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In this article, we explore the Construction Support Package announced by the Building and Construction Authority (BCA) on 27 June 2020¹ to help construction firms affected by COVID-19.

Most construction activities screeched to a halt when the COVID-19 pandemic hit our shores. Following the Singapore circuit breaker exit on 2 June 2020, we are seeing a gradual resumption with more projects receiving the necessary approvals from the relevant authorities for a restart. The focus of the sector turns to a new normal, placing priority on more stringent safety and health management measures at worksites to minimise the risk of outbreaks among construction workers. Parties are required to comply with the Building and Construction Authority’s COVID-Safe Restart Criteria before projects are allowed to restart².

Undoubtedly, there will be additional compliance costs due to the implementation of the new targeted measures and requirements which range from technology-enabled processes to track health status of workers, additional material/equipment to comply with COVID-Safe Worksite requirements, reduced physical interaction by having split teams restricted to working in a single zone without any cross-deployment and ensuring safe distancing at work sites, regular swab tests and appointment of safe distancing and safe management officers..

Against this backdrop, the BCA unveiled the S$1.36 billion Construction Support Package on 27 June 2020 to give financial support to construction firms to maintain business sustainability, support businesses to be COVID-safe and to assist with cashflow. A summary of the more relevant and material measures are included below:

Construction Restart Booster³

A S$525.8m construction restart booster is set aside to help construction firms to defray the additional compliance costs in order to resume works safely. This comprises two separate components:

COVID-Safe Firm-Based Support

This funding will co-share additional costs incurred by firms to comply with COVID-safe requirements. This relates to the costs of procuring additional material and equipment such as additional portable toilets, provision of PPEs, masks for workers and individually packed meals. The one-off support provides an allocation of S$400 per construction worker employer per firm.

COVID-Safe Project-Based Support

Project sites are required to provide temperature screening facilities, contact tracing systems and safe distancing measures. This one-off support applies only to ongoing construction projects and is intended to offset costs incurred for procuring additional barricades and implementing demarcated work zones. For project contract values of S$100,000 and above, the support amount will be at 1.5% of the project contract value subject to a limit of S$150,0000 per project. For projects with contract values below S$100,000, the support amount is S$1000 per project.

Co-Funding Salaries of Safe Management Officers (SMOs)⁴

For a resumption of construction activities, it is mandatory that all projects with contract values above S$3 million must appoint SMOs as part of the COVID-Safe Worksite Criteria.

The Singapore Government has set aside S$48 million to co-fund 50% of the first $4,600 of gross monthly salaries of SMOs who are Singapore citizens or permanent residents. The support will be available for a period of six months from September 2020 to February 2021.

Co-Sharing of Prolongation Costs for Public Sector Projects⁵

This applies only to on-going public sector main contracts and tenders closed on or before 1 June 2020.

The funding of $793 million will support government agencies in the co-sharing of 50% of the prolongation costs for delays on public sector projects due to:

• • the circuit breaker, the extended circuit breaker until controlled restart; subject to a maximum of 5 months from 7 April 2020 until approval is obtained from the Building and Construction Authority (BCA) or 6 September 2020, whichever is earlier
  • loss of productivity from the point of restart due to compliance with COVID-Safe requirements; subject to a maximum of 4 months following BCA’s approval for restart of works

In each instance, parties can only make a claim up to a limit of 0.2% of the awarded contract sum per month of delay, subject to an overall limit of 1.8% of the awarded contract sum for the maximum period of 9 months as described above.

Co-sharing of prolongation costs is on the proviso that an extension of time has been certified by the employer’s appointed contracts administrator or the Superintending Officer under the Public Sector Standard Conditions of Contract. Prolongation costs to be co-shared largely cover non-manpower costs such as rental of plant and equipment, site maintenance and extension of performance bonds and insurances. The co-sharing excludes the below:

• • Manpower costs associated with salaries, accommodation and transportation of workers and foreign worker levy are which are covered under other government relief measures
  • Compliance costs for restart in connection with the provision of safe management measures such as segregating workers or co-horting of workers at their places of accommodation
  • Other costs covered by government relief measures

It is pertinent to note that Contractors will be required to enter into a supplemental agreement or a separate letter of agreement before the government agencies can make the ex-gratia payment.

At the time of writing, the co-sharing framework will support prolongation costs for a maximum 9-month period described above. In this respect, Contractors would need to consider the contractual remedies available under their respective contracts should the project delays due to COVID-19 protract beyond this period.

Support for Cost of Swab Testing⁶

The Singapore Government will continue to fund the costs of COVID-19 testing for the construction sector until 31 March 2021.

Foreign Worker Levy Rebates⁷

Based on the latest update by the Ministry of Manpower (MOM) on 1 August 2020 concerning the foreign worker levy (FWL) rebates and rebates for the construction sector, MOM will provide: 

• • a full FWL waiver for levies due in August and September 2020;
  • for levies due in October, the FWL waiver will be stepped down to 75%;
  • 50% FWL waiver for levies due in November; and
  • 25% FWL waiver for levies due in December 2020

Construction firms will be provided with a FWL rebate of $375 for each S Pass and Work Permit Holder for August and September 2020. For October 2020 to December 2021, the FWL rebate will be $90 monthly.

Extension of Advance Payment for Public Sector Projects

BCA issued a circular on 7 April 2020⁸ regarding a one-off advance payment for public sector construction contracts affected by the suspension of works due to the circuit breaker. This was to alleviate the cashflow of construction firms due to suspension of activities during the circuit breaker.

In consideration that not all public sector projects have resumed works, BCA issued a further update on 29 June 2020 which allows government agencies to continue providing ex-gratia advance payment at monthly intervals until the project has been granted permission to restart work or 31 December 2020, whichever is earlier.

In general, the amount of advance payment would be computed based on:

• • the advance payment amount certified in the preceding month; or
  • 50% of the average monthly payment based on past 3 most recent certified monthly payments, if no advance payments were certified previously.

The amount of the ex-gratia monthly advance payment to firms working on public sector projects is capped at 2.5% of contract sum or $5 million, whichever is lower (subject to a total advance payment cap of 5% of the awarded contract sum or $10 million, whichever is lower).

The main contractors and downstream sub-contractors are expected to apportion and pass down the portion of the advance payment due to their sub-contractors. 

This measure does not apply to newly awarded contracts with tenders closed after 1 June 2020.

Conclusion

The construction landscape is changing daily and the impact of the COVID-19 pandemic has placed a significant financial and emotional toll on the sector. The Government’s Construction Support Package is a step in the right direction and provides a much-needed financial lifeline in these uncertain times.

A contractor’s financial entitlement for prolongation costs under the support package is highly dependent on the success of the extension of time claim since the recovery is premised on an extension of time being awarded by the superintending offer under the PSSCOC contract. As a necessary first step, it is essential that contractors prepare and submit a detailed and fully compliant extension of time submission in order to leverage on the support package.

The governmental support measures for the construction sector are reviewed, updated and amended from time to time. With the financing support and other temporary relief measures implemented by the Singapore Government to ensure business continuity, it is hopeful that the adverse legal and financial implications for parties in the construction industry may be mitigated.

Contributed by:

Moon Kua – Associate Director, FTI Consulting

Disclaimer : The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.

FTI Consulting, Inc., including its subsidiaries and affiliates, is a consulting firm and is not a certified public accounting firm or a law firm.