PSSCOC Lite refers to Singapore’s public sector standard conditions of contract for construction works estimated at more than $90,000 but not exceeding $1million. The term ‘lite’ therefore suggests that such contract form caters to relatively low cost or minor construction project which require simpler contract conditions due to its reduced risks profile. Its adoption takes effect from 1 May 2025 onwards. PSSCOC Lite is drafted based on omissions and simplification of certain clauses included in the original PSSCOC (8th Edition July 2020) with the aim of reducing compliance cost, balancing risk of contractors and streamline administrative processes. This article is Part 1 of a two part series that focuses on minor scale projects and the associated forms of contract. In Part 1, the focus will be on relevant clauses that were either simplified or omitted altogether from the original PSSCOC in the course of producing PSSCOC Lite. This review will enable users of PSSCOC Lite particularly contractors carrying out smaller scale construction projects for public sector to be more commercially informed. 

PSSCOC Lite can be viewed as the counter part of SIA Articles and Conditions of Contract for Minor Works 2012 of which the latter is similarly a simplified contract form of the original SIA Building Contract meant for private sector projects. Creating an abbreviated contract form for low value low risk project appears sensible given the difference in risk profile. The tricky part however is deciding the actual scope of simplification or abbreviation in the process of deriving a ‘lite’ form. The scope of amendments of PSSCOC for the purposes of producing a ‘lite’ version involves the following provisions: (1) valuation of variations, (2) finalisation of account, (3) programme revisions, (4) liquidated damages and (5) other administrative clauses e.g. appointment of Assistant of Superintending Officers, security deposit, prefabrication clauses, price fluctuation clauses etc. On the other hand, the scope of amendments for SIA Minor Works are quite different.

In deciding what constitute a ‘lite’ form, it is important to have a clear understanding of the general nature of smaller scale project apart from the obvious parameter of having lower contract sum. Firstly, smaller projects are likely to be of additions and alterations to existing space within a building rather than constructing building or infrastructure from scratch on a vacant plot of land. Such additions and alterations initiative often involve repurposing an existing space with the view of changing or enhancing its function. It follows that there may be considerable interfacing works with existing building systems. Examples include converting certain parts of storage space to office, reinstatement of previous leased space to its original condition, repair and replacement of various building systems such as lifts, water tanks, power system etc. Whilst these examples are not meant to be exhaustive, it is clear that low contract sum may not inevitably lead to lower risk. Unfortunately, there is no universal metric for measurement of risk unlike construction cost which is measured in dollar value. Therefore it is challenging to clearly stipulate with precision on what should be the risk level for projects that adopts PSSCOC Lite. Therefore contracting parties are encouraged to stay intellectually nimble by examining risks and costs in parallel. 

Another notable characteristic of smaller scale projects is the shorter construction period, ranging from several weeks to perhaps months. Risks tend to correlate positively with construction duration, in that there is limited amount of construction activities over such brief duration. Such shorter construction period allows one to re-evaluate the typical types of risk that confronts a conventional construction project such as cashflow, delay, price fluctuation in construction costs etc. By way of example, a contractor undertaking smaller project may have fully completed the works by the time it receives its very first progress payment. Therefore various contractual safeguards that are relevant for larger project such as enforcement of performance bond, revision of programme, varying methods of valuation where variation disrupts progress of works etc may not serve its purpose as originally intended. 

In the next few sections of this article, the scope of simplifications of the original PSSCOC to derive PSSCOC Lite (Construction Works) will be examined in greater detail.

