A typical construction contract document consists of various components such as specifications, drawings, pricing schedule etc where one may find conflicts, ambiguities and discrepancies amongst these documents. As these inconsistencies and contradicting terms may have cost and schedule implications, standard conditions of contract often include a mechanism on how these issues shall be resolved. This article provides a comparison on how the Public Sector Standard Conditions of Contract (PSSCOC) published in 2020 and Singapore Institute of Architects (SIA) Building Contract published in 2016 deal with such matters. The contractor usually has very limited role in compiling contract document as well as the production of tender document. If there is any discrepancy say between specifications and drawings produced by the project consultants resulting in a claim for additional payment by the contractor, which party should bear the financial or schedule risk? Should the contractor be responsible for its failure to detect the discrepancy in advance and clarify during tender? Or should the Employer be responsible for its consultants’ negligence in the production of their professional deliverables? 

In deciding the contractual philosophy to these questions, it is evident that both these contract forms adopt a very distinct approach. Under the PSSCOC, whilst the contractor may be entitled to compensation, there are certain contractual hurdles that it had to overcome prior to being successful in its claim. The SIA form arguably takes a more subtle approach where it does not have an equivalent claims mechanism as that of PSSCOC but it provides rules on how the contract document shall be construed and interpreted. Whilst some may favour such approach by giving parties more latitude and freedom to manoeuvre, others may frown at its lack of specificity. The details to these contrasting mechanisms will be further elaborated in this article.

It is also important to understand why contradictory terms found in contract document may give rise to claims for additional cost and time. By way of illustration, suppose architectural contract drawings indicate the use of porcelain tiles in respect of bathroom finishes but the interior design schedule of finishes instead reflected certain marble tiles which are more expensive and takes a longer time to source. Apart from the price differences between these different materials, the use of marble tiles potentially give rise to schedule risk. This is because it is more challenging to source for marbles with consistent appearance as regards its colour tonality, veining pattern etc in a natural environment such as a quarry. Assuming the contractor had calculated its contract sum based on porcelain tiles, such discrepancy in basis of pricing is deemed a ‘commercial nature’. This is quite different than discrepancy of a ‘legal nature’ stemming from conflicting choice of words used in drafting of contract conditions resulting in ambiguity in meaning. Whether a discrepancy is of a commercial or legal nature, the effectiveness of contract form in addressing such issue is largely dependent on the resolution mechanism. As a matter of comparison, it appears that the PSSCOC form caters more specifically to discrepancy of a commercial nature recognising the unique procurement process for construction industry.  What are the specific nature of construction procurement process that give rise to conflicting terms and which components within the contract are particularly vulnerable? These will be elaborated in the next section of this article.

Components Of Contract Documents That Are Prone To Conflicts, Ambiguities And Discrepancies

The above mentioned example of conflicting choice of interior finishes is is quite common in reality given the frequent value engineering exercise carried out during design development under a procurement pathway of design-bid-build. In an ideal world all design consultants ought to revise their drawings and specifications in tandem with the latest decision made by the Employer to ensure consistency. However, the frequency with which these design changes occur within a compressed design development timeframe prior to tender is a risky proposition. Consequently, it is a fairly common industry practice for the consultants to issue tender addendum at the late stage of tender or even after tender closing deadline for tenderers to amend their price accordingly. One may find that certain architectural tender drawings that are issued belatedly are not substantively in sync with tender drawings of other disciplines such as structural, mechanical and electrical services. The problem is compounded when specifications included in tender document are not drafted on a bespoke basis for the project in hand but rather ‘standard documents’ that are used repeatedly from project to project. Therefore it is quite common not just for discrepancy to arise amongst different types of tender drawings but also between specifications and drawings. 

As a matter of sequence of work flow, these addendum drawings and specifications will be issued to the consultant quantity surveyor for a corresponding update to its pricing schedule. Depending on the nature of procurement pathway of the project in hand, the quantity and/or descriptions included in the pricing schedule had to be revised accordingly. This information transition from consultant to consultant again becomes a key point of vulnerability. 

