SINGAPORE Law and Practice Contributed by: Dorothy Marie Ng, Monica Yip, Tay Peng Cheng and Tan Shao Tong, WongPartnership LLP
7.2 Assigning Responsibility for the Design and Construction of a Project Under the traditional contracting model, the employer (who is the owner of the project) will engage a third-party consultant (an architect in a building project, or an engineer in an engineering project) as the lead consultant responsible for the preparation and completion of the design. That lead consultant typically also oversees the development of the project, together with other consultants engaged by the employer, and acts as the contract administrator or superintending officer for the main construction contract. The lead consultant would also undertake the role of an independent certifier to certify payment, assess claims by the contractor and certify the works done and, ultimately, the completion of the project, fairly and independently, notwithstand - ing having been appointed by the employer. In such a model, the responsibility for design lies with the consultants; the contractor will only be responsible for the building works. The employer will have direct contractual recourse to its directly appointed consultants for any deficiency in design, and against the main contractor for any delay or defects in the build - ing works that are not design-related. The main contractor is responsible for the building works and is typically liable for any delay or any other default under the terms of the main construction contract arising out of its works, even if such delay is caused by a subcontractor. There are specific instances where an employer may wish to have direct rights against a specialist subcon - tractor (eg, in relation to waterproofing works) or a supplier (eg, in relation to the supply of certain fixtures). This would require the specialist sub - contractor or supplier to extend a warranty in relation to those specialist works or material to the employer.
Alternatively, it is increasingly common for employers to enter into “design and build” con - tract, where responsibility for design and con - struction lies solely with the main contractor. In this model, the employer provides a desired out - come and broad specifications for the project. As the single point of responsibility, the main contractor undertakes the obligations and risk of the design (through its employment of the rel - evant architects, engineers and consultants) and the construction of the project. In this model, the employer typically does not have direct contrac - tual recourse against the architect and engineers who are appointed by the main contractor, but would have recourse to the main contractor. 7.3 Management of Construction Risk Contractors and specialist subcontractors are typically required to furnish undertakings and/or indemnities relating to specific works. Employ - ers of large projects would commonly require a security deposit, in the form of a cash deposit or a performance bond. This provides the employer with some security in the event of non-perfor - mance by the contractor. Performance bonds typically secure about 5% to 10% of the value of the contract, and are usually valid up to the expiry of the defects liability period. It is also common for performance bonds to be drafted as “on-demand” bonds, which would require the issuer of the performance bond to make payment to the beneficiary on demand, without enquiring into the beneficiary’s rea - sons for the demand. A restraint on payment under such bonds will only be allowed on lim - ited grounds (eg, fraud or unconscionability), although unconscionability can be excluded as a ground for such restraint under the contract or in the performance bond.
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