Round-Up Speech by Minister Desmond Lee on the COVID-19 Temporary Measures (Amendment No. 3) Bill
Nov 3, 2020
I would like to thank the Leader and this House for dispensation. Mdm Deputy Speaker, let me address some of the questions that have been raised in respect of the provisions in Part 8A, 8B and 8C of COTMA Amendment Bill.
Response to Queries on Extension of Time
Mr Louis Ng asked whether an Extension of Time, or EOT, beyond four months automatically applies when a contractor serves a Notification for Relief under Part 2 of the Act, and how this would interact with contractual provisions on EOT, while Dr Jamus Lim why we chose four months universal EOT instead of aligning with the two months Circuit Breaker or with Phase 1. Mr Xie Yao Quan asked if we had consulted the industry on the universal EOT proposal, and whether contracts between contractors and sub-contractors will also be covered.
First, let me assure the Members that our proposals were developed in close consultation with the industry, and are supported by the industry associations.
Part 8A of the Bill provides for a universal EOT of four months to cover the period earlier this year when most construction projects were stopped. As I mentioned earlier, two months account for the Circuit Breaker period, and two months account for the subsequent period when all dormitories were yet to be cleared. So instead of aligning it with Phase 1, we align it with the reality on the ground – which is the duration for which most of the workers were still in the dormitories, and the dormitories had not yet been cleared. All contractors, including sub-contractors, were affected by these delays. Hence, the proposed universal EOT will also apply to contracts between contractors and sub-contractors.
Now, contractors seeking an EOT beyond the universal four months provided by the Bill should negotiate with their counter party, or rely on contractual provisions. The intent is to arrive at an amicable resolution that is acceptable to both parties.
But if the matter cannot be resolved, then the contractor can serve a Notification for Relief under the existing Part 2 of the Act. Once the Notification for Relief is served, the contractor will be able to rely on the defence under Section 6 of the Act against any claims for liquidated damages payable under the contract in respect of delays that are materially caused by COVID-19, which occur beyond the four months EOT provided by Part 8A, and within the prescribed period. In this respect, in response to Mr Louis Ng’s question, the protection afforded under Section 6 of the Act, is similar in effect to an Extension of Time, but they are not exactly identical. For instance, depending on the terms of the contract, an EOT may also clearly have an impact on matters such as defects liability period of a project, or DLP.
Response to Queries on Co-Sharing of Additional Costs
Mr Xie Yao Quan also asked how equitable co-sharing between parties will be determined in respect of Part 8B of the Bill. He suggested that we model the universal provision for co-sharing after the approach that has been adopted for public sector projects – I think he is referring to the prolongation costs that Government Procuring Entities have provided to Government projects. That is indeed what we have done. The proposed provision in Part 8B of the Bill will require 50 per cent co-sharing of additional non-manpower-related costs between the contracting parties in all applicable construction contracts, whether public or private. This is subject to a monthly cap of 0.2 per cent of the contract sum, with the total claimable amount capped at 1.8 per cent of the contract sum.
Mr Xie also said that it may not be easy for contractors to fully account for additional costs such as incremental private transport costs, which may add up. To clarify, the provisions under Part 8B of the Bill provide for co-sharing of additional costs due to delays arising from COVID-19. We have separately provided construction firms with substantial financial support to help with additional compliance costs associated with COVID-Safe restart criteria.