CLAUSE 14.2(E) PSSCOC – CHANGE OF (ALL) LAW?
The Public Sector Standard Conditions of Contract, or commonly referred to as the PSSCOC, is no doubt a familiar standard form contract to many contractors. In this regard, one of the common questions that we have encountered is whether compliance with the rules and regulations in relation to the various COVID-19 measures would trigger Clause 14.2(e) PSSCOC entitling the Contractor to an extension of time. In other words, would any change of laws suffice to trigger Clause 14.2(e) PSSCOC, entitling a Contractor to an extension of time? In this short blog, we take a quick look at this issue.
8th Edition. For ease of reference, we will be referring to the 8th Edition of the PSSCOC. This is because for the purposes of the present blog, there are no changes to the clauses referred to as compared to the 7th Edition.
However, we highlight that in respect of extension of time applications for COVID-19 related issues, where the Parties are using the 8th Edition, the first port of call should be the new Clause 14.2(q) PSSCOC, which is a specific clause that deals with epidemics and pandemics.
This is likely the more immediately relevant provision, though we query to what extent can a Contractor avail himself of the new Clause 14.2(q) PSSCOC if the Contractor had entered into a contract based on the 8th Edition. This is because this edition was only promulgated in July 2020, after the effects of COVID-19 had become apparent.
Thus, potentially, an argument may be made that any pre-existing and foreseeable COVID-19 related measures at the time of contract ought to have been taken into account by the Parties, and hence, Clause 14.2(q) PSSCOC is only applicable to either new or unforeseeable measures implemented post entry into contract.
But we leave this point as food for thought, as the focus of this blog is on Clause 14.2(e) PSSCOC.
Clause 14.2(e) PSSCOC. Returning to the issue, Clause 14.2(e) PSSCOC reads as follows:
“Compliance with the requirements of any law, regulation, by-law or public authority or public service company as stipulated in Clause 7.1.”
The broad interpretation. A cursory read of Clause 14.2(e) PSSCOC would appear to suggest that it is simply a “change of law” clause which entitles the Contractor to claim for an extension of time so long as:
a. There has been a change of law; and
b. A delay will occur due to the Contractor’s compliance with the change of law.
This is relevant for many on-going contracts involving the PSSCOC, as Parties are unlikely to trigger Clause 14.2(q) PSSCOC since their contracts would be based on the 7th Edition.
Hence, if Clause 14.2(e) PSSCOC can be accorded the above broad reading, it is likely that a Contractor would be able to argue that any COVID-19 related change of law that caused a delay would entitle him to an extension of time. This would, for example, include delays due to restrictions on the amount of manpower that can be deployed on site, etc.
However, we must ask ourselves whether such a broad interpretation is correct.
In particular, does the phrase “as stipulated in Clause 7.1” change the above understanding, especially since Clause 14.2(e) PSSCOC begins with “compliance with the requirements”?
Clause 7.1 PSSCOC. Clause 7.1 PSSCOC reads as follows:
“The Contractor shall comply with and give notices required by any law, regulation or by-law, or by any public authority or public service company, relating to the Works or, in the case of a public authority or public service company, with whose systems the same are or will be connected. The Contractor shall pay and indemnify the Employer against any fees or charges imposed by law, regulation or by-law, or by any public authority or public service company in respect of the Works.”
Reading Clause 14.2(e) PSSCOC with Clause 7.1 PSSCOC, an extension of time would only be granted if it is due to a change of law “relating to the Works or, in the case of a public authority or public service company, with whose systems the same are or will be connected.”
In other words, if the Contractor incurred delay due to the Contractor complying with a change of law that is unrelated to the Works, an extension of time would not be granted.
This immediately cuts down the broad interpretation that any change of law would entitle the Contractor to an extension of time.
This interpretation, however, may mean that COVID-19 related measures such as safe-distancing measures, etc. may not potentially fall within the scope.
This is because it is arguable that such changes of law (including requirements from public authorities) relating to COVID-19 are not directly related to the Works in question.
Even narrower interpretation. As stated earlier, when we read Clause 14.2(e) PSSCOC, it provides that it is delays arising from compliance with the requirements of Clause 7.1 PSSCOC which entitles the Contractor to an extension of time.
If so, and if the phrase “The Contractor shall comply with and give notices required” in Clause 7.1 PSSCOC is interpreted as restricting the law in question to the giving of notices, then an even narrower interpretation is possible: Clause 7.1 PSSCOC is only concerned with the complying with the requirements for giving notices and the giving of notices as required by any law, regulation or by-law, or by any public authority or public service company, etc..
In other words, rather than interpreting Clause 7.1 PSSCOC as a requirement for the Contractor to comply with any law and, separately, for the Contractor to give notices required by the law, it is possible to read Clause 7.1 PSSCOC as a requirement for the Contractor to comply with the laws on giving notices and to give notices as required by the relevant laws.
If so, it follows that Clause 14.2(e) PSSCOC would only be triggered if there is a delay arising because of the Contractor suffering a delay due to the Contractor’s compliance with the requirement to give notices.
Hence, if the project suffered delay due to movement control orders restricting the import of goods / materials from overseas, and the delay is not due to the Contractor having to give notices required by any law, such a narrow interpretation of the PSSCOC would not entitle the Contractor to an extension of time.
Observations. The ambit of the extension of time under Clause 14.2(e) PSSCOC is thus unclear.
On one hand, a restrictive interpretation can be adopted such that it would bar claims for extension of time unless the delay is related to the giving of notices under Clause 7.1 PSSCOC. This would likely bar a lot of COVID-19 related claims, as very few claims would involve a delay resulting from a need to give notices (barring a Notification for Relief under the COVID-19 (Temporary Measures) Act, which is unlikely to qualify as a notice under Clause 7.1 PSSCOC).
On the other hand, a more expansive interpretation can be adopted such that it would cover claims for extension of time so long as the change of law is related to the Works. But this would require interpreting Clause 7.1 PSSCOC to mean that it provides that the Contractor is to comply with all laws relating to the Works, and separately provides for the Contractor to give notices required under the laws.
Putting aside the powers of the assessor (and potentially the adjudicator) to “adjust” contractual terms under the COVID-19 (Temporary Measures) Act 2020, it remains to be seen how the courts and tribunals would address this issue moving ahead, bearing in mind that:
a. on one hand, it is undeniable that COVID-19 has severely impacted the construction industry, and thus the broader interpretation may “ameliorate“ the impact caused by COVID-19; and
b. on the other hand, the Parties may have entered into the contract before COVID-19 and we need to ascertain the parties’ intention at the time of their entry into the contract, including how they have allocated the risks then.
A possible (and perhaps most effective) way forward would be for parties to mutually agree on extensions of time (where possible) in relation to COVID-19 related delays, so as to avoid protracted disputes over whether the contractual terms cover (or do not cover) the delay in question and whether there is an entitlement to any extension(s) of time.
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