Out-Law / Your Daily Need-To-Know

Singapore passes law to allow for fairer sharing of burden of construction costs

Out-Law News | 21 Jun 2021 | 11:40 am | 1 min. read

The Singapore parliament has introduced legislation that will allow more equitable sharing of the increased foreign manpower costs arising from Covid-19.

The amendment to Singapore’s Covid-19 (Temporary Measures) Act is designed to make sure that no single stakeholder group in the construction industry bears an undue share of the burden imposed by Covid-19.

Minister for national development Desmond Lee told parliament that construction projects could be put at risk if one party in “long, interlocking contractual value chains” failed.

The amendments allow contractors to seek monetary relief from their project partners for the spike in foreign worker wages due to Covid-19 that had not been priced into ongoing construction projects. Parties must first engage in good faith negotiation before this amendment can be invoked.

Once invoked, an assessor will determine the loss suffered and decide on an adjusted sum. The amendments will not affect certain projects like Build-To-Order Housings Board flats which have been sold.

Lee said data from the Ministry of Manpower showed median wages for construction work permit holders in March 2021 were 15-30% higher compared to pre-Covid-19 times. Restrictions on the number of permits available for construction workers due to border controls had affected new and ongoing projects, Lee added.

Singapore recently tightened its border control measures with countries including Bangladesh and India, the main source of foreign construction workers.

The amendments build on the support packages introduced last year for the construction industry, including a S$1.36 billion construction support package to help contractors bear additional costs caused through delays and Covid-secure measures.

Those working in the construction industry generally welcomed the amendments, but were concerned how the changes would play out in practice. This included a worry that negotiations for contract costs were sensitive and could give rise to disputes.

Construction law expert Charlotte Wang of Pinsent Masons, the law firm behind Out-Law, said: “This should be a welcome amendment to contractors as it allows for more equitable distribution of unforeseen construction costs among stakeholders. Nonetheless, having to bring in an assessor may place parties at adversarial positions and have a negative effect on parties’ relationship, especially on long-term projects.”

The amendments were introduced in mid-May 2021 and are not yet in force.