Construction Comparative Guide -

1 Legal framework

1.1 Which legislative and regulatory provisions govern construction projects in your jurisdiction?

Key legislation governing construction projects in Singapore includes:

the Building Control Act, which regulates various aspects of buildings;
the Building and Construction Industry Security of Payment Act, which regulates progress payments during a construction project;
the Architects Act and the Professional Engineers Act, which respectively regulate the activities of architects and professional engineers; and
the Building and Strata Management Act, which regulates the maintenance and management of buildings.

The COVID-19 (Temporary Measures) Act 2020 provides various reliefs for construction and supply contracts impacted by COVID-19, including a moratorium against the commencement of proceedings and even adjustments of the contract sum. However, in general, only contracts entered into before 25 March 2020 can benefit from most of the reliefs available under this legislation and various statutory requirements must be met in order for its provisions to apply.

1.2 What other legislative and regulatory provisions have relevance for construction projects in your jurisdiction?

Other potentially relevant legislation includes:

the Land Titles Act or the Land Titles (Strata) Act, for issues pertaining to land titles;
the Environmental Protection and Management Act, for issues of environmental protection; and
the Employment Act and the Employment of Foreign Manpower Act, for employment-related issues.

There are also many potentially relevant regulatory provisions, which are managed by different key agencies and authorities, such as the following

The Building Control Authority deals with general construction-related issues and infrastructure-related issues;
The Public Utilities Board deals with matters relating to sewerage and drainage;
The SP Powergrid deals with matters relating to electricity;
The Land Transport Authority deals with matters relating to transportation, roads and so on;
The Singapore Civil Defence Force deals with matters relating to fire safety and civil defence;
The National Parks Board deals with matters relating to the planting of trees, parks and so on;
The National Environment Agency deals with matters relating to pollution, environment and health;
The Urban Redevelopment Authority deals with matters relating to zoning and urban development and planning;
The Singapore Land Authority, the Housing Development Board and the Jurong Town Corporation deal with matters relating to obtaining consent for the use of land; and
The Infocomm Media Development Authority deals with matters relating to info-communication facilities and services.

1.3 Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?

In general, the agencies and authorities identified in question 1.2 are responsible for supervising and enforcing the applicable laws and regulations. Certain agencies, such as the Ministry of Manpower, have their own prosecution department responsible for prosecuting offences pertaining to legislation that falls under the purview of the relevant agency.

In general, when it comes to criminal matters, the state prosecution agency will be the Attorney General's Chambers, which discharges the role of the public prosecutor. The attorney general is constitutionally empowered pursuant to Article 35(8) of the Constitution of the Republic of Singapore to institute, conduct or discontinue any proceedings for any offence.

As an example, in the recent Singapore High Court decision of Leong Sow Hon v Public Prosecutor [2021] 3 SLR 1199; [2020] SGHC 228, the offender was prosecuted for offences under Section 18(1) of the Building Control Act, punishable under Section 18(3) of the same act. This prosecution was brought against the offender by the Attorney's General Chambers.

1.4 What is the general approach in regulating the construction sector?

In general, the regulatory framework governing the built environment in Singapore is transparent and clear. Unless the issue is novel, past approvals should reasonably inform a party as to future regulatory responses.

2 Procurement methods

2.1 What procurement methods are most commonly used in your jurisdiction? Do these vary depending on whether international parties are involved?

When procurement is discussed in the sense of the process by which resources are gathered and used, and contracts are agreed for the purposes of implementing a project, the defining question is whether the project is a public one.

Public procurement is governed by:

the Government Procurement Act;
the Government Procurement (Application) Order;
the Government Procurement (Challenge Proceedings) Regulations; and
the Government Procurement Regulations 2014.

Pursuant to Regulation 23 of the Government Procurement Regulations 2014, public procurement must be by way of open tender or selective tender as prescribed, save in the exceptional situations provided for in Regulation 26 of the regulations, which permits limited tendering.

For private projects, the method of procurement is not mandated by law. Perhaps the most significant point to note is that it is fairly common for letters of intent to be issued by an employer/main contractor to a contractor/subcontractor.

Typically, such letters of intent will confirm the intent of the main contractor to engage the subcontractor, and provide for the subcontractor to commence some subcontract works while waiting for agreement to be reached on the actual contract.

The legal effect of such a letter of intent will turn on its individual provisions. Some letters of intent may have contractual effect, while others have no contractual effect at all.

For smaller construction projects, the employer may simply approach the desired contractor directly and negotiate with it on the terms – primarily pricing. In such cases, the tendering process is simple.

For larger and more sophisticated construction projects, employers may call for an open tender or a closed tender with pre-approved contractors.

2.2 What are the advantages and disadvantages of these different methods?

Please see question 2.3. When it comes to public procurement, it is not meaningful to speak of advantages or disadvantages, given that the procurement method is prescribed by statute.

2.3 What other factors may influence the choice of procurement method?

In general, under Singapore law, invitations to tender are merely invitations to treat: a binding contract is entered into only if the tender submission from the contractor is accepted by the owner.

Most comprehensive tenders do not envisage further contractual documentation to be agreed once a tender is accepted, as the tender documents will have already included all contract specifications, design intent drawings and the standard form of contract to be entered into.

While procurement issues are typically analysed from a contractual framework, it is important not to lose sight of the fact that other legislation may be potentially applicable.

For instance, the Competition Act regulates competition and abuse of dominant position in the market in Singapore. Contractors have been penalised by the Competition & Consumer Commission Singapore for bid rigging in tenders for maintenance services for swimming pools and other water features (see CCCS 500/7003/17), as well as for bid rigging in electrical and building works (see CCS 500/001/09).

3 Project structures

3.1 How are construction projects typically structured in your jurisdiction? Does this vary depending on whether international parties are involved?

