2nd Reading Speech by Minister Desmond Lee on the COVID-19 (Temporary Measures) (Amendment No. 3) Bill
May 11, 2021
Mdm, I will first set the context for this urgent Bill before going through its key features.
Our construction industry continues to face significant headwinds due to the COVID-19 pandemic. While most construction work had resumed since August last year, the inflow of migrant workers who form the main bulk of our workforce has remained constrained due to the global impact of the pandemic. We have recently tightened our border control measures with a number of countries, including Bangladesh and India, which are our main sources of construction Work Permit Holders. While this was necessary to safeguard public health, it has made the shortage of manpower in the sector even more severe.
Compared to pre-COVID levels, the number of construction Work Permit Holders has dropped by about 15%, and the number is projected to fall in the months ahead given the ongoing COVID situation. In tandem, construction manpower costs have been rising. Based on MOM’s data on construction Work Permit Holder salaries, median wages in March 2021 were 15% to 30% higher compared to pre-COVID levels, due to competition for the limited supply of workers within the sector. This has affected both new and ongoing projects.
We have also implemented various Safe Management Measures, to keep workers safe and reduce the risk of COVID transmission. These are important public health precautions, but they also inevitably impact productivity. This, together with the ongoing manpower shortage, has unfortunately led to project delays. For example, we had previously shared that more than 8 in 10 of ongoing HDB BTO projects have been delayed by about 6 to 9 months beyond the Estimated Completion Dates originally indicated to flat buyers during project launches. Barring any unforeseen circumstances, we are expecting a further delay of 3 months, arising from the recent border measures. We are faced with a difficult balancing act – the more we need to tighten border measures for everyone’s safety, the greater the impact will be on construction timelines and on home buyers.
We had therefore intervened significantly last year to assist the many stakeholders across the value chain that have been affected by rising costs and delays. Let me outline some of these.
For construction firms, we introduced a $1.36 billion Construction Support Package last year to help our contractors bear part of the additional costs they had to incur due to construction delays and Safe Management Measures. We have also assisted firms with Foreign Worker Levy rebates and waivers, as well as wage subsidies via the Jobs Support Scheme, to relieve some of their burden from manpower costs and help keep local jobs. Under Part 8 of the COVID-19 (Temporary Measures) Act (COTMA), we established a mechanism for firms to seek relief from additional rental costs that are incurred due to construction delays caused by COVID-19. And under Parts 8A and 8B of COTMA, we legislated a universal extension of time of four months and mandated the sharing of non-manpower prolongation costs between project parties.
For developers, we had earlier provided a 12-month extension of the Project Completion Period and Additional Buyer’s Stamp Duty remission timelines for completion, to account for delays due to COVID-19. Part 8C of COTMA will also allow developers whose projects face construction delays to seek relief on the date of delivery of possession.
For home buyers, Part 2 of COTMA prohibits developers from withholding or forfeiting any part of the booking fee paid by home buyers under the Option to Purchase during the relief period, or terminating agreements for sale and purchase of the property because the home buyer was not able to make payment. We also capped the late payment interest and charges under agreements for sale and purchase of property, to protect home buyers. In addition, under Part 8C of COTMA, where the developer has extended the delivery date, home buyers may also seek reimbursement from the developer, up to a specified cap, if they incur certain out-of-pocket expenses due to a delay in delivery of the unit by the developer.
For HDB flat buyers, HDB has been progressively updating home buyers who have been affected, on the revised completion dates. For those who are unable to make alternative housing arrangements, HDB has assisted them with Interim Rental Housing flats.
Now, the manpower situation will be further exacerbated by the recent tightening of our border measures with Bangladesh, India and other countries. As Ministers Lawrence Wong and Gan Kim Yong have explained earlier, we have had to tighten our border controls to better protect Singapore from heightened COVID risks. And we should expect these stringent measures to be in place for some time, given the worsening situation overseas.
