There are various types of standard forms of contract used in construction industry. Each type of form is developed by different institutions and notably exhibits different characteristics. In deciding which form of contract should be used in any given project, it is important to have certain  level of practical working knowledge of the distinctions between each form. This appreciation is important no matter which side of the equation one may be on, whether it is the consultant administering the contract, the contractor considering the risks prior to submitting its tender bid or the Employer who  usually plays a dominant role in deciding the types of form used. 

In construction industry of Singapore, there are three main forms of contract used namely the SIA Building Contract, the Public Sector Standard Conditions of Contract or PSSCOC in short and the REDAS form. This article will be the first part of a series of articles that aims to compare the SIA form and the PSSCOC form. Whilst these articles are by no means an in-depth legal analysis of the pros and cons of each form, it provides a general understanding of certain practical distinctions between the forms.


SIA vs PSSCOC – Why the comparison?

In Singapore the SIA Building Contract and the PSSCOC form makes an obvious choice of comparison since the former is widely adopted in the private sector whereas the latter is the form of choice for most public sector projects. For avoidance of doubt, this article refers to SIA form published in 2016 and the PSSCOC published in 2020. The public sector utilises public funds in its construction projects and are therefore subject to certain level of scrutiny, accountability and political imperatives which are unique relative to private sector. These standard forms of contract are essentially standard terms of agreement between the Employer and main contractor. The nature of relationship between the Employer and contractor in construction industry is often described as adversarial and prone to disputes. However the statutory boards or government agencies playing the role of the Employer in public projects are acutely aware that its counter party to construction contract i.e. the main contractor are effectively members of the public too. Therefore it is inevitable for the drafting philosophy of PSSCOC to include certain element of fair play, certainty and even fostering of collaborative relationship. This is often contrasted with private sector commercial philosophy where parties are free to compete and negotiate the best deal for themselves which often leverages on different bargaining power. Private entities are after all responsible to its shareholders in respect of profit maximisation. By understanding the overarching backdrop of the drafting philosophy, one would be able to better appreciate the intention behind certain clauses and how it should be interpreted.

Even if one is not presently required to select which contract to be used, there are still compelling reasons to compare different contract forms. This is because comparison of forms will give rise to a better understanding of the gaps, vulnerabilities and opportunities in the contract form that is being used. Comparison is often the means to an effective qualitative assessment. By way of example, the PSSCOC has provisions dealing with claims for loss and expense whereas such provision is noticeably absent under the SIA Building Contract. Even if one is not presently required to decide on whether to use SIA or PSSCOC, this distinction should trigger an intellectual inquiry on whether one is able to claim for loss and expense under SIA despite the absence of those provisions and if so, how can it be done?

Architect vs Superintending Officer (SO) – Independent Certifier

As mentioned earlier in the preceding section of this article, the relationship of contracting parties in construction industry is often described as being adversarial. The differences between parties usually relates to amongst others, claims for additional money, additional time for completion and whether certain parts of the works complies with the contractual specification. In view of these commonly occurring disputes, most construction contracts incorporate a certification regime so that certificates can be issued from time to time to prevent disputes from causing the project to grind to a halt. The certification regime is administered by a certifier who is an identified individual appointed under the contract. Under the SIA form, the certifier is the Architect whereas under the PSSCOC the certifier is Superintending Officer, or otherwise known as ‘SO’. There are similarities and differences in the certification regime between SIA and PSSCOC. It is important to contrast the regimes under these two different contracts as it enables one to navigate the contractual landscape in an informed manner.

