2nd Reading Speech by Minister Desmond Lee on COVID-19 (Temporary Measures) (Amendment No. 3) Bill

Tuesday, 3 November 2020

Introduction

The Built Environment sector builds our homes and workplaces, lays our roads and rail, and creates our recreational spaces such as parks and sports facilities, and much much more. But the sector, especially construction, has been hit very hard by the COVID-19 pandemic. Construction ground to a complete halt during the Circuit Breaker period. After the Circuit Breaker, projects could not restart immediately as the dormitories took some time to be cleared. Without any work done, payments were delayed, and consultants and builders faced serious cashflow problems. Border restrictions also disrupted supply chains and some workers were stuck outside Singapore. Within Singapore, many of our migrant workers were locked down in the dormitories due to COVID-19. Home buyers and business owners were also impacted as their premises under construction were delayed and many had to make alternative arrangements meanwhile.

As the impact of a total shut down of construction activity was unprecedented and the situation was evolving very rapidly, we had to have very frequent meetings between agencies and industry associations and ground visits. This allowed us to better understand ground realities and adjust our restart measures accordingly.

To prevent a collapse of the entire industry, we had to intervene very significantly – through providing financial assistance, foreign worker levy waivers and rebates, and putting in place legislation. This Bill seeks to provide further support to stakeholders to ensure that no one in the Built Environment sector has to bear a disproportionate share of the burden brought about by the pandemic. So please consider the measures being proposed today, not in isolation, but as part of a whole series of interventions and trade-offs along the length and breadth of the entire Built Environment value chain – affecting but at the same time also supporting buyers, developers, consultants, builders, sub-contractors and suppliers. With these and the other measures in place, we hope the sector can adapt and adjust to the new operating environment, recover quickly from the pandemic and preserve industry capacity.

Main Contractors, Sub-contractors and Suppliers

Before diving into the provisions of today’s Bill that are pertinent to the Buillt Environment sector, let me first sketch out the measures that we have already put in place to support main contractors, sub-contractors and suppliers. Beyond supporting salaries of local employees through the Jobs Support Scheme, and providing significant foreign worker levy waivers and rebates, we have extended a $1.36 billion construction support package to construction firms. Through the COVID-19 (Temporary Measures) Act, firms also have temporary relief against stipulated legal action. In addition, the Act also provides a defence against breach of contract and damages due to COVID-19 for the construction and supply contracts that they are parties to. This means that developers cannot claim damages from their contractors for a delay that is assessed to be due to COVID-19. Part 8 of the Act also provides a mechanism for firms to seek relief from additional rental costs that are incurred due to construction delays caused by COVID-19. This means that contractors who had rented equipment during the Circuit Breaker, but who were unable to use this equipment as no work was on-going, can apply for an equitable adjustment of the rental costs that they must pay to the suppliers.

Developers and Purchasers

The Built Environment value chain is very much inter-connected, and the impact to our construction sector has a cascading effect on the entire value chain. Developers have to deal with project delays and the increased costs for their projects. As projects are delayed, homebuyers and businesses may have to incur additional rental and other costs while waiting for their new homes and premises to be ready.

Hence, the Government has also provided relief to developers and purchasers. For developers, we provided an extension on the Project Completion Period and Additional Buyer’s Stamp Duty remission timelines. To protect purchasers, we prohibited developers from withholding or forfeiting any part of the booking fee paid by purchasers under the Option to Purchase during the relief period, unless determined otherwise by an Assessor. Developers could not terminate agreements for sale and purchase of property with the buyers on the basis of the buyer’s non-payment, nor increase interest rates or impose new charges without buyers’ agreement, during the relief period. We also capped the late payment interest or charges under the agreements for sale and purchase of property.

Progress Made

Together, we have made progress in restarting construction. Almost all construction works have restarted. We completed the clearance of the dormitories in August this year. And since then, COVID-19 infection amongst our workers in dormitories has come down significantly. Now, on a daily basis, there are very few infection cases, if any.

To prevent a resurgence, we have also taken measures to strengthen our defence against COVID-19. In October 2020, we completed the cohorting of workers in dormitories, so they stayed together with colleagues from the same firm, instead of mixing with workers from other firms. We are also giving out 450,000 BluePass tokens, which will allow us to better conduct contact tracing of COVID-positive cases, and to more surgically quarantine those who have been in close contact, instead of casting an overly-wide quarantine net. We have implemented the BuildSG-COVIDSafe Platform for better worksite access control and data-driven audit and inspection.

While we have made progress, the construction sector is far from being out of the woods. The threat of resurgence continues to loom, and the sector will grind to a halt again if we are not careful. We also continue to receive feedback that the sector is still facing challenges. Labour cost has increased due to a lack of supply of new migrant construction workers. Projects continue to face delays as productivity has dropped due to the necessary safe management measures in place at construction sites.