Such discrepancies, conflicts and inconsistencies are so prevalent during procurement that the ‘post tender clarifications’ or ‘tender questionnaire’ issued by the consultants to the tenderers are rather revealing. As if in anticipation of the almost inevitable conflicts within the tender document, tenderers are usually asked to confirm that in case of contradictions, the tender price shall be deemed to have included the ‘stricter’ or ‘more costly’ requirement. Such requirement effectively reverses the burden of conflict and inconsistencies on the contractor but often to the financial detriment of the Employer. Therefore as regard discrepancy that are of commercial nature, it is mostly caused by negligence that are avoidable with advance planning. 

Mutually Explanatory Of One Another – PSSCOC Clause 3.1 vs SIA Article 10 

Clause 3.1 of the PSSCOC states that contract document which consists of several sections of documents and drawings are to be taken as mutually explanatory of one another. In case of inconsistencies, the Particular Conditions, if any shall take precedence, followed by Standard Conditions. In the event of any conflict between the drawings, then the order of precedence shall be prescribed in the Appendix. The placeholder for Clause 3.1 in the Appendix relates only to drawings by allowing parties to decide by way of descending order, which drawings shall take precedence. Since architectural drawings typically leads the design development process, it will not be unusual for architectural drawings to take precedence follow either by structural or mechanical and electrical drawings. Notably the specifications, pricing schedules, tender clarifications and contractor’s submissions are not included in this provision. Clause 3.1 recognises that ‘several documents’ and drawings are part of the contract document, of which the former is likely to collectively refer to amongst others specifications, pricing schedules, tender clarifications and contractor’s submissions. However these documents are apparently subordinate to Particular Conditions, Standard Conditions and drawings. The likely rationale for allowing the drawings to take precedence is that the PSSCOC referred to in this article relates to lump sum contract where as a matter of industry practice, the drawings provide the overarching definition of the scope of works. However what is less clear is that the pricing schedules, particularly the section on ‘Preliminaries and General’ typically found under the first section commonly include various particular conditions. These are included in pricing schedule to allow the tenderer to indicate any price implications for compliance with such bespoke requirements. In most cases, these particular requirements may have intended to supersede standard conditions. Therefore parties are advised to be cautious about placement of bespoke requirements or particular conditions within contract document in light of the effects of Clause 3.1 of the PSSCOC. It is also worth noting that documents exchanged during tender such as tender clarifications, pricing breakdowns in schedules, responses to tender questionnaires are produced by the tenderer responsive to its evaluation of tender drawings provided. By way of logic, these documents to the extent that it include details that deviates from the ordinary reading of the said drawing ought to prevail.

Article 10 of the SIA form similarly deals with interpretation and construction of contract document. As with Clause 3.1 of the PSSCOC, Article of the SIA form states that the contract document shall be read and construed as a whole. Unlike the PSSCOC which stipulates the order of precedence of various parts of contract document, Article 10 by contrast states that no special priority other than that accorded by law shall apply to any one document or group of documents. Unlike the PSSCOC, Article 9(1) of the SIA form expressly require that various drawings, specifications, schedule of rates and prices that are included in contract document shall be both identified and signed by the parties. In other words during the compilation of contract document after the issuance of letter of acceptance, parties are expected to sieve through all specifications, drawings and pricing submissions exchanged during tender with the aim of only to include the prevailing versions. Whilst this may be administratively laborious, it is a necessary practice of ensuring that there are no conflicting versions of either drawings or specifications which in turn necessitate stipulation of the order of precedence. Ironically, it is also entirely possible that parties may dispute over which drawings or specifications ought to be included in contract document during its compilation process. Some may argue that such administrative hassle is completely unnecessary as parties had already signed on the letter of acceptance which ordinarily would define the list of contract documents that are binding. In other words, the signed letter of acceptance should take precedence. However it is interesting to note that under Article 9(1)(f) of the SIA form, the letter of acceptance is identified as part of ‘such other letters or documents’ that the parties may agree and attach as contract document. This suggest the letter of acceptance after all may not be accorded any special priority in determining which drawings and/or specification shall be included in the contract document in case of dispute. 