The individual responsible for issuing certificates under the contract is usually the certifier. Whilst the contract may require the identification of various important parties such as the Quantity Surveyor, the Contractor’s Representative, the Employer’s Representative, none of them issues certificates. Certificate is essentially a formal decision by a certifier on various important matters such as the sum of money payable for any given month based on a determination of work done, whether a certain phase of works are practically completed, whether the contractor is entitled to any extension of time etc. To this end, the Architect and the SO issues various certificates under their respective contract forms. It is important to appreciate that these certification functions are not merely an administrative duty. Under the law, the certifier is expected to act independently, fairly, honestly and impartially. Failure to do so may result in the certificates being challenged legally resulting in the reversal of any decisions contained therein. The Architect and SO shoulders the same responsibility. However it is important to point out that not every named individual under every contract form who is authorised to issue certificate is under the same legal duty of independence and impartiality. By way of example, based on recent case laws such as CEQ v CER in 2020, it was held that the Employer’s Representative under the REDAS Design and Build form, who issues certificates of payment is neither an independent certifier nor a referee between the parties in that the certificates are not an objective assessment of works done and monies due. Since the REDAS form is outside the scope of comparison of this article, this unique distinction will be explored further in a separate article in future.

As the independence and competence of a certifier have far reaching contractual implications to both parties, the SIA form and the PSSCOC have fairly unique ways of managing its appointment process. Under Article 3 of the SIA form, in the event that the Architect’s employment is terminated by the Employer, the main contractor has a significant level of influence over the appointment of a replacement Architect. The main contractor could object over the Employer’s choice of a replacement Architect and thereafter make an application with the SIA for the President or Vice President of the SIA to make a nomination for an alternative Architect. Such nomination by the SIA may take place if the objection by the main contractor is not on unreasonable grounds and there was also no delay in such application. The Employer shall thereafter accept such nomination and shall remunerate this replacement Architect based on terms that may be fixed by the President or Vice President. This decision shall be final and conclusive. If the Employer fail or refuse to engage such nominated Architect, then the main contractor shall have the right to terminate the contract. It is thus evident that the independence of the certifier is so inviolable that a contractual mechanism is put in place to ensure an appropriate individual is appointed for this position by way of assistance of a neutral and external institution namely the SIA. Obviously this elaborate mechanism begs the question of whether a similar regime is in place for the appointment of the very first certifier? The answer is no because the presumption is that if the main contractor is dissatisfied with the choice of the initial certifier, it could well decline to participate in the tender for the project. The identity of the certifier would usually be provided in the tender document. 

Interestingly, under the PSSCOC there is no equivalent provision for the appointment of the replacement SO if the existing SO’s employment is terminated. In other words, the Employer could technically appoint a replacement SO despite the objection of the main contractor. Does this mean that the element of independence of SO is accorded with less priority under the PSSCOC appointment regime? It is important to understand the context of the employment of SO by the Employer. It is quite common for the public sector project to be initiated by a government agency or statutory board which then assumes the role of the Employer under the PSSCOC. The SO appointed by the Employer is usually its employee on its payroll. This SO is also likely a senior executive working in that organisation. This can be contrasted with the relationship of the Architect and the Employer under the SIA form where the Architect is an external party or ‘independent contractor’ of the Employer. Some argue that an employee to an organisation is unlikely to be impartial as compared to an independent contractor to the Employer. This lends credence to the argument that the PSSCOC should have an appointment regime of a replacement certifier equivalent to that of the SIA. Firstly it is worth reiterating that since the SO is usually the employee of the Employer there is no equivalent independent professional institution like that of an SIA in this regard. Secondly, the PSSCOC appears to have adopted express provisions in the drafting of its conditions to make certain that the requirement of independence of certifier is abundantly clear. By way of example, under Clause 14.3(4), the certifier is expressly required to exercise its responsibilities in a fair and reasonable manner in respect of certification of extensions of time even if the information supplied to him by the main contractor may not be sufficient. This duty binds the authorised SO be it the existing one or his replacement.

Architect vs Superintending Officer (SO) – Delegation of Authority

Since the SO under PSSCOC is likely to be an employee who holds a fairly senior position within the Employer’s organisation, it follows that he is unlikely to be engaged in the project’s day to day operational matters. Recognising the need to mitigate this issue, the PSSCOC expressly provides for delegation of SO’s duties and authorities to one or more Representatives. In order to ensure sufficient presence and representation of the SO further down the value chain, the SO and its authorised Representatives may further appoint any number of persons as their ‘Assistants’. 