Mr Speaker Sir, it is in this context that we need to provide further support to the Built Environment sector, so that no one segment of the value chain bears a disproportionate portion of the overall burden. Let me briefly run through the proposals in turn.

Universal Extension of Time

First, Part 8A of the Bill will provide a universal Extension of Time or EOT of four months for construction contracts. Members may ask why four months, why this number? First, from 7 April to 1 June 2020, construction works stopped for approximately two months due to the Circuit Breaker period. Second, works were further delayed by at least another two months as all dormitories were only cleared in early August 2020.

This universal EOT will reduce the administrative burden for contractors so that they can focus on restarting and ramping up work quickly and safely, and adjusting to the new measures required. For contractors who wish to seek a longer EOT beyond the four months, they can negotiate with developers or rely on contractual provisions. Alternatively, contractors can also serve a Notification for Relief on the developer as a defence under Section 6 of Part 2 of this Act, to disregard any liquidated damages payable under the contract due to delays.

Co-sharing of Additional Cost due to Delays

Next, let me go through Part 8B of the Bill, which will require the built environment value chain – from builders to contractors to sub-contractors, to co-share additional costs due to delays in the project caused by COVID-19. For example, some contractors will need to rent machinery like tower cranes for a longer period, as works have been delayed. The Bill will allow contractors or sub-contractors to claim part of these costs from their clients through regular progress payment claims. The amount will be either 50 per cent of the total qualifying cost for anything done for, or provided to, or enjoyed by the clients in the specified period, or 0.2 per cent of the contract sum, whichever is lesser. But the total amount that can be claimed under this mechanism is capped at 1.8 per cent of the contract sum. This will ensure contracting parties co-share a fair amount of these additional costs.

In cases of disputes, contractors can submit an adjudication application under the existing Building and Construction Industry Security of Payment Act or SOPA Framework. The appointed SOPA adjudicator will be able to determine whether the relief applies, and if it does, he will then determine the amount to be co-shared between the parties.

Extension to Date of Delivery of Possession

Mr Speaker, finally, let me move on to Part 8C.

As I described earlier, developers are also facing difficulties on their end. Even as they are required to provide the EOT to contractors and co-share additional costs of the delay in Parts 8A and 8B respectively, they remain liable to deliver the units to purchasers according to the deadlines set in their sale and purchase agreements entered into prior to the pandemic. It is in the interest of developers for projects to be completed in a timely manner, and they have been working closely with contractors to do so, while ensuring compliance with COVID-safe measures. However, there may be some instances  where they are unable to meet the committed delivery date due to unexpected delays caused by the COVID-19 situation.

We have been encouraging developers who are unable to meet the date of delivery to first discuss with their purchasers and come to a workable and mutually agreeable arrangement. 

For developers who are unable to come to an arrangement and require help, the Bill will allow them to seek relief on the date of delivery of possession. Under Part 8C, developers who have faced construction delay due to COVID-19 and require relief may serve a notice for an extension of the delivery date by up to 4 months, in line with the extension of time for construction projects. Should the developer need relief of more than 4 months, they will be required to seek an assessor’s determination of the length of construction delay materially due to COVID-19.

Let me assure this House that as we provide relief to developers, we recognise that purchasers face challenges on their end as well.

Hence, we want to support purchasers who have had to incur out-of-pocket costs due to the delay in delivery of the unit. For example, some purchasers may have had to rent accommodation or find alternative premises during the period of delay. As such, purchasers may seek reimbursement from the developer for these actual costs, up to a cap of 70% of the original liquidated damages that would have been payable to the purchaser for the delay, based on the terms in the agreement for the purchase of the property. For HDB flats, purchasers can similarly claim up to 70% of the prescribed LD formula, which will be aligned with that of the formula stated in the Housing Developers Rules for private residential properties. This allows for co-sharing of such costs between the developer and purchaser. And if there is any dispute, the parties can seek an assessor’s determination.

Conclusion

Mr Speaker Sir, to sum up, COVID-19 has been an unprecedented challenge to the entire Built Environment sector. The sector has been brought to its knees, and it is slowly standing up again, adjusting to a totally new operating environment.

In this regard, stakeholders of the sector continue to face significant financial and possibly legal burdens due to COVID-19. Parts 8A to 8C of the Bill will help alleviate the hardship faced by these stakeholders. The aim of the amendments is to share the burden amongst the stakeholders while providing relief, to allow us to get through the crisis together. Beyond the Bill, MND will continue to work with the stakeholders to help the Built Environment sector recover, and preserve industry capacity for us to continue building and improving Singapore.