Notwithstanding the contractual mechanism that is in place to stipulate how contract document shall be interpreted and construed, there may be occasions where parties take issues over the application of such mechanism.  Where such discrepancies are of significant commercial nature that underpins the basis of contract sum, the project may grind to a halt if left unresolved. The next section of this article elaborates how PSSCOC allows the contractor to claim for additional payment and/or time, subject to compliance with certain condition precedents.

Claims For Ambiguities And Discrepancies – PSSCOC Clause 4.4

The provision allowing contractor to claim for additional payment and/or extension of time for ambiguities and discrepancies in contract is found  under Clause 4.4 of the PSSCOC. As mentioned earlier, this is unique to PSSCOC as there is no equivalent provision under the SIA form. The advantage of such provision is that it provides the certifier appointed under the contract the authority to grant contractual relief which is interim but binding. In the absence of such provision, parties may only deal with these differences under the dispute resolution clause that may involve legal proceedings. The disadvantage of such claims provision is that it typically include condition precedents that the contractor shall comply, failing which it may lose any entitlement to relief under future legal proceedings. 

Clause 4.4(1) of PSSCOC places the burden of notifying of any ambiguity, discrepancy, conflict, inconsistency or omissions found in the contract document evenly on both parties. If such ambiguity is of commercial nature that underpins the basis of contract sum or time for completion, the Superintending Officer (SO) may issue an instruction to the contractor to provide its explanation to the ambiguity concerned and make the necessary adjustment to the term involved. Referring to the earlier example of discrepancy in specification of marble tiles or porcelain tiles, such instruction shall clarify as to which tiles will be used to the bathrooms in issue. 

Upon receipt of such instruction from the SO, if the contractor is of the view that the instruction will give rise to loss and expense and/or schedule delay, the contractor shall notify the SO in writing pursuant to Clause 4.4(2). The contractor’s entitlement to any additional payment in respect of loss and expense or extension of time, is subject to its compliance with the associated condition precedents found in Clauses 14, 23 and 32. Any compensation for loss and expense will only be allowed if it could not have been reasonably foreseeable by an experienced contractor, assuming a diligent perusal of the documents submitted prior to contract. Whilst loss and expense compensates the contractor for heads of claims that are of overhead cost by nature such as prolongation cost, additional preliminaries and/or disruption cost, what is noticeably absent is the direct cost arising from the SO’s instruction. Assuming the SO’s instruction clarifies that the bathroom finishes shall be marble tiles, the loss and expense merely compensates the contractor for its additional indirect cost for managing the project over an extended period of time. The direct cost is not ordinarily compensated under loss and expense claim. In this regard, the direct cost accounts for increase in contract sum due to extra over cost of marble tiles over porcelain tiles. Interestingly, the subsequent Clause 4.4(3) states that if the SO’s instruction result in reduction in contract sum, such reduction shall be valued in accordance with Clause 20. It appears that the cost claims under PSSCOC caters to two exclusive categories namely (1) additional indirect cost and (2) reduction in direct cost.

In most cases of loss and expense claims, it is quite common for relief to be granted only if the event was unforeseeable even by an experienced contractor, such as adverse ground condition. The presumption is that the contractor is in a better position in terms of execution of construction works and therefore is able to better manage the relevant risks. However in the case of discrepancy and ambiguities in contract document, the Employer and its consultants arguably played a dominant role in preparation of drawings, pricing schedule, choice of standard conditions, specification drafting etc. A strong case could be made that it is the Employer and the Architect who had more responsibility in preparation of the contract term than the contractor. It is therefore unclear whether it made sense to place a unilateral burden on the contractor such that the ambiguities and discrepancies must not have been foreseeable by the contractor before claim is allowed. In the next section of this article, the responsibility of the drafter will be examined as regards rule of interpretation. 

The likely explanation as to why SIA form do not allow for claims in case of contract terms ambiguity can be found in its Article 8. Under this article, prices submitted by the contractor shall be inclusive of all works, including those that either indispensably necessary to carry out and bring to completion the construction works or which may contingently become necessary to overcome difficulties before completion. Such lump sum and all inclusive clause makes it challenging for contractor to successfully raise any claim that its price is not sufficient to bring the works to completion because of difference in interpretation of say specifications and/or drawings.