The PSSCOC made subtle distinction in regard to the duties and authorities between Representatives and Assistants indicating the different level of executive functions between these positions. As regards the Representatives, any act done by him shall have the same effect as though it had been done by the SO so long as those acts are pursuant to powers that are delegated under Clause 2.3. As regards the Assistants, Clause 2.4 stipulates that unless authorised, they have no authority to issue any instructions unless such instructions are necessary to enable them to carry out their duties and ensure that the works are done in accordance with the contract. Whether certain works in dispute is carried out in accordance with the contract is a matter of interpretation of the conditions which in and of itself can be contentious. This in turn raises the question of whether any instructions issued by the Assistants are valid when challenged. Projects that require SO to appoint Representatives and Assistants are likely to be of considerable scale. Such project usually requires the engagement of external project consultants as well. It is unclear what would be the distinction between the role of Assistants and Representatives as compared to the project consultants and whether there are overlapping responsibilities that may be confusing and counter productive.

SIA on the other hand does not appear to provide any power for the Architect to delegate its duties and authorities that are of equivalence to SO under PSSCOC. Article 4 of the SIA recognises that a professionally qualified Quantity Surveyor, a named individual whose duty will be to assist the Architect in all matters of valuation or measurement under the terms of contract. There are certain certificates issued by the Architect that are predominantly matters of valuation and measurement such as interim progress payment, final accounts etc. This appear to suggest or at least tacitly recognise that the Architect does not have the professional expertise in these matters. Therefore it begs the question of whether the Architect is expected to discharge its certification duties independently when he is assisted and reliant upon the Quantity Surveyor on matters that are objectively outside his scope of expertise. Any party challenging the validity of the Architect’s certificate in this regard would be wise to highlight the fact that the Architect is merely assisted as opposed to have delegated or outsourced its certification functions entirely.

There are practical concerns when the Architect for a large projects are theoretically expected to undertake his certification functions single handedly without any authorised representatives or assistants as found in PSSCOC. In reality, the Architect does rely on a team of individuals in the discharge of his functions except that under the SIA, these individuals are not contractually authorised. In other words, the viability of this informal arrangement is dependent on whether the team of representatives on the ground are adequately savvy and sophisticated to keep the Architect briefed on contractual matters that may demand the required level of independence. Indeed to expect that this arrangement is contractually robust may require an excessive level of optimism. 

Even in the case of SO who is supported by a team of Representatives and Assistants, there are also practical concerns that one had to be conscious of when the certifier delegates his functions. This relates to Clause 2.3(b) which states amongst others that if the main contractor disputes any act of the Representatives, it may refer the matter to the SO who shall confirm, reverse or vary the act or decision of the Representative. At the first glance, this provision appear to make sense since the SO should reserve his right to make his very own decision despite any delegation of any duties or authorities. Is delegation of duties or authorities synonymous with delegation of independence? This issue appears debatable. If indeed the Representatives’ act fulfils the independence requirement demanded under the law, it is hard to explain why such independence is dependent on the final decision of the SO? This provision appears to function like an avenue for “appeal” in case where the main contractor takes issue with the Representative’s decision. What if the main contractor fail to refer the disputed matter to the SO? Does that mean that the main contractor had effectively prejudiced its future right to challenge the validity of such decision on grounds of independence? There are certainly room for further clarity in regard to this provision.

Architect vs Superintending Officer (SO) – Instructions and Directions

In most standard forms of contract, it is customary for the certifier to be authorised to issue some form of written instructions to the main contractor for various reasons such as amongst others, to vary the scope of works or to secure compliance in adherence to certain contractual requirements. The SIA has a unique approach in this regard in that Clause 1(2) therein provides for ‘Direction’ and ‘Instruction’ with difference in definitions and more importantly consequences. Firstly, the term ‘Direction’ shall mean an order of the Architect compliance with which will not under the terms of the contract entitle the main contractor to additional payment or compensation but may result in reduction in contract sum. On the other hand, ‘Instruction’ shall mean an order of the Architect compliance with which will in principle entitle the main contractor to additional payment or compensation or to an increase in the contract sum. Whether the order of the Architect is a Direction or Instruction, it is contractually distinguished from suggestions, recommendations or agreements with proposals made by the main contractor. 