In general, a less specialised client will simply engage a main contractor to manage the project under a design-and-build contract. A more specialised client may engage professionals to come up with the desired design and then engage various specialist contractors to carry out various aspects of the project. These specialist contractors may also be nominated contractors, as the client may only engage a single main contractor. In general, however, most clients for bigger projects will prefer to have a single point of contact: design-and-build contracts are common.

The presence of international contractors will not vary this analysis, save that international contractors will generally be the main contractors if they are engaged (assuming that they have the appropriate licences to carry out works in Singapore).

3.2 What are the advantages and disadvantages of these different structures?

The main advantage of the design-and-build model is that the client need only look to a single contractor for a ‘one-stop shop' solution to all its requirements. There is no need to separately engage, for example, an architect to come up with the design and perhaps another construction professional to supervise the contractor's works as the contractor progresses with construction. This also important if a dispute arises, as the contractor cannot attempt to evade responsibility by saying that the issue arose from a negligent or defective design caused by the architect.

On the other hand, the disadvantage of a design-and-build model is that the client must be confident that the design-and-build contractor can achieve the design intent. As the design-and-build contractor is responsible for the design, the client may have less say over the specific design elements as compared to the traditional model of contracting, whereby the client engages a specialist architect to come up with the design. To some extent, this may be mitigated by, for example, the client first engaging an architect to come up with an intended design and then novating that design contract to the contractor.

3.3 What other factors may influence the choice of project structure?

Another key factor that will influence the choice of project structure is the complexity and costs of the project. For simple contracts, it may not make sense to engage a design-and-build contractor, especially if there are no complex design elements.

4 Financing

4.1 How are construction projects typically financed in your jurisdiction? Does this vary depending on whether international parties are involved?

Focusing on major infrastructure projects in Singapore, financing is generally structured by way of a special purpose vehicle (SPV) structure. The Marina East Desalination Plant is an example of a project adopting this model.

A sponsor (or sponsors) will set up an SPV. The SPV will enter into a concession agreement with the government. The SPV will also engage the engineering, procurement and construction and operation and maintenance contractors. The SPV will then have to source funding and enter into facility agreements with banks or other financial institutions.

4.2 What are the advantages and disadvantages of these different structures?

The industry has found the SPV model to be very user friendly; other models are not generally utilised.

4.3 What other factors may influence the choice of financing structure?

Complexity is key. If the construction project is simple, then the SPV structure would generally not be appropriate.

4.4 What types of security and other protections are available to lenders to safeguard their position?

Lenders can safeguard their position in a variety of ways – for example, by:

assigning project bonds to lenders from day one;
requesting that guarantees be given by the parent company of a subsidiary to the lenders;
entering into various forms of security agreements over assets, such as land, plant, machinery, equipment and step-in rights; and
(for project financing) insisting that the project company has no business other than that of the project itself, so as to remove external sources of risk.

For public infrastructure projects, in the 2019 financial year, the Singapore government announced that it was adopting a policy whereby statutory boards and government companies may issue bonds to fund such projects, alongside the provision of government guarantees for some of these long-term borrowings for critical national infrastructure.

Depending on the nature of the security arrangement, certain formal requirements may need to be met and governmental consents may need to be obtained. For instance:

certain security interests created by a Singapore-incorporated company must be registered with the Accounting and Corporate Regulatory Authority; and
certain types of security over real property must be in a prescribed or approved form and be registered with the Land Titles Registry.

4.5 What law typically governs project finance agreements in your jurisdiction? Do any specific requirements apply in this regard?

Most project finance agreements for projects in Singapore are governed by Singapore law or, less commonly, English law.

Depending on the agreement, certain formalities and/or statutory and regulatory requirements may need to be fulfilled.

5 Bribery and corruption

5.1 What measures are in place to combat bribery and corruption in your jurisdiction?

Bribery and corruption are offences under the Prevention of Corruption Act (Cap 241), and offenders are severely punished. Pursuant to Section 5 of the act, the offence of corruption has two key elements – that is, person has "corruptly" solicited, received, given promised, or offered any "gratification". Under Section 2 of the act, ‘gratification' includes "money or any gift, loan, fee reward, commission" as well as "any other service, favour or advantage of any description whatsoever".

Further, the Prevention of Corruption Act has extra-territorial effect in relation to Singapore citizens and is supplemented by provisions under the Penal Code, as well as the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act.

Section 39 of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act obliges any person who knows, or has reasonable grounds to suspect, that any property represents the proceeds of, was used in connection with, or is intended to be used in connection with any act of drug dealing or a serious offence (which includes corruption) to disclose the knowledge to a suspicious transaction reporting officer as soon as reasonably practicable.

Legal practitioners in Singapore are obliged to carry out customer due diligence under the Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules 2015 and must disclose that a client may be engaged in money laundering by filing a suspicious transaction report.

6 Standard form contracts

6.1 Which standard form contracts are typically used for construction projects in your jurisdiction? Does this vary depending on whether international parties are involved?

The three most common standard form contracts in Singapore are:

the Singapore Institute of Architects Building Contract (the latest edition being the 2016 edition) (‘SIA Standard Form');
the Real Estate Developers of Singapore Design and Build Contract (the latest edition being 2010 edition) (‘REDAS Contract'); and
the Public Sector Standard Conditions of Contract (the latest edition being the 2020 edition) (PSSCOC).

In particular, most public sector projects will involve the PSSCOC or a modified version of the PSSCOC. However, some agencies – such as the Land Transport Authority – also have their own conditions of contract.

When international parties are involved, for public sector projects, the PSSCOC (or a variant) will usually still be involved. However, the SIA Standard Form and the REDAS Contract will be less commonly used.

When it comes to international projects, the most commonly encountered type of standard form will be one of the contracts of the International Federation of Consulting Engineers (typically either the Red, Yellow or Silver Book).