Contra Proferentem Rule – SIA Article 10(1)(c)

Contra proferentem is a rule of contract interpretation where in case of ambiguity, the term shall be construed against the party who was responsible for the drafting. Although contra proferentem rule works against the party responsible for the draft, it should be noted that the drafting of SIA form is led by the Singapore Institute of Architects (SIA) as opposed to the Employer. Whilst the Architect is not a contracting party, it is engaged by the Employer to act as its agent, amongst others. Therefore where the contra proferentem rule applies, it is reasonable to assume that it shall work against the interest of the Employer. This is because the Employer is usually responsible for the choice of contract form to be used and such SIA form is drafted by its agent’s professional institution.

In Singapore, where there is ambiguity in the contract conditions, the court will look at the surrounding context and the purpose of the agreement i.e. the ‘factual matrix’ to ascertain the true meaning of the term in issue. Therefore if on proper construction of the contract based on the surrounding context the ambiguity can be resolved, the contra proferentem rule need not apply. Article 10(1)(c) of the SIA form states that the contra proferentem rule shall not apply either to the Articles or Conditions of the SIA Building Contract 2016. The aim of this Article 10(1)(c) is to prevent any ambiguity to be construed against the Employer, in case contra proferentem rule is applicable. In this regard, Article 10(1)(c) act as an exclusion clause. However it is curious that such exclusion is only applicable to Articles or Conditions of the SIA form. This presumably excludes all other documents that are commonly included in contract such as specifications, pricing schedule, drawings, letter of acceptance, contractor’s submissions, tender clarifications etc. It is likely that these groups of documents may contain ambiguities that are commercial by nature than the Articles and Conditions of SIA form. Therefore the very documents that are likely to contain commercial ambiguities that underpins the basis of contract sum and time for completion are curiously excluded from the effects of Article 10(1)(c). The likely explanation for this approach is that most of these commercially related documents would contain certain order of precedence based on the dates on which these were issued for negotiation and agreement. In other words any changes or evolution to these documents would exhibit certain paper or digital trail. Therefore it is not difficult for the court to construe the appropriate meaning of the terms in issue by following the chronology of events.

Letter Of Acceptance

Whilst most of the mechanism to resolve inconsistencies and ambiguities in contract document are found in standard forms of contracts, there could be similar provisions included in letter of acceptance. In other words, there may be conflicts within resolution of conflict provisions. As the template letter of acceptance is typically provided by the consultant quantity surveyor appointed by the Employer, these templates could be used from project to project regardless of contract form adopted. These template letter of acceptance may stipulate that the terms included in such letter shall take precedence over any other conditions, articles of agreement, correspondence etc. Depending on positions taken by disputing parties, these competing provisions may give rise to ‘battle of forms’. 

Notably some may take the position that a letter of acceptance represents nothing more than an acceptance of an offer. Such letter should not introduce any new terms, unless it is a counter offer. The terms that is accepted by way of such letter could be found in the offer i.e. the tender submissions made by the contractor. Such submission typically include the standard form of contract including the provisions to resolve ambiguities, conflicts and discrepancies. Therefore, the letter of acceptance should not take precedence over the contract form adopted by the parties. On the other hand, if parties dispute over the conflicting mechanism during the process of compilation of contract document, the only document that was signed by the parties was the letter of acceptance. In this regard pending the formalisation of the complete contract document, the letter of acceptance may carry more weight of evidence from the perspective of a state court or arbitral tribunal. Therefore parties should pay special attention to the letter of acceptance to ensure that it does not create more conflict than it intends to resolve.

Conclusion

Provisions resolving conflicts, ambiguities and discrepancies do not get the necessary attention that it deserves during tender negotiations. For some, these mechanism may be regarded as ‘standard’ provisions. Unfortunately those who do not examined these provisions adequately may find that it could be a costly mistake particularly when it consist of discrepancies with commercial nature. Indeed these provisions should not be contentious during negotiation because both parties have the very same incentive to ensure clarity in contract terms.




Koon Tak Hong Consulting Private Limited