In reality, it is not uncommon for the Architect not to be entirely certain whether a particular order give rise to entitlement to additional payment to the main contractor at the point when the order was given. By way of example, if the Architect changes his design mid way through the construction, there may be abortive works such as hacking of work done, omission of existing design and implementation of new design. Whilst notionally the new design may appear to be a more cost effective option, the actual cost consequences may be otherwise. Likewise, if the Architect makes an order to the main contractor in what the Architect originally believes was merely an insistence on what was already contractually provided for according to his interpretation of the conditions, the eventual arbitrator, adjudicator or judge may disagree with the Architect’s interpretation. Therefore Clause 1(2) under the SIA which presumes the Architect to be fully informed of the actual cost implication of his order may not be practical in reality. This is particularly so when the order was made under time pressure, as it usually happens in construction project. 

If the Architect is indeed uncertain of the actual cost implication of his order, he is naturally more inclined to take the more conservative position that all of his orders are issued as Direction. This then puts the burden on the main contractor to challenge the classification of Direction in order to reserve its position to claim for additional payment. Under Clause 1(5) of the SIA, the main contractor has 28 days from the receipt of such order to dispute its classification to be an Instruction rather than Direction. If the main contractor fails to do so, it will be conclusively deemed to have undertaken to comply with the Direction without an increase in contract sum or any additional payment or compensation. The main contractor’s time grace of 28 days can be increased by a further 14 days if it requests the Architect to inform in writing under which provision of the contract the Direction was issued. One should be aware that the number of such orders may be in the hundreds or even well above a thousand for large projects. The frequency with which such orders may be issued presents a real challenge to the main contractor in terms of workload. Again, taking a conservative approach, the main contractor may be inclined to challenge every Direction as a knee jerk reaction in order to reserve its rights to claim for additional payment sometime down the road.

On the other hand, the PSSCOC does not make any distinction between Direction or Instruction. Every order made by the SO is deemed instruction and it may not necessarily amount to an admission from the SO that such instruction entitles the main contractor to additional payment. The onus is on the main contractor to determine whether instruction issued give rise to entitlement to additional payment. By way of example, Clause 19.2 under the PSSCOC it is possible that an instruction does not state whether it involves a variation. Under such case, it is up to the main contractor to assess whether a variation is instructed and if so, the main contractor shall within 14 days of receipt of such instruction to confirm in writing to the SO that such instruction involves variation.

Both the SIA and the PSSCOC takes a similar approach in that it puts the onus on the main contractor to notify the certifier in writing within a certain time frame that certain order could give rise to additional payment. The philosophy behind this approach is likely to stem from the fact that there is a presumption that the main contractor is in a better position to assess whether certain order involves additional payment and if so, the Employer through the certifier may have an advance notice of such cost implication. The Employer would therefore be less likely to be surprised by the end of the project of any budget overrun. In reality, the main contractor outsources a significant portion of the construction works to its subcontractors and in turn rely on the subcontractors to provide the necessary advance notice in respect of claims for additional payments. Therefore the burden is effectively being transferred down the supply chain. Some argue that since the Employer has a bird’s eye view of the financial health of the project with the assistance of its consultant Quantity Surveyor, it may not be wise to shift the burden down the supply chain. After all, most of the variations ordered originated from the Employer’s desire for change and the Employer should theoretically be cognisant of the cost implication of any changes made out of its own volition.

Conclusion

The above sections of this article which deals with general comparison of the role of certifier between the SIA and PSSCOC underscores the different drafting philosophies. Admittedly there is no absolute right or wrong in the respective approaches and it is up to the user of the standard form to be cognisant of these differences and make an informed decision on the choice of forms. 

Koon Tak Hong Consulting Private Limited