SINGAPORE Law and Practice Contributed by: Benjamin Tay, Chou Ching, Norman Ho, Vikna Rajah, Chun Kiat and Marcus Tay, Rajah & Tann Asia
specific development requirements frequently specify design-and-build delivery. 7.2 Assigning Responsibility for the Design and Construction of a Project Under a traditional procurement route, the employ - er engages a professional design team (architect, structural engineers and mechanical, electrical and plumbing (MEP) engineers) separately from the main contractor. The design team is responsible for design, and the contractor is responsible for constructing the works in accordance with the design. Responsibility for design defects lies with the design team, while construction defects are the contractor’s responsibil - ity. Under a design-and-build arrangement, design and construction responsibility is unified in the contrac - tor. The employer’s requirements document defines the scope, and the contractor develops and executes the design to meet those requirements. This simplifies the allocation of responsibility but places a premium on the quality of the employer’s requirements and the robustness of the contractor’s design development process. Management contracting and construction manage - ment arrangements are less common in Singapore but are used for complex or phased projects where early contractor involvement in the construction pro - gramme is advantageous. 7.3 Management of Construction Risk Construction risk in Singapore is managed through a combination of contractual provisions and insurance. Key contractual devices include: • indemnities from the contractor in favour of the employer for third-party claims arising from the contractor’s works; • performance bonds provided by the contrac - tor’s bank or surety, typically at 5% to 10% of the contract sum, cashable on demand or on proof of contractor default; • retention as a percentage of each progress pay - ment withheld until practical completion and the
• limitations of liability capping the contractor’s aggregate liability under the contract, often exclud - ing consequential or indirect losses. Limitation of liability clauses are enforceable in Sin - gapore, subject to the Unfair Contract Terms Act and the requirement that they be reasonable in the circum - stances. Exclusion of consequential loss is standard practice in commercial construction contracts. 7.4 Management of Schedule-Related Risk Schedule risk in Singapore construction contracts is primarily managed through liquidated damages (LD) clauses, which provide for a pre-agreed daily or week - ly sum to be deducted from payments due to the con - tractor for each day of delay beyond the contractually agreed completion date. LD clauses are enforceable in Singapore, provided the pre-agreed sum is a genuine pre-estimate of the employer’s loss and not a penalty. Singapore courts apply the test of whether the amount was a genuine pre-estimate at the time of contracting. Extension of time provisions allow the contractor to claim additional time – but not additional money – for delays caused by specified neutral events such as exceptionally adverse weather, variations ordered by the employer and other events listed in the contract. For delays caused by the employer, the contractor is entitled to additional time and, in some contracts, additional money by way of prolongation costs. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Bonds Performance bonds are the most common additional security obtained from contractors in Singapore. On- demand bonds – cashable without proof of breach – are standard for public sector projects under the BCA’s standard public sector conditions. For private sector projects, conditional bonds (requir - ing proof of breach before they can be cashed) are more commonly negotiated by contractors, though on-demand bonds are accepted where the employer has sufficient bargaining power. The enforceability of on-demand performance bonds has been extensively litigated in Singapore, and the courts have consist - ently upheld the right of the beneficiary to call on an
expiry of the defects liability period; • liquidated damages for delay; and
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