6.2 What are the advantages and disadvantages of using the different standard forms?

In general, save for public sector projects, most private sector projects do not use the standard forms. This is because most well-established main contractors have their own bespoke contracts for downstream contracts.

For public sector projects, if a standard form is to be used, it will be the PSSCOC or the PSSCOC with modifications. Downstream contractors generally have little to no say as to which standard form is used in general.

6.3 What other factors may influence the decision to use standard form contracts and the choice of standard form?

One possible reason for the use of standard forms is if the parties do not want to take the time to create their own bespoke contract. Again, typically, this does not happen for most construction projects, as most main contractors will have their own internal bespoke contracts.

The other reason why a party may use a standard form is if the construction project in question is not a major construction project, but instead is, for example, a simple residential project where the client is an individual who is looking to engage a contractor to conduct addition and alteration works to his or her house. In such cases, the client may wish to consider using a standard form contract.

Contract administration is an important issue when selecting a standard form. While a party may wish to rely on the standard form to allocate risks, it is important to realise that in entering into a standard form contract, the client is also taking on the administration mechanism as set out in the relevant standard form. So, for example, if the standard form selected is based on interim progress payments as opposed to milestone payments, the client must in a position to make interim progress payments.

6.4 Where standard form contracts are used, do parties typically modify their provisions?

In general, most local construction companies will not use either the SIA Standard Form or the REDAS Contract alone. It is more common to encounter bespoke contracts or contracts where the parties incorporate the SIA Standard Form or the REDAS Contract as part of the bespoke contractual documents.

However, it is extremely common to encounter the PSSCOC because almost invariably, all public sector contracts will use the PSSCOC or a modified version of the PSSCOC.

Hence, it is fair to say that most local contracting parties typically modify provisions of the standard forms.

7 Contractual issues

7.1 Is a choice of foreign law or jurisdiction valid and enforceable? In the case of a choice of foreign law of jurisdiction, will any provisions of local law have mandatory application?

A choice of foreign law or jurisdiction is valid and enforceable. The parties are free to agree:

to have their contracts governed by the laws of another jurisdiction; and
(in the case of arbitration) to have their arbitration seated in another country and to have the law of the arbitration agreement be governed by a foreign jurisdiction as well.

However, in general, while the parties may choose to have their relationship governed by foreign law, they cannot entirely opt out of all local law. Typically, matters such as regulatory and licensing issues, taxation, public health and safety requirements and so on cannot be opted out of.

7.2 What formal, substantive and procedural requirements typically apply to construction contracts in your jurisdiction? Are there any mandatory terms? What terms are typically included? Are any terms prohibited?

In general, no formal or procedural requirements are required for a construction contract. A contract can be formed if:

there is a valid offer and acceptance in exchange for valuable consideration; and
the parties have the intention of entering into a legal relationship.

However, a construction contract will usually require agreement on:

the price;
the scope of works or a description of the works; and
the time to complete the works.

While the absence of one of these terms will not necessarily mean that no agreement has been concluded, the absence of all these terms tends to suggest that the parties have failed to agree on the essential terms that are necessary to form a contract.

Other typical terms that will be included include terms addressing:

access to the site;
the specifications of the works;
the standard of workmanship;
liquidated damages and extensions of time;
variations;
termination;
provision of securities such as performance bond and retention monies;
indemnities to be given by the contractor to the employer;
insurance;
boilerplate clauses such as governing law, dispute resolution, entire agreement and so on; and
permissible amendments to the security of payment framework.

Certain terms are prohibited, such as pay-when-paid provisions or other provisions tending to prevent the operation of the Building and Construction Industry Security of Payment Act. In general, contractual terms that seek to carry out some form of illegality or offend public policy will also be prohibited and will be struck out.

7.3 How is risk typically allocated between the parties? What steps can the parties take to mitigate these risks?

Most construction contracts shift risks to the downstream contractor – typically by way of:

indemnities;
warranties;
the provision of various forms of security; and
various conditions precedent that must be met before the contractor is entitled to claim for extensions of time, loss and expense, or for additional costs arising from variations.

In addition, risks for delay are increasingly commonly shifted onto the contractor, such as by providing that in the event of a concurrent delay, the contractor is not entitled to claim for any extension of time for the period of concurrency or any extension of time at all.

Steps that can be taken to mitigate these risks by the contractor and the employer include:

collaborative contracting;
the use of appropriate project insurance to insure against risks; and
detailed negotiations on the specific risks and liabilities and who is best placed to bear such risks before entering into the contract.

7.4 How can liability be excluded or restricted in your jurisdiction? Are parties able to cap their liability?

The parties are free to contractually agree to exclude or limit liability, as long as the exclusion or limitation is not prohibited by statute or otherwise illegal. This also applies to capping liabilities; and it is not uncommon to encounter, for example, terms where the parties agree:

that the contractor's liability for liquidated damages is capped at a percentage of the contract sum; or
to limit and cap liability for indirect loss and damage.

7.5 In the event of delay to the project, what consequences will this typically have for the parties?

Where there is a delay to the project, the consequences are typically that:

the contractor will apply for an extension of time if there is a relevant extension of time clause under the contract;
the employer (or the architect or an equivalent, as the case may be) will assess the contractor's application for an extension of time; and
the employer will then grant (or refuse to grant) the contractor an extension of time.

Depending on the specifics of the dispute, if the contractor is of the view that there has been an insufficient grant of an extension of time, the contractor may choose to escalate the dispute in a few ways, such as:

mediation;
formal dispute resolution; or
reservation of its rights and continuation of the works.