Valuation of Variations

There are a few aspects of variations provisions that were either simplified or omitted entirely from the original PSSCOC. It should be noted that whilst the authority and discretion by the Employer and its agent to instruct variations under contract remained largely intact, it is the valuation of variation components that are affected. Firstly, Clause 19.3 of the original PSSCOC which deals with submissions of quotations of variations is omitted. This clause was in essence an opportunity for parties to have an advance agreement on an all inclusive cost of a proposed variation, so as to have upfront certainty on the cost implication of the said variation.  The omission of this clause under PSSCOC Lite perhaps indicates the lower likelihood of variations instructed under a smaller scale project due to possibly a brief construction period. So why are the other parts of variation provisions such as definition of variation (Clause 19.1) and authority to instruct variation (Clause 19.2) remained intact? Some may argue that the advance agreement  on cost of variation is especially important for smaller size contractors. However given the brief construction duration for smaller scale projects, the likelihood of significantly large variations being instructed is considerably lower, therefore reducing the possibility of dispute over the applicability of contract rates and prices. Where variations instructed are significantly large with disruptive effects on the regular progress of works, the prevailing contract rates may not be sufficient to compensate the contractor for the overall financial impact that ensued. Under such circumstance the ability to agree on the cost of variation in advance is particularly helpful. Therefore if a project has its final contract sum being significantly larger than the original contract sum, the choice of PSSCOC Lite may not be appropriate as it indicates considerable variations taking place during the construction period.

By the very same token, Clause 20.4 of the original PSSCOC which deals with valuation of variations using daywork rate method is omitted from PSSCOC Lite. The use of daywork rate is one of the more ‘generous’ valuation method of variation given that the contractor is compensated based on actual cost incurred in accordance with record of resources expended such as labour, plant, equipment, material etc. This daywork method is a significant departure from the application of contract rate which is typically a lump sum composite rate comprising a blend of labour, plant, equipment and material. Similarly, it is reasonable for one to question whether the omission of daywork rate valuation method under PSSCOC Lite is fair for small size contractor that is more financially vulnerable. Assuming that smaller projects are unlikely to have significantly large variations instructed that may warrant the use of daywork rate valuation methodology, this may explain the rationale behind such omission of provision. 

Clause 20.2 which deals with agreement on valuation is amended or simplified considerably under PSSCOC Lite. This provision deals with the mechanism to value and pay any variation works upon progressive completion. There are a few notable amendments in this regard. Under the original Clause 20.2(2)(b), there were elaborate mechanisms under which the contractor is required to notify the Superintending Officer when it is of the view that the variation works are substantially completed. This notification in turn requires the Superintending Officer to either certify such completion or notify the contractor on what works remained incomplete. These mechanisms were omitted in its entirety under PSSCOC Lite. Again, these omissions suggest that under PSSCOC Lite any variations instructed are likely to be minor or moderate in scale within a brief construction period. Therefore the formalities associated with certification of completion of varied works were dispensed with. Consequently, the contractor under PSSCOC Lite is expected to submit its own valuation of the variation works for payment purposes as soon as it considers that the variation work is completed. This departs from the original practice of doing so within 30 days from the Superintending Officer’s certification of completion of the varied works. Such flexibility accorded to the contractor is significant since the contractor is not constrained by the timely certification of completion by the Superintending Officer. On the other hand, the Superintending Officer’s valuation of the varied works is now streamlined. Instead of the original practice of valuing the varied works within 60 days of its own certification of completion of the varied works, he shall now do so within 30 days of his receipt of the contractor’s valuation of the said works. It follows that the Superintending Officer therefore will now, under PSSCOC Lite, certify the completion of the project as a whole, without a separate certification of completion for the varied works. 

Under Clause 20.2(2)(e) of the original PSSCOC, if the contractor disagrees with the Superintending Officer’s valuation of the varied works, it shall provide its notice of disagreement within 30 days, and simultaneously set out details of its own alternative valuation. Failure to do so within the prescribed 30 days shall prevent the contractor from disputing the same in future. In receipt of the notice of disagreement, the Superintending Officer under Clauses 20.2(2)(f) and 20.2(2)(g) of the original PSSCOC may either amend the valuation in the subsequent payment certificate or to do so during the issuance of Interim Final Accounts, to the extent that the Superintending Officer agrees with the contractor’s position. Under the PSSCOC Lite, these provisions are simplified by the removal of the 30 days time frame restrictions imposed on the contractor. The Superintending Officer may amend his valuation in the subsequent payment certificate. Any outstanding dispute over valuation of variations shall be referred to Clause 35.1 which pertains to references of dispute to Superintending Officer, as part of the multi-tiered dispute resolution clause. The application of Clause 35.1 remains in force under both the original PSSCOC as well as the PSSCOC Lite. 

