Ministry of National Development (“MND”) website www.mnd.gov.sg:
- BCA circular on Extension of relief period under the Covid-19 (Temporary Measures) Act for relevant contracts in the built environment sector
- MND press release: Further extension of relief periods under the Covid-19 (Temporary Measures) Act for relevant contracts in the built environment sector
- BCA circular on adopting pandemic resilient contracting practices for public sector consultancy agreements
- BCA Standard Consultancy Agreement webpage
Allen & Gledhill has a Covid-19 Resource Centre on our website www.allenandgledhill.com that contains knowhow and materials on legal and regulatory aspects of the Covid-19 crisis.
In addition, we have a cross-disciplinary Covid-19 Legal Task Force consisting of Partners across various practice areas to provide rapid assistance. Should you have any queries, please do not hesitate to get in touch with us at email@example.com.
Knowledge Highlights 19 January 2023