In general, it is not uncommon for the parties to engage in protracted correspondence over the grant (or refusal to grant) of an extension of time for the delay. This typically culminates in either:

a final dispute resolution proceeding at the end of the project during final accounting; or
an adjudication under the Building and Construction Industry Security of Payment Act (because if an extension of time is not granted, liquidated damages are usually imposed and the aggrieved contractor will be seeking to claim for progress payments under the statutory adjudication regime).

7.6 Is the concept of force majeure recognised in your jurisdiction? If so, what are the typical implications for the parties?

In Magenta Resources (S) Pte Ltd v China Resources (S) Pte Ltd [1996] 2 SLR(R) 316, the High Court observed that what is commonly referred to as ‘force majeure' in Singapore law is "really no more than a convenient way of referring to contractual terms that the parties have agreed upon to deal with situations that might arise, over which the parties have little or no control, that might impede or obstruct the performance of the contract".

This was affirmed in RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd [2007] 4 SLR(R) 413, where the Court of Appeal made clear that the precise construction of the clause in question is of paramount importance, as it defines the scope and ambit of the clause. However, the courts will also presume that the expression of ‘force majeure' is likely to be intended by the parties to be restricted to those supervening events that arise without the fault of either party and for which neither of them has undertaken responsibility.

Typically, a force majeure clause prolongs the time for the completion of the works by being grounds for either:

an extension of time; or
the temporary suspension of the obligation to carry out works while the force majeure event subsists.

Whether any damages, loss and expense can be claimed varies depending on the contract in question. It is rare for a force majeure clause to provide that the contract will be terminated without more.

7.7 What scope do the parties typically have to make material variations to the works?

In general, the employer will have the power to order variations to the works, so long as:

there is an express clause under the contract empowering the employer to order variations; and
the variation ordered does not fall outside the ambit of the contract in question.

The first ground is readily satisfied, as most contracts will provide that the employer has the right to order a variation. The contractor will usually be entitled to claim for costs, though there will be strict conditions precedent that the contractor must fulfil to have a valid claim.

The second ground is a fact-specific inquiry that must be addressed based on the specific contract in question. Given how widely drafted most variation clauses are, it is uncommon to encounter situations where the additions to the contract works and alterations of the scope of the contract works are to such an extent that the variation would fall outside the ambit of the variation clause.

In principle, however, if, for example, the variations are such that they would properly have been the subject of a separate contract, it is likely that such variations will fall outside the ambit of the contract. In addition, omissions ordered with a view to awarding the omitted work to another contractor to carry them out at a lower price will likely be made in breach of contract, as the contractor has a right to complete the works as originally contracted.

7.8 Are there any particular requirements for completion or taking-over in your jurisdiction?

As between the contractor and the employer, technically, there are no particular requirements for completion or taking over subject to whatever provisions the parties may agree in the relevant contract.

Practically, as between the main contractor and the employer, there are various requirements that must be fulfilled when it comes to a major construction or infrastructure project. This is because the main contractor will have to ensure that the project can meet the relevant authority requirements for completion, such as the requirements to obtain a temporary occupation permit and a certificate of substantial completion from the Building and Construction Authority.

This will usually involve obtaining clearances from the relevant authorities, as mentioned earlier.

It is not uncommon for partial taking over to be effected in a construction contract.

7.9 What requirements and restrictions typically apply to the termination of the construction contract in your jurisdiction?

Typically, most termination clauses under the construction contract – regardless of whether they are termination for convenience or termination for default – will have a notice requirement. They will vary in terms of the length of the notice.

Most termination for convenience clauses will simply provide that, upon the requisite notice in writing being served, the contract will be terminated within a specified timeframe.

Most termination for default clauses, in contrast, will typically provide that written notice must first be given to call upon the defaulting party to remedy the default. If the default is not remedied within the timeframe specified in the notice (which is typically set out in the contract), the innocent party will be entitled, upon service of a separate notice, to terminate the contract. Such provisions typically will then set out the parties' respective rights and obligations.

In addition to the above scenario, the parties have the right to terminate at common law if, for example, there has been:

a repudiatory breach of the construction contract; or
a breach whose consequence is to deprive the innocent party of substantially the whole of its benefit under the contract.

This common law right will exist unless it has been expressly contracted out of by the parties; and most contracting parties in Singapore generally do not contract out of this common law right of termination.

7.10 How are delay or liquidated provisions dealt with in your jurisdictions?

Liquidated damages provisions are recognised in Singapore unless the provision in question amounts to a penalty and not a genuine pre-estimate of loss. This was confirmed in the recent Singapore Court of Appeal decision of Denka Advantech Pte Ltd v Seraya Energy Pte Ltd [2021] 1 SLR 631; [2020] SGCA 119.

The Court of Appeal held in Denka v Seraya that in Singapore, the applicable tests governing liquidated damages provision remain those laid down by Lord Dunedin in Dunlop Pneumatic Tyre Co, Ltd v New Garage and Motor Co, Ltd [1915] AC 79, instead of the legitimate interest test as set out by the UK Supreme Court in Cavendish Square Holding BV v Makdessi [2016] AC 1172.

In practice, it would not be easy for a contracting party to argue that the liquidated damages provision amounts to a penalty clause – that is, that the sum stipulated is so extravagant and unconscionable in amount in comparison with the greatest loss that could be proved to follow from the breach – as long as the liquidated damages provision in question has been drafted properly and can be said to be a genuine pre-estimate of loss.

8 Subcontractors and suppliers

8.1 Are there any particular issues which arise when dealing with subcontracts and/or subcontractors which are different from the issues discussed elsewhere?

As a practical issue, as with all construction projects, when dealing with subcontracts and subcontractors, it is important to maintain clear and open lines of communication. A failure to appreciate the subcontractor's concerns raised early in the project may sow the seeds for a major dispute later in the day.