In response, we have recently announced more support measures to help the construction industry. First, we have granted an additional 49-day Extension of Time (EOT) for eligible public sector construction projects, on top of the 122 days of EOT already provided under COTMA last year on a universal basis. This gives contractors more time to complete their projects. Second, contractors working on eligible public sector projects with an awarded contract sum of up to $100 million will receive 0.1% of the awarded contract sum for every month of delay as payment for non-manpower related qualifying costs under COTMA. There is no need to provide detailed substantiation for their claims. Third, we have increased the existing Foreign Worker Levy rebates for Work Permit Holders from $90 per worker per month to $250 per worker per month, for the period May to December 2021.
Measures such as these will help firms to cope. But the crux of the current problem is limited inflow of workers. Hence, fourth, we will temporarily allow new PRC construction Work Permit Holders to enter Singapore to work first and take their skills certification tests locally, instead of in China. This will allow firms to continue bringing in workers for their projects even though some Chinese Overseas Training Centres had halted operations due to the pandemic. In addition, we have been proactively working with industry associations and firms to explore other ways to resume the inflow of construction Work Permit Holders from other source countries safely. We will continue to work with them on additional measures to help alleviate the tight labour situation.
In January 2021, we had also set up a taskforce, led by BCA and comprising government agencies, consultants, as well as trade and professional associations representing developers, contractors, quantity surveyors and architects. The taskforce is studying how to enhance our standard construction procurement contracts in both the public and the private sector to mitigate the impact of the current pandemic as well as future crises. For example, we have received feedback that contractors have been buffering for risks in their current tender bids, which has resulted in an increase in tender prices for new contracts. This is understandable as they are worried about unanticipated cost increases due to unexpected developments during the pandemic. Our new construction contracts should enable more equitable risk and cost sharing during pandemic events and crises of this nature. Everyone along the value chain will need to step up and share the burden of uncertainty and help one another get through these challenging times together.
Key Amendments of the Bill
At the same time, there is still a need to provide support for existing construction projects, where parties may not have adequately priced in the unexpected increase in foreign manpower costs. This is why we are introducing the COVID-19 (Temporary Measures) (Amendment No. 3) Bill.
The Bill seeks to facilitate sharing of the increase in foreign manpower costs between project parties. This is to ensure that no single stakeholder group in the construction industry bears a disproportionate share of the burden imposed by COVID-19.
Let me now take Members through the key features of this Bill.
Clause 3 of the Bill introduces a new Part 10A. This provides a relief framework that will allow parties, such as contractors, to apply to adjust the contract sum for their projects, to take into account increases in foreign manpower cost due to COVID-19.
Contracts covered by the Framework
The new section 79B defines the scope of the contracts covered by this framework. First, it will apply to contracts for construction works. These are contracts of longer duration that generally involve structural works and are most likely to be affected by the foreign manpower crunch. Second, it will apply to construction contracts entered into before 1 October 2020. Parties may not have fully priced in foreign manpower cost increases before this date, as there had been substantial Foreign Worker Levy waivers and rebates provided by the Government up to that point. Third, it excludes contracts that have been completed or terminated.
The new Section 79C sets out the scope of the relief. This specifies the period subject to relief, which will be from 1 October 2020 to 30 September 2021, or any extended date as may be prescribed, to tie in with the current end points of relief periods under Part 2 and Part 8B of the Act. It also makes clear that the purpose of the adjustment is to take into consideration the increasing foreign manpower costs of Work Permit Holders incurred due to COVID-19 during the relief period.
Additionally, it states that a party must have made a reasonable attempt to negotiate a contract sum adjustment with the other party, before he can apply for an Assessor to determine the adjustment. This is an important point. Construction projects involve many parties, often in long interlocking contractual value chains, and if one goes down, the entire project may be put at risk. Moreover, many of the developers and contractors in the construction sector have long term relationships. At the end of the day, all stakeholders are part of the same Built Environment ecosystem. And for this ecosystem to thrive and grow, stakeholders need to step up to help one another during these challenging times. We encourage all parties affected by the pandemic to negotiate with each other in good faith, before triggering the adjudicatory process set out in this Bill.
