As the war against Covid 19 intensifies in Malaysia, the government of Malaysia has issued a restriction of movement that has essentially halted the operations of various businesses in Malaysia in order to limit the spread of the virus. On 16.3.2020, the Prime Minister, via a special message, issued the Restriction of Movement Order pursuant to Prevention and Control of Infectious Diseases Act 1988 and the Police Act 1967. The Government.
One of his directives are as follow:
“Complete restriction of movement and assembly nationwide, including religious activities, sports, social and cultural events. To enforce this restriction, all houses of worship and business premises are to be closed, except supermarkets, public markets, sundry shops and convenience stores selling essential goods…”
However, it is unclear if the construction site falls under the definition of Business Premises. As a construction site is technically not a business premise, does this mean contractors are allowed to resume operations as normal despite this restriction? This sudden and drastic Restriction of Movement has created a lot of confusion in the construction industry as it is unclear if construction site works are allowed to operate normally.
The ambiguity of the order has led to different interpretations, exposing the contractors that do continue to operate during this period to the risk of jail time and an extensive fine.
On 17.3.2020, DBKL issued a notice “Notis Pematuhan Perintah Kawalan Pengerakan” which request for construction parties including the main contractor, nominated subcontractor, domestic subcontractor, site workers, to obey the Restriction of Movement Order. It further recommends the following steps to be taken:
- Ensure and control the safety and cleanliness of the construction site
- Ensure construction sites are free from the threat of damage and theft
- Ensure that the proper safety record and documentation on site
- Have an updated photographic snapshot of the construction progress as of 17.3.2020 and to take all necessary steps to ensure that work can continue after the order has been rescinded.
On the morning of 18.3.2020, a Prevention and Control of Infectious Diseases (Measures within The Infected Local Areas) Regulations 2020 was gazetted, with this Regulation, it provides a glimpse of clarity that where Regulation 3 states that:
(1) No person shall make any journey from one place to another place within any infected local area except for the following purposes:
(a) to perform any official duty;
(b) to make a journey to and from any premises referred to in regulation 5;
(c) to purchase, supply or deliver food or daily necessities;
(d) to seek healthcare or medical services; or
(e) any other special purposes as may be permitted by the Director-General.
Around evening time of 18.8.2020, the Ministry of Work released it’s Frequently Asked Questions (FAQs) answering some queries in relation to the construction industry. Briefly, it confirms that all construction projects have to be stopped apart from those that involve work that’s critical. It defines critical works as
“kerja-kerja yang mana jika sekiranya tidak diteruskan boleh mendatangkan mara bahaya atau kemudaratan kepada pekerja, orang awam atau persekitaran”
It gave a list of critical works as follow:
- Slope Repairs;
- Pothole Repairs;
- Traffic Management Control;
- Examination of Lifts/Escalators/TravelatorsPemeriksaan and other critical electrical and mechanical equipment;
- Facility upgrading works in premises with critical services;
- Traffic light repairs;
- Construction repairs on the damaged Bailey Bridge;
- Emergency works that are stated on a prior contract; and
- Any other construction that needs to be completed that may be a hazard.
However, before such critical work can be carried out, recommendations letter must be obtained from the person in charge of the project / Resident Engineer / Principal Submitting Person for the project, and such recommendations need to be submitted to the relevant ministry of work / local authority for its approval.
It looks like, apart from the exception stated in Regulation 3(1) above, no person should leave their premises at all. Together with the above FAQs issued by the Ministry of Works, it’s mostly settled that construction sites do not fall under essential services and construction sites should stop work unless it falls under the category of critical works.
This then brings up a series of unaddressed issues/concerns such as:
- Does the Restrictive of Movement constitute as a Force Majeure event?
- Who is going to bear for the loss of time and cost?
- Are the contractors entitled to claim for Extension of Time (EOT)?
- If so, do developers get to claim for the same, and from who?
- What happens to the workers that are currently working?
The Ministry of Work had made it clear that the Government will not bear for any loss and expense during this unforeseen period, it looks like many in the industry are left hanging not knowing what to do.
On the same day, Master Builders Association Malaysia have also issued a letter to the Chief Executive of Construction Industry Development Board Malaysia (CIDB), requesting for construction work to be continued as the severity of impact toward the construction industry. In view of the FAQs issued by the Ministry of Works, the chances for the Government to resume work in the construction industry is low.
So, what options do the industry players have?
Malaysian Institute of Architects (“PAM”) issued an Advisory Note to its members on 18.3.2020 in which they perceive this Restrictive Movement Order does constitute as a Force Majeure event under the PAM Contract 2006 which entitles contractors to apply for EOT.
On 19.3.2020, PAM issued another Advisory Note to its member, reminding fellow architects of their legal duty to instruct a contractor to revise the Works Programme to cater for the temporary suspension and it is at the affected contractor’s liberty to submit his claims for an Extension of Time and/or for any loss and additional expense arising. The Architects role is to ensure that these claims are submitted wholly in accordance with the terms of the contract and assessed fairly.
With all the above information, Speedbrick would like to recommend the following steps to be taken by the contractors:
Firstly, immediately review your construction contracts, familiarise yourself with the clauses in relation to Extension of Time and Force Majeure.
Secondly, draft the following letters to your client:
- To inform your client that your work is being suspended pursuant to the Restrictive Movement Order;
- To apply for an Extension of Time and/or any loss and additional expense arising;
- To notify your client of your intention to invoke the Force Majeure Clause.
By doing so, you have fulfilled the notice requirement that may be required under the construction contract.
Thirdly, you are to keep proper records of your current work progress and record on how you are being affected during this difficult period. Although this may not prevent the foreseeable risk and issues that are going to happen in the near future, but at least there is a proper paper trail and documentation detailing the necessary impact.
As you may well know, the lack of clarity has brought up a bucket load of issues that will continue to compound over time, as the construction industry as a whole comes to terms with the measures taken to stop the spread of the virus. We can only hope that the chain of consequences will be minimised to prevent further unnecessary losses from continuing as a result of this order as it may heavily impact the cash flow and the financial stability of many construction companies in the industry.
As part of the construction industry, Speedbrick recognises the difficulties that construction companies are going through. We hope that during this unprecedented time, you maintain proper documentation and site security safety to prevent any unnecessary losses on your end further. Most importantly, ensure that safety continues to be a priority for everyone involved.
Speedbrick Solutions is a construction software company specialises in helping its clients stay in control and ahead of construction risks. Two modules are available now, Speedbrick COMPOSE: managing supply chain management risk and Speedbrick ECHO: managing project financial performance and important contractual terms,including EOT management.