This circular informs the industry on the COVID-19 (Temporary Measures) (Amendment No. 3) Bill 2021 passed by Parliament on Tuesday, 11 May 2021, which provides a relief framework to allow parties, such as contractors, to apply to adjust the contract sum for their projects, to address foreign manpower cost increases in respect of Work Permit Holders due to the COVID-19 pandemic.
2 Firms in the construction industry continue to face challenges due to the COVID-19 pandemic. While construction works have resumed from August 2020, construction projects continue to face challenges as they experience manpower shortages and increases in manpower cost as a result of border control quotas that limit the inflow of migrant workers, including the recently tightened border measures.
Additional Relief Measure under the COVID-19 (Temporary Measures) Act 2020 (“COTMA”)
3 In view of the increased foreign manpower cost due to foreign manpower shortages caused by the COVID-19 pandemic, an additional legislative relief under Part 10A of the COTMA is provided to ensure that everyone along the value chain steps up to co-share the increased costs. This is part of the broader package of support measures introduced to help the Built Environment sector to preserve industry capacity, adjust to the new operating environment, and recover from the impact of the pandemic.
4 Part 10A of the COTMA will provide further support, by allowing an Assessor to adjust the contract sum of a construction contract that satisfies the stipulated criteria to address foreign manpower cost increase if parties to the contract are unable to re-negotiate the construction contracts. The relief period for this Part 10A will be from 1 Oct 2020 to 30 Sep 2021 (or any extended date as prescribed).
5 Contractors are encouraged to negotiate with their customers/clients (who procured their services) to reach a mutually agreeable arrangement to address the cost increase in respect of Work Permit Holders performing the project. This will be applicable to every tier of construction contract (e.g. main contractors to negotiate with developers, subcontractors to negotiate with main contractors, etc).
6 Contractors can seek a determination by an Assessor to adjust the contract sum to address the cost increase of the Work Permit Holders should the negotiation be unsuccessful. The Assessor will consider the application and render an outcome which is just and equitable in the circumstances of the case. Details in respect of the adjustments that the Assessor may make will be set out in subsidiary legislation. The Assessor must consider all relevant factual circumstances, such as the loss suffered or benefit obtained by any contractual party, when deciding what is just and equitable.
7 The industry will be informed on the commencement date of the legislative relief. Further details of the relief, together with the subsidiary legislation, are still being worked out and will be announced later. You may contact us at https://www.bca.gov.sg/feedbackform/ for any enquiries on the above.