It is also important to ensure that the scope of works is clearly defined. It is common for subcontractors to offer a slightly lower quotation to make their bids more competitive and then seek to recover costs via variations. This can be dealt with through a clearly defined scope of works coupled with careful analysis of the various quotations/bids put forward by the subcontractor. Something which is often overlooked is the fact that the project team is seldom involved in the subcontract negotiations. A business development team often may not appreciate the full extent of the works to be done until the project team takes over.

8.2 Are there nominated subcontractors in your jurisdiction?

Nominated subcontractors are common in Singapore. For example, the Public Sector Standard Conditions of Contract (PSSCOC) have a supplement – the Standard Conditions of Nominated Sub-Contract 2008 – which is meant to be used together with the PSSCOC in situations involving nominated subcontractors.

9 Payment

9.1 Are there any statutory or other requirements which govern how parties are paid?

The key legislation governing payments for construction contracts in Singapore is the Building and Construction Industry Security of Payment Act.

This is a security of payment law that is intended to preserve cash flow in the construction industry by ensuring that contractors have a right to claim for progress payments and enforcing the same through the establishment of a fast, low-cost adjudication regime.

The legislation operates around the key documents, being the payment claim and the payment response (payment certificate). The payment claim delineates the claim amount that may be brought to an adjudication; while the payment response and its contents effectively restrict the defences that may be raised in an adjudication application. Failure to serve a payment response to a payment claim will invariably and severely prejudice the defence of any relevant adjudication application.

Section 36 of the Building and Construction Industry Security of Payment Act also provides that the act will have effect notwithstanding any contractual provisions to the contrary; and any provisions that, for example, seek to exclude or modify the operation of the act will be void.

9.2 Are ‘pay when paid' clauses valid? In what circumstances?

Pursuant to Section 9(1) of the Building and Construction Industry Security of Payment Act, a ‘pay when paid' provision is "unenforceable and has no effect in relation to any payment for construction work carried out or undertaken to be carried out, or for goods or services supplied or undertaken to be supplied, under the contract".

Section 9(2) of the act defines a ‘pay when paid' provision. Of particular importance is Section 9(2)(c), which defines a ‘pay when paid' provision as any provision of the contract that "makes the liability to pay money owing, or the due date for payment of money owing, contingent or conditional on the operation of any other contract or agreement".

By way of example, it has been held in adjudications under the Building and Construction Industry Security of Payment Act that provisions which have the effect of conditioning that the release of a moiety of retention moneys by a contractor to the subcontractor on the contractor obtaining a certificate of substantial completion from the employer will fall foul of Section 9 of the Building and Construction Industry Security of Payment Act.

9.3 How are retentions typically dealt with?

Retentions are typically dealt with by the parties as an express term of the contract. In general, a fairly common practice is for the parties to agree that the retention sum is set at 5% of the original contract sum, with 10% of each interim progress payment to be withheld as retention until the 5% limit has been reached.

These retention moneys will then typically be released in two moieties. The first moiety is typically released when the contract works are substantially completed (and is fairly commonly linked to the issuance of a certificate of substantial completion), with the second moiety typically released at the end of the defects liability period.

10 Health and safety

10.1 What key health and safety requirements apply to construction projects in your jurisdiction?

A variety of health and safety requirements are laid down by the various authorities. Key health and safety requirements are typically set by the Building and Construction Authority and the Workplace Safety and Health Council; although, depending on the relevant works, there may be additional requirements that an employer/contractor will have to comply with.

Key laws include:

the Workplace Safety and Health Act (Cap 354A), which regulates the safety, health and welfare of persons working in the workplace, as supplemented by the Workplace Safety and Health (Construction) Regulations 2007; and
the Work Injury Compensation Act 2019, which deals with compensation for injury suffered in the workplace.

COVID-19 has seen the introduction of many additional health and safety requirements in the construction industry. These are termed ‘safe management measures' by the Building and Construction Authority, and include measures such as rostered routine swab tests, cohorting requirements in relation to the accommodation of workers and so on.

10.2 What reporting requirements apply with regard to construction site accidents in your jurisdiction?

Pursuant to the Workplace Safety and Health (Incident Reporting) Regulations, the employer must report any accident that leads to the death of any employee, and a duty for the occupier of a workplace must report the death of any person who is not at work or a self-employed person, to the commissioner for workplace safety and health as soon as reasonably practicable, and submit a report not later than 10 days after the accident.

There is also a duty to notify the commissioner for workplace safety and health of a dangerous occurrence as soon as reasonably practicable, with a report to be submitted not later than 10 days after the occurrence.

A similar mechanism applies for:

any accidents that lead to injuries if the employee:
- meets with an accident at a workplace on or after 1 September 2020; and
- "is certified by a registered medical practitioner or registered dentist to be unfit for work, or to require hospitalisation or to be placed on light duties, on account of the accident"; and
any occupational disease that is specified in the Second Schedule to the Workplace Safety and Health Act.

The form and manner of reporting is set out in the Workplace Safety and Health (Incident Reporting) Regulations, and the obligation is to make a notification "in such form and manner as set out at the website http://www.mom.gov.sg/iReport".

10.3 What are the potential consequences of breach of these requirements – both for the contractor itself and for directors, managers and employees?

Pursuant to the Workplace Safety and Health (Incident Reporting) Regulations, it is an offence for any employer or occupier to contravene the reporting obligations as set out in the Workplace Safety and Health (Incident Reporting) Regulations. A first offender is liable on conviction to a fine not exceeding S$5,000; and second and subsequent offenders are liable to a fine not exceeding S$10,000 or to imprisonment for a term not exceeding six months or to both.

Pursuant to Section 48 of the Workplace Safety and Health Act, where an offence has been committed by a body corporate under the act, an officer of that body corporate will also be guilty of the offence and is liable to be prosecuted and punished, unless:

the offence was committed without the officer's consent or connivance; and
the officer has exercised diligence to prevent the commission of the offence.

