Amended law allows for fairer sharing of Covid-19-induced construction costs

The supply of foreign workers has effectively dried up after the government placed a ban on new arrivals. PHOTO: ST FILE

SINGAPORE - Construction firms here can soon apply to the authorities to seek adjustments to contract sums, after the law was amended so that project partners will more equitably share in increased foreign manpower costs resulting from Covid-19.

"This is to ensure no single stakeholder group in the construction industry bears an undue share of the burden imposed by Covid-19," said National Development Minister Desmond Lee in his speech on the amendment to the Covid-19 (Temporary Measures) Act that was passed in Parliament on Tuesday (May 11).

Mr Lee noted that construction projects involve many parties, often in "long, interlocking contractual value chains", with the implication that should one party fail, the entire project might be put at risk.

The supply of foreign workers, which had already shrunk over the past year because of pandemic restrictions, has effectively dried up after the Government placed a ban on new arrivals from countries like India and Bangladesh due to surging Covid-19 cases in those countries.

Median wages for construction work permit holders in March were 15 to 30 per cent higher than in pre-Covid-19 times due to competition for the limited supply of workers. This has affected both new and ongoing projects, said Mr Lee.

While the amended Act allows contractors to seek monetary relief from their project partners for the Covid-19-induced spike in foreign worker wages that have not been priced into ongoing construction projects, it can only be invoked after a negotiation has been attempted.

Mr Lee encouraged all affected parties to "negotiate with each others in good faith", before triggering the process, where an assessor will determine the loss suffered and decide on an adjusted sum.

Responding to Leader of the Opposition Pritam Singh (Aljunied GRC), who asked if BTO prices will be affected, Mr Lee said prices of BTO flats that have been sold will not change. He noted that BTO flats are not priced to recover construction or land cost.

"Certainly (flat construction) will cost more as a whole, but this is not a factor in determining the price we set for BTO flats," he said.

Responding to Mr Louis Ng (Nee Soon GRC) and Mr Henry Kwek (Kebun Baru SMC), he said the Government is open to looking at allowing in construction workers from different source countries, such as Myanmar and Thailand, to alleviate the current manpower crunch.

But he said the Covid-19 situation in these countries must also be taken into consideration, as well as the industry's demand for workers from these countries, given language and other barriers.

Mr Kwek also suggested extending the additional buyer's stamp duty (ABSD) remission timeline to relieve pressure on developers, which are now expected to pay more for ongoing projects.

Mr Lee said an earlier 12-month extension of the project completion period and ABSD remission has been provided, although the Government will monitor the impact and take further steps as necessary.

Mr Lee acknowledged that foreign workers levy rebates, cost-sharing and grants are "stop-gap measures" that are not sustainable in the long run, which shows the importance of pressing on with efforts to transform the sector.

"We need to work closely with the industry to transform the sector to become more productive to grow local jobs and to reduce the overall reliance on low-skilled foreign manpower for longer term resilience and sustainability," he said.

But the amendment to the law is aimed at helping construction firms here deal with a severe manpower crunch and cost increases that are beyond what companies could have predicted.

The updated law nudges project partners to have a dialogue on equitable cost-sharing, beyond which there is a framework that allows for adjudication, he said.

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