Covid-19: Faced with labour crunch, supply disruptions, contractors in S’pore fear missing project deadlines

SINGAPORE — Tighter labour laws and delays in the production and shipment of materials due to the ongoing Covid-19 outbreak have led some construction firms here to worry about whether they can meet the upcoming deadlines of their building contracts.

Construction firms interviewed by TODAY said the restrictions imposed by the Singapore and Chinese authorities have led to a manpower crunch and the problem has been especially acute for firms which predominantly hire Chinese workers.

Since Jan 31, the Ministry of Manpower has stopped issuing new visas to Chinese nationals. Chinese work permit holders must also seek approval from the ministry before entering the country and those who return must comply with a strict 14-day stay-at-home notice.

Production halts at Chinese factories have exacerbated the issue as it has meant that the materials needed for ongoing building projects have not arrived on time and many companies said they expect to see delays down the road.

This has resulted in some companies seeking advice from lawyers on whether they have the option of getting out of their building contracts by invoking the force majeure clauses in building contracts, Reuters had reported earlier this week.

Force majeure refers to unexpected external circumstances that prevent a party from meeting their contractual obligations.

Lawyers whom TODAY spoke to said they have received between four and 10 inquiries about invoking force majeure clauses from contractors since the outbreak started. They expect to receive more if the outbreak continues.

‘I’LL BE KIDDING IF I SAID THERE’S NO IMPACT AT ALL’

A spokesperson for a local construction firm said the firm had already been experiencing a labour shortage before the Covid-19 outbreak hit Singapore.

Its subcontractors were planning to hire new workers to alleviate the existing manpower crunch, but the new labour and travel restrictions have put a stop to their plans and have aggravated the firm’s existing problems, said the spokesperson, who spoke on the condition of anonymity.

When asked whether the firm will consider other sources of labour to tide through the period of uncertainty, the spokesperson said that workers from other countries are not skilled in the areas of work that they require.

“Training workers from other sources to reach similar standards in quality also has its own risks and will incur cost and time,” he said.

In a similar vein, Mr Neo Tiam Boon, chief executive officer of construction firm TA Corporation Ltd, said that overcoming supply chain disruptions is not as easy as looking for alternative sources.

Some of the necessary materials require special moulds that were made for the specific project and so finding another factory to produce another set of moulds will not only take longer but will also cost a fortune, he said.

Because of these issues, contractors told TODAY that they are already feeling the pinch and many of them said they have started making preparations in case the outbreak gets worse.

For example, some firms have started issuing notices to their clients informing them of the expected delays.

So far, the clients have been understanding, said Mr Nelson Tee, managing director of CHH Construction System. But no formal agreements on extensions of time have been put in writing, he said.

Responding to TODAY’s queries, a Building and Construction Authority spokesperson said it has informed contractors involved in public sector projects that they may submit claims for extensions of time under the contract provisions if work progress has been delayed due to the Covid-19 outbreak.

“BCA has advised Government Procuring Entities to be prepared to evaluate such claims for (extension of time) and has also sought the support of the Real Estate Developers' Association of Singapore (Redas) for private sector projects similarly affected,” the spokesperson said.

NOT A ‘LIFE OR DEATH SITUATION’ YET

When asked whether they are considering taking legal action to get out of their contracts, the contractors told TODAY that legal recourse is not something they are considering at the moment.

For one thing, involving lawyers will take up more resources in terms of time and costs that are already being stretched because of the outbreak, said Mr Tee.

“Because most of my clients are individual owners so it’s very different from the public sector. The public sector may have measures to handle this, but for us, we have to address our clients individually which is not easy,” he said.

Other contractors, such as Mr Johnny Lim, are optimistic that because the situation is not too dire, a compromise can be reached through talks with the clients.

“For us it is still at the initial stages. We would prefer to sit down and dialogue with our clients and see how we can best solve the problem, rather than go through legal means straightaway,” said Mr Lim, executive director of Teambuild Construction Group.

However, TA Corporation’s Mr Neo noted that though the developers may be willing to reach a compromise, they could still face pressure from their buyers who still expect to take up the units that they bought on time.

This will raise a whole set of other problems, he said, adding that he expects to see more cases taken to court in the future.

LEGAL RECOURSE IS NOT A STRAIGHTFORWARD ROAD

Building and construction lawyers told TODAY that it would not be so easy for construction firms to wriggle out of their business contracts by invoking force majeure clauses.

Mr Derek Loh, a lawyer at TSMP Law Corporation, said that because force majeure is not a legal concept that is recognised in Singapore law, it can only be invoked if it is explicitly specified in the building contract.

Force majeure also does not have a consistent definition in the local law. Therefore, whether or not a firm will be successful in a legal suit would depend on how it is worded in the contract, he said.

Force majeure is included as one of the grounds for extension of time in all three of the more commonly used standard form construction contracts here. They are:

• The Singapore Institute of Architects’ Standard Form of Contract

• Redas Design and Build Contract

• Public Sector Standard Conditions Of Contract (PSSCOC)

Invoking force majeure may also only offer temporary relief in terms of extra time granted to complete the works, but not recovery of the additional costs resulting from the outbreak, said Mr Ho Chien Mien, a lawyer from Allen and Gledhill.

Lawyer Christopher Chuah from Wong Partnership said there is a high burden placed on the party seeking to rely on the force majeure clause to relieve his contractual obligations.

The contractor would have to prove that it is impossible or commercially impractical for him to carry out his contract. He would also have to prove that he has taken reasonable steps to avoid the effects of the outbreak on his projects, said Mr Chuah.

“If not, it cannot be said that the occurrences of these effects were beyond his control, in which the force majeure clause would not apply.”

Ms Spring Tan, a lawyer at Withers KhattarWong LLP, added that since the current public health outbreak is not unprecedented, it is therefore not unforeseen and hence is not a force majeure event.

Mr Loh foresees that the contractors — be they the main contractors or subcontractors — will ultimately bear the brunt of the additional costs that result because of the delays.

“The big question is whether the construction companies can absorb the additional cost or whether the employers are prepared to give compensation to address these issues.

“Somebody will have to pay for the cost of these delays to the work and in all likelihood, it’s likely to be felt by the lower end ,” he said.