The term ‘officer' has been defined to include "any director, partner, member of the committee of management, chief executive, manager, secretary or other similar officer of the body corporate and includes any person purporting to act in any such capacity".

In addition to the penalties under the Workplace Safety and Health (Incident Reporting) Regulations, pursuant to Section 60 of the Workplace Safety and Health Act, an errant employer (and/or its employees) may be exposed to civil proceedings.

10.4 What best practices in relation to health and safety should construction contractors consider adopting in your jurisdiction?

The Ministry of Manpower and the Building and Construction Authority have issued various codes of practice for compliance. Best practices are to comply with these codes of practices as well as any other relevant guidelines. There are many companies that provide health and safety services to the construction industry – for example, safety officers.

10.5 Which bodies are responsible for enforcement of health and safety obligations?

In general, health and safety obligations will be enforced by the Workplace Health and Safety Council under the Ministry of Manpower and/or the Building and Construction Authority.

10.6 What is the general approach in regulating the construction sector from a health and safety perspective?

The regulatory authorities strictly enforce health and safety laws and regulations. Infringements leading to injuries or death invariably invite an immediate stop work order at the site and follow-up prosecution by the relevant authorities.

11 Environmental and sustainable development issues

11.1 What environmental authorisations are required for construction projects in your jurisdiction? Do these vary depending on the type of project or the location of the site?

For construction projects involving existing buildings, Part IIIB of the Building Control Act sets out various requirements. Owners of the buildings must:

comply with certain minimum environmental sustainability standards;
submit periodic energy efficiency audits; and
submit certain required information such as those in respect of energy consumption to the commissioner of building control.

The Building Control (Environmental Sustainability Measures of Existing Buildings) Regulations also sets out various environmental sustainability measures.

In addition, the Building Control (Environmental Sustainability) Regulations 2008 apply to:

building works for new buildings which involve a gross floor area of 2,000 square metres or more;
building works which involve increasing the gross floor area of an existing building by 2,000 square metres or more; or
building works relating to an existing building which involve a gross floor area of 2,000 square metres or more.

If the construction project meets these requirements, the Building Control (Environmental Sustainability) Regulations 2008 will apply, unless the building works consists only of repairs or alterations that do not involve the provision, extension or substantial alteration of the building envelope and building services.

The effect is that the building works must then meet certain environmental requirements by achieving a minimum score or certification, with different requirements applicable depending on factors such as the location of the land and whether the building is residential.

There are other potentially relevant environment regulations depending on the nature and size of the construction project.

11.2 What is the process for obtaining environmental authorisations?

The requirements for environmental sustainability are integrated into the overall process for the submission of building plans and the obtaining of a temporary occupation permit from the Building and Construction Authority. The submission requirements and the process are regulated by the Building and Construction Authority, and the relevant information can be accessed from its website at www1.bca.gov.sg/regulatory-info/legislation-on-environmental-sustainability-for-buildings.

11.3 What environmental requirements must the contractor observe while the site is operational?

In general, noise and light pollution, cleanliness and mosquito vector control are some of the minimum requirements to be observed from an environmental regulatory perspective.

11.4 What are the potential consequences of breach of these requirements – both for the contractor and for directors, managers and employees?

Where there is a breach of the Building Control (Environmental Sustainability) Regulations 2008, the penalty under the regulations is that the person will be liable on conviction to a fine not exceeding S$10,000.

Depending on the facts, a breach of the subsidiary legislation under the Building Control Act or a breach of Part IIIB of the Building Control Act may entail a breach of Section 5 (application for approval of plans of building works) or 5A (deviations from approved building plans) of the Building Control Act.

If so, offences may be established under Section 20(1), 20(2) or 20(3) of the Building Control Act, as the case may be. These are serious offences, punishable by fines ranging from S$20,000 to S$200,000, imprisonment for between 12 months and two years, or both.

Section 31 of the Building Control Act further provides that where an offence is committed under the act or any subsidiary legislation made thereunder, every officer of the body corporate will also be guilty of the offence and will be liable to prosecution and punishment, unless the statutory exceptions can be established.

The making of false declarations and information is a separate offence that is governed by Section 43A of the Building Control Act, with a liability upon conviction of a fine not exceeding S$20,000, imprisonment for up to 12 months or both.

11.5 What environmental requirements apply to new buildings?

Please see questions 11.1 and 11.2. In brief, the relevant environmental requirements are generally set out in detail by the Building and Construction Authority.

11.6 Which bodies are responsible for enforcement of environmental obligations?

In general, the Building Control Authority is responsible for the enforcement of environmental obligations. However, the National Environment Agency is also commonly involved for issues such as vector management in relation to mosquito breeding at construction sites.

11.7 What is the regulators' general approach in regulating the construction sector from an environmental perspective?

Policies are open and clear, with past approvals generally guiding future actions.

11.8 What is the impact of Net Zero in your jurisdiction?

Singapore has set out a whole-of-nation movement to advance its agenda on sustainable development as set out in the Singapore Green Plan 2030. The plan has five pillars:

City in Nature;
Energy Reset;
Sustainable Living;
Green Economy; and
Resilient Future.

The Singapore Green Plan 2030 seeks to:

increase and improve energy efficiencies in buildings;
cease new registrations of diesel cars and taxis from 2025;
set up chargers for electronic vehicles in 8 EV-Ready Towns;
increase the amount of greenery; and
increase the share of trips taken on mass public transport as well as the coverage of rail network.

Details can be found at www.greenplan.gov.sg/.

12 Insurance

12.1 What types of insurance arrangements - whether compulsory or optional - are typically put in place for construction projects in your jurisdiction?

In most construction projects in Singapore, the employer will require the contractor to take up, or will itself take up, the following policies:

a contractor's all risks policy; and
a work injury compensation policy.