The scope of simplifications of the above mentioned Clauses 20.2(2)(e), 20.2(2)(f) and 20.2(2)(g) from the original PSSCOC serve as a timely reminder on why variations constitute a fertile ground for disputes. The contractor not only is required to carry out additional works to the required standards and potentially be in dispute over scope of compensation, but also to comply with requirements on manner in which valuations are disputed. In this regard, there appears to be considerable contractual relief provided to the contractor under PSSCOC Lite. 

Revised Programme

Clause 9.2 of the original PSSCOC which deals with revision of programme is deleted from PSSCOC Lite. Under this clause, the Superintending Officer may at any time during the construction period instruct the contractor to supply additional particulars of the accepted baseline programme or to submit a revised programme if he is of the view that the works is not progressing in accordance with the agreed baseline programme. The contractor under this clause shall comply with such instruction within seven days to show how it intends to complete the works within the original Time for Completion. Apart from the value of providing schedule remedial measures, it is also an important part of any eventual delay analysis in case of assessment of extension of time or in deciding on issue of liability for liquidated damages. 

Given that clauses for liquidated damages and application for extension of time continues to be in force under PSSCOC Lite, it would appear that Clause 9.2 that enables the provision of revised programme continue to be relevant and necessary. On the other hand, this is balanced by the likelihood of a shorter construction period for projects using PSSCOC Lite which in turn reduces the risks of delay considerably. As the requirement for baseline programme under Clause 9.1 continues to exist under PSSCOC Lite, including the financial implications of failure to submit an adequate baseline programme provided for under Clause 9.4, it is clear that programme remains important for both small and large projects. Therefore even with the absence of Clause 9.2 under PSSCOC Lite, it should not prevent the contractor from taking the initiative of providing a revised programme in the event of schedule overrun, whether due to excusable delaying event or not. This is because the provision of revised programme should not be viewed as an administrative burden but rather a  helpful tool for any future application of extension of time. In other words, the deletion of Clause 9.2 may not be intended to diminish the value of any revised programme since parties are still free to utilise any revised programme in the absence of mandatory conditions.

Liquidated Damages

Under PSSCOC Lite, liquidated damages payable by the contractor pursuant to Clause 16.1 shall not exceed 10% of the contract sum cumulatively. This amendment is reflected in the Appendix of the Conditions of Contract. The wordings in Clause 16.1 remain unchanged. By way of illustration, a project with contract sum of $500,000 will have its liquidated damages capped at $50,000. Assuming the rate of liquidated damages for project of this scale is $5000/day, the contractor’s exposure to liquidated damages for any delay shall not exceed 10 calendar days. This provides a balance of deterring culpable delay whilst at the same time not financially crushing smaller scale contractor over its schedule default. 

It is noteworthy however that Clause 16.3 which deals with the Employer’s common law rights for damages remain unchanged under PSSCOC Lite as well. Under this clause, it is stated amongst others that the contractor’s liability to pay the Employer such loss, expense, costs or damages shall not be limited in any way whatsoever by the amount of liquidated damages for which he might otherwise have been liable for. Does this clause run counter to the cap of liquidated damages at 10% of contract sum? There are clearly two opposing views in this regard. The first interpretation is that since there is an express agreement for 10% of contract sum cap for liquidated damages, this Clause 16.3 should be read accordingly. Therefore Clause 16.3 is only applicable if the Employer is found not to be entitled in law to recover liquidated damages under Clause 16.1 e.g. default in certification procedures. In other words, Clause 16.3 should not be read as a ‘back door’ to the Appendix to the Standard Conditions which serve as particulars to the contract. The opposing view however is that, Clauses 16.1 and 16.3 could be read harmoniously in that only the former relieves the Employer from burden of proof. Liquidated damages are essentially pre-estimated of losses. Where the Employer elects to rely on Clause 16.3 to pursue additional damages above and beyond any liquidated damages cap, it is subject to the usual burden of proof. Therefore, under this alternative interpretation, it appears that the cap only relates to the scope of damages that had to be proven rather than the overall quantum of damages advanced by the Employer. 

In reality the risk of a full blown arbitration dealing with such intricacies of legal issues is rather low in view of the fact that PSSCOC Lite deals with smaller scale project. Parties however are still encourage to negotiate and document any specific clarification on this issue, if necessary. Standard conditions are after all default clauses for parties’ consideration.