We have anecdotally seen such ‘give and take’ in the sector already. For example, some developers have given their contractors an extension of time beyond what has been mandated in the existing COTMA for the completion of on-going projects. Some have also provided advanced payments and increased the frequency of progress payments to aid contractors’ cashflow.
Application for Adjustment
The new Division 2 sets out the processes of the relief framework. Section 79F details how a party can apply for an adjustment to the contract sum. For example, Parties who wish to seek relief must apply to the Registrar to appoint an Assessor who can then determine the adjustment. The new Section 79G explains how an Assessor will determine an adjustment. For example, the Assessor must seek to achieve an outcome that is just and equitable in the circumstances of the case. The Assessor must also consider matters and principles that will be prescribed in the subsidiary legislation. For example, in arriving at a just and equitable decision, the Assessor should take into account all the facts, including the loss suffered or benefit obtained by any contractual party, such as Foreign Worker Levy rebates.
Mdm Deputy Speaker, allow me to say a few words in Mandarin please.
Transformation of the Built Environment Sector
Mdm, I have spoken about many of the measures that the Government has implemented to support our construction industry through this COVID-19 pandemic.
But the reality is that these are just stop-gap measures to try to staunch some of the bleeding. They are not sustainable in the long run. That is why we want to work with the construction industry to press on with ongoing efforts to transform the sector and accelerate the pace of change, even as we put in place measures to support the industry during these difficult times.
This latest disruption in inflow of migrant workers has shown how vulnerable the construction industry is, because of our over-reliance on low-cost migrant workers. We must build greater resilience in our sector, create more good, productive local jobs and move decisively away from manpower-intensive construction methods. We have already started this transformation some time back, with the launch of the Construction Industry Transformation Map in 2017.
At MND’s Committee of Supply Debate in March this year, we had announced a suite of initiatives to partner the industry in accelerating the pace of transformation. For example, we will adopt a value chain approach to drive transformation through the new Growth and Transformation Scheme. The scheme recognises that the construction industry works through value-chains. It will therefore support alliances of firms all along the value chain, from developers and consultants to builders and contractors. Each alliance will develop a business plan to achieve ambitious outcomes in productivity and digitalisation. This would be through the use of productive methods of construction involving Design for Manufacturing and Assembly (DfMA), and technology such as Integrated Digital Delivery (IDD), as well as efforts to enhance sustainability, workforce development including the creation of local jobs, business growth and strategic collaboration.
This alliance approach seeks to uplift the entire value chain, because given the heavy interdependencies between different segments of the value chain in construction, it is difficult for any one firm to effect significant transformation entirely on its own. We plan to roll out the Growth and Transformation Scheme with a few alliances first, starting in the second half of this year.
We have also extended the Construction Productivity and Capability Fund (CPCF) by one year until March 2022, and will maintain the enhanced co-funding support of 80% under the Productivity Innovation Project (PIP) scheme. This will support the industry in its recovery from COVID-19, and help our firms minimise disruptions to their operations by leveraging DfMA and IDD technologies and other innovative, productive processes.
In addition, we will review our foreign manpower levers for the construction sector. As previously announced, we intend to remove the Man-Year-Entitlement (MYE) framework in the near future and replace it with a system that incentivises more productive off-site work. We are also studying the reduction of the construction Dependency Ratio Ceiling (DRC) to support more manpower-lean construction. We will continue to consult our industry partners before making any major moves.
Mdm Deputy Speaker, let me now conclude. This Bill will facilitate more equitable sharing of the increase in foreign manpower costs brought about by COVID-19, amongst parties to existing contracts. Taken together with our other measures, it will help alleviate the significant stresses that the construction industry is currently facing due to the manpower crunch.
But even as we deal with these near-term challenges, we must keep our eyes on the future. We will continue to work with the industry to quicken the pace of transformation. These structural changes will be painful, but they are necessary to ensure that the industry as a whole can emerge more resilient and productive from this crisis.
Mdm Deputy Speaker, I beg to move.