If the contractor is the party taking up the policies, most employers will also typically require:

that the policies be procured from specified approved insurers; and
that the contractor ensure that all subcontractors will effect and maintain such policies as are necessary with respect to the subcontracted works, unless the risks are covered by either the contractor's all risks policy or the work injury compensation policy.

If the employer is the party taking up the policies, most employers will also require the contractor to take up such additional insurance policies as are required to cover any risks beyond the scope of those covered in the policies taken by the employer, to ensure that the employer is fully indemnified for any risks that may result from the contractor's obligations under the relevant contract.

In addition, and more generally, pursuant to the Work Injury Compensation Act 2019, it is a mandatory requirement for all employers to insure and maintain insurance under one or more approved policies with designated insurers against all liabilities that they may incur under the Work Injury Compensation Act 2019. A contravention of this requirement is an offence and exposes the employer to a fine, imprisonment or both, with more severe sanctions for repeat offenders.

12.2 If local insurance is required, can local insurers assign reinsurance contracts in your jurisdiction?

Yes.

12.3 Is it possible to obtain insurance for fitness for purpose design obligations?

Most insurance policies will exclude liability in respect of a fitness for purpose design obligation. Many contractor's all risks insurance policies will also exclude, or at least limit, liability for defective design and workmanship. Insurance for fitness for purpose obligations is uncommon and, if procured, is normally obtained out of Singapore.

12.4 What other forms of insurance feature in construction projects in your jurisdiction?

Other forms of insurance that commonly feature in Singapore construction projects include:

professional indemnity insurance taken out by construction professionals; and
insurance to cover any exclusions in the relevant contractor's all risks insurance policy.

13 Employment

13.1 What legislation must employers and contractors be aware of when hiring labour?

When hiring labour, the two key laws that employers and contractors must be aware of are:

the Employment Act; and
the Employment of Foreign Manpower Act.

The two laws deal with employment matters for local and foreign manpower, including key issues such as:

salary requirements;
leave requirements; and
any mandatory restrictions on working days.

Each of these laws is supplemented by various subsidiary legislation that further set out various details on matters such as:

applying for a work pass for foreign employees; and
the amounts payable for foreign employees.

14 Tax

14.1 What issues must be considered from a taxation perspective in relation to construction projects in your jurisdiction?

In general, the taxation issues facing construction companies should not differ significantly from those facing other companies, with necessary adjustments to be made bearing in mind that:

most construction companies:
- tend to involve many staff in the form of foreign workers; and
- need to maintain good accounting practices, bearing in mind the multitude of supplies; and
the supply of goods and materials may (and in general will) include goods and materials shipped from overseas.

14.2 Are any exemptions or incentives available to encourage construction in your jurisdiction?

There are certain schemes through which contractors may be able to obtain tax relief. For example, applicants that meet the requirements for the Investment Allowance Scheme (IAS) may receive tax relief on approved capital expenditure. Another example is the Land Intensification Allowance (LIA). Companies that qualify for LIA may claim qualifying capital expenditure incurred on the construction of a qualifying building or structure.

14.3 What strategies might parties consider to mitigate their tax liabilities in the construction context?

The Singapore government periodically grants tax incentives to promote the advancement of the construction industry. Such incentives are published by the Building and Construction Authority on its website at www1.bca.gov.sg/buildsg/productivity/other-incentives-scheme.

15 Technology

15.1 How is Building Information Management (BIM) dealt with in your jurisdiction? Does the government mandate any particular BIM standards or other requirements?

While many smaller construction contracts still do not address BIM-related issues, the Building and Construction Authority, together with the Ministry of National Development, has issued the Singapore BIM Guide (currently in its second version) as a reference guide for the development of a BIM execution plan.

The BIM guide seeks to outline the deliverables, processes and parties that are involved when BIM is used in a construction project. It can be used together with the BIM Particular Conditions promulgated by the Building and Construction Authority together with the Ministry of National Development to allocate various responsibilities contractually.

In addition, for larger construction projects – such as those for new developments of over 20,000 square metres – BIM e-submission (ie, electronic submission) is mandatory (eg, see Circular APPBCA-2015-07 issued on 15 April 2015 by the Building and Construction Authority).

15.2 Are smart contracts used in your jurisdiction? Are there any special restrictions or regulations?

In general, a ‘smart contract' is a programme where the parties have agreed and coded into the programme that upon the occurrence of certain events, certain pre-agreed actions will automatically ensue as part of their agreement. In general, smart contracts are not commonly encountered.

Depending on the type of smart contract and the transaction involved, potentially relevant laws will include:

the Personal Data Protection Act (in terms of the protection of personal data);
the Payment Services Act 2019 (eg, if the payment involves the use of digital payment tokens); and
the Securities and Futures Act (although this is less likely to be relevant to construction contracts).

The legal requirements for the formation of a contract must be met for smart contracts to be valid – for example, if there was no offer and acceptance, the smart contract will fail. Moreover, given that smart contracts are supposed to execute automatically, there may be potentially legally complicated issues if, for example, an event occurs that is not coded.

15.3 What developments in digital technology do you see having a major impact on the construction industry?

Advances in artificial intelligence (AI) and machine learning will almost certainly have an impact on the construction industry. It is not difficult to foresee that advances in technology will replace presently repetitive human-intensive jobs with AI-powered robots; examples might include concrete pouring, welding, bricklaying and demolition and clearance jobs.

16 Disputes

16.1 In which forums are construction disputes typically heard in your jurisdiction?

The most common forum for construction disputes is adjudication under the Building and Construction Industry Security of Payment Act.

Final dispute resolution normally takes place through arbitration.

Other common forums include litigation before the Singapore courts.