Final Accounts

Final account for construction project is usually concluded over the Defects Liability Period that may ordinarily last 12 months after substantial completion (also known as practical completion). There are fairly significant changes in the process of finalisation of account under PSSCOC Lite. Under the original PSSCOC, there was an intermediary step of Interim Final Account where the Superintending Officer makes an interim assessment of the project financials to enable progress payment made to contractor pending final resolution of the project accounts. This was necessary as it was usually time consuming to sort through much of the complex issues that have financial implications such as valuation of variations, delay analysis or remedial of defective works. An interim assessment in this regard, facilitates cash flow. Under the PSSCOC Lite, the Superintending Officer proceeds directly with the Final Account without the need for an Interim Final Account, as smaller projects are expected to have less complexities and issues in dispute in the course of finalisation of account. The following are some of the specific examples.

Firstly, Clause 32.4(1) of the original PSSCOC provides for submission of Final Payment Claim by the contractor within 90 days of the date of substantial completion. Under PSSCOC Lite, the contractor shall do so within 30 days of the expiry of Defects Liability Period. At the first glance it appears that there is a delay in submission of Final Payment Claim under PSSCOC Lite that may run counter to the aim of balancing risks of smaller scale contractors. However, the contractors are free to submit its regular progress payment claim at the point of substantial completion, where necessary pursuant to Clause 32.1(2) of PSSCOC Lite. The delay in submission of Final Payment Claim can therefore be construed as an extension to the duration for submission of regular monthly progress claim.

Upon dispensing with the need for Interim Final Account found under Clause 32.5(1)(a) of the original PSSCOC, the finalisation of account effectively takes place after Defects Liability Period as opposed to during Defects Liability Period. It is expected that the Final Payment Claim under PSSCOC Lite may therefore be inclusive of any additional claims that may arise during Defects Liability Period. Therefore the Final Payment Claim under PSSCOC Lite is anticipated to be more all encompassing. Upon receipt of Final Payment Claim, the Superintending Officer under Clause 32.5(1)(a) of the PSSCOC Lite shall within 21 days provide its assessment and simultaneously issue the Payment Certificate according to such assessment. It should be noted that under Clause 32.5(3) the original PSSCOC, the Superintending Officer shall do the same within 30 days of the end of Defects Liability Period. In other words, there is no appreciable delay to the finalisation of account under PSSCOC Lite notwithstanding the later due date for submission of Final Payment Claim by the contractor. 

What happens if the contractor disagrees with the Superintending Officer’s assessment of final account? Under the original PSSCOC, Clauses 32.5(4), 32.5(5) and 32.5(6) provide a series of steps that allows the contractor to notify the Superintending Officer within 30 days of receipt of such assessment and thereafter for the Superintending Officer to respond within further 30 days either with an amendment or not. Any outstanding dispute or difference shall be subject to Clause 35 of PSSCOC multi-tier dispute resolution provision. The contractor’s failure to respond with its disagreement within the stipulated time frame is deemed to have agreed with the Superintending Officer’s assessment which then becomes final and binding. However the same is streamlined under PSSCOC Lite. In this regard, any disagreement by the contractor in respect of the final account shall be responded within 30 days and be directly subject to Clause 35.1 which is part of the multi-tier dispute resolution provision. Therefore it appears that the new provisions under PSSCOC Lite is less onerous to the smaller scale contractors.

Conclusion

Apart from the provisions elaborated in the preceding sections of this article, there are other omissions from the original PSSCOC for the purposes of creating PSSCOC Lite which are rather self explanatory and made sense intuitively. These include the waiver of security deposit under Clause 4.5, appointment of Superintending Officer’s assistants under Clause 2.4, price fluctuation under Clause 33 and Option Module D pertaining to advance payment for Prefabricated Prefinished Volumetric Construction (PPVC). Collectively, these are contractual mechanism that are less relevant for smaller scale projects. With the introduction of PSSCOC Lite there is a good chance that this will give rise to appreciable difference in tender prices, risks appetite and scope of dispute. It may be worthwhile for construction practitioners and statutory authority to make an objective and constructive assessment in due course of any notable lessons learnt from the adoption of PSSCOC Lite. 



Koon Tak Hong Consulting Private Limited