16.2 What issues do such disputes typically involve?

Most construction disputes in Singapore typically involve issues of payment and disputes over the quantities of work done. Such disputes typically centre on issues concerning variations, such as:

whether there has been a valid variation under the construction contract;
where the conditions precedent have been satisfied; and
how to value the variations.

The other common types of disputes are time-related disputes. These generally come in the form of liquidated damages levied by the employer against the contractor, and will thus involve disputes over what (if any) extensions of time should have been granted to the contractor. It is also not uncommon to encounter claims for prolongation costs by the contractors in such disputes.

16.3 How are disputes typically resolved?

Most disputes are resolved through adjudication under the Building and Construction Industry Security of Payment Act, as this is the quickest way of resolving disputes. Depending on the nature of the dispute, as well as the quantum involved, the parties may or may not reach a settlement after the adjudication process is over. If settlement is not reached, the parties will typically proceed to final dispute resolution by way of litigation or arbitration.

16.4 Is the use of alternative dispute resolution common and/or encouraged by legislation or the courts?

The use of alternative dispute resolution (ADR) is generally encouraged both under legislation and by the courts. The Singapore government actively encourages parties to resolve disputes amicably, as is reflected in the Singapore Convention on Mediation. While this does not affect construction disputes between local entities, the position of the Singapore government is clear.

If the parties opt for litigation, Order 59, Rule 5(c) of the Rules of Court provides that the court has the power to take into account the parties' conduct in relation to any attempt to resolve the dispute by way of ADR when exercising its discretion in relation to costs.

16.5 Is the use of dispute boards common in your jurisdiction?

Currently, for local construction projects, the use of dispute boards is still not common. However, we expect to see more use of dispute boards in the future. For instance, the Singapore Infrastructure Dispute-Management Protocol 2018 (SIDP) was established in 2018 as an opt-in protocol and is recommended for projects of more than S$500 million in value. Authorised appointing bodies for the SIDP are the Singapore Mediation Centre and the Singapore International Mediation Centre.

16.6 Have there been any recent cases of note?

One important recent case of note is the Singapore Court of Appeal decision in Diamond Glass Enterprise Pte Ltd v Zhong Kai Construction Co Pte Ltd [2021] SGCA 61, delivered on 21 June 2021.

In brief, the Court of Appeal held that if a successful claimant under an adjudication determination obtained under the Building and Construction Industry Security of Payment Act obtains an order to enforce the adjudication determination as an order of the court and subsequently applies to wind up the respondent, the respondent cannot challenge the winding up by disputing the adjudication debt.

However, the respondent can challenge the winding up by showing, on a prima facie standard, the existence of a justiciable cross-claim that is likely to equal or exceed the claim, provided that the cross-claim being raised is not an abuse of the court's process.

17 Trends and predictions

17.1 What has been the impact of the COVID-19 pandemic on construction in your jurisdiction?

The COVID-19 pandemic has impacted on the construction industry by driving up material and labour costs. While the Singapore government has stepped in to assist the built environment sector through a number of relief initiatives, including the COVID-19 (Temporary Measures) Act, many construction companies have faced – and continue to face – both cash-flow issues and issues with completing projects on time.

17.2 How would you describe the current construction landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Given the ongoing COVID-19 pandemic, the construction landscape remains challenging for contractors. However, given the Singapore government's stance that COVID-19 is now endemic and the high rates of vaccination in Singapore (and the even higher rates in the construction sector), we would not expect a return to lockdown, barring extreme circumstances. However, we also expect that routine testing and strict site safety management measures will remain in place for the foreseeable future, which will have implications in terms of both costs and productivity for the construction sector.

On 23 September 2021, the Building and Construction Authority issued a circular on the adoption of pandemic-resilient contracting practices for public sector projects which provides, among other things, that the Public Sector Standard Conditions of Contract (PSSCOC) will be amended to specifically recognise pandemics as grounds for:

extensions of time; and
co-sharing between the employer and the contractor for loss and expense (as defined under the PSSCOC) arising from additional costs due to compliance with government or statutory or public authority measures in relation to pandemics.

The circular also suggests that private sector contracts should:

allow contractors to claim for extensions of time due to delays caused by pandemic events; and
set aside provisional sums to cater for ‘known unknown' costs arising from pandemics, as well as ‘unknown unknown' costs.

Finally, on 29 September 2021, the Building and Construction Authority issued another circular announcing that the prescribed period for relief under the COVID-19 (Temporary Measures) Act for construction and supply contracts would be extended until 31 December 2021.

18 Tips and traps

18.1 What are your top tips for smooth completion of construction projects in your jurisdiction and what potential sticking points would you highlight?

The top tips for smooth completion of construction projects are as follows:

Actively manage disputes and potential disputes as and when they arise;
Make your claims on time;
Keep proper records; and
Issue a proper payment response.

It is important to try to resolve disputes as and when they arise, because the longer a dispute is left unresolved, the more likely it is to snowball. This can have severe time and cost implications.

Further, claims should be made on time as required under the contract. We frequently encounter claims for variations or extensions of time that are not made in accordance with the contractual requirements, which in turn leads to lengthy disputes over whether the conditions precedent have been met or have been waived. This is also linked to issuing proper payment responses: failure to include an objection in a payment response, or to issue a payment response at all, can have severe implications under the Building and Construction Industry Security of Payment Act.

This brings us to the need to keep proper records. While it may seem trite, contractors sometimes do not keep proper records or fail to issue correspondence to record key events that have transpired. Those failures can cause, and have caused, major difficulties should formal dispute resolution proceedings commence.

Lastly, read and check the contract carefully. We have encountered situations where the parties do not discover until during formal dispute resolution proceedings that the wrong drawings were enclosed or that the scope of work remains unclear because the tender drawings and the contract terms have failed to address certain items.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Singapore: Construction Comparative Guide