Labour crunch and offer delays: Some construction companies in Singapore feeling any risk of strain of COVID-19

Construction firms in Singapore are needs to feel any risk of strain from labour shortages and supply chain disruptions caused by the outbreak of COVID-19, with some seeking deadline extensions because of their projects.

Singapore had its first confirmed case of the novel coronavirus on Jan 23 and since that time, this number has increased to 91 on Tuesday (Feb 25).

Within measures to curb the spread of COVID-19 here, the Manpower Ministry said earlier this month that work pass holders with travel history to China in the last 14 days should be approved by authorities before entering the united states. A lot of the 30,000 work pass holders from China have not returned according to Manpower Minister Josephine Teo. Those who return will be located on a 14-day leave of absence.

These new requirements, alongside a decrease in flights to and from China, have slowed up the return of Chinese workers, exacerbating a preexisting manpower crunch in the construction sector, industry players told CNA.

“Even before COVID-19, there’s already a shortage of employees as the industry, that was in a downturn previously, slowly recovers and is seeing more construction projects,” said Mr Kenneth Loo, executive director and chief operating officer of Straits Construction Singapore.

“These (new rules) have only aggravated the shortage.”

At Teambuild Construction Group, it has seen a “significant impact” as many of its personnel with expertise in areas such as for example reinforced concrete works, are from China.

Increasing its manpower woes, there's been a “sharp rise” in the amount of Bangladeshi and Indian personnel requesting to come back home, a company spokesperson told CNA.

Echoing that, Mr Loo said his firm has also seen a number of such requests following news that five Bangladesh workers tested positive for COVID-19 in recent weeks.

“The workers are incredibly worried about catching the disease here,” he said.

Besides labour woes, industry players also need to contend with the problem lately deliveries of machinery and recycleables such as for example tiles and steel coils, as factories in China were shut for a long period after Chinese New Year and also have been slow to restart.

Nearly two thirds of those surveyed by the Singapore Contractors Association Limited (SCAL) said their supplies of materials and equipment have been “severely or very severely affected”. The poll done by the association the other day involved 133 of its members.

Not just construction recycleables, companies are also facing a shortage of face masks, including the N95-type masks, which personnel don as part of their protective gear during functions such as cutting and cement mixing, said SCAL’s president Ng Yek Meng.

The coronavirus outbreak in addition has caused work to slow down and 73 % of respondents indicated severe impact on their cashflow, the same survey showed.

CONCERNS ABOUT PROJECT DELAYS

Altogether, these have given rise to worries among industry players about possible missed deadlines.

Teambuild Construction Group, for example, said it really is "currently seeking all possible assistance" to request for extension of time (EOT) as the impact has been "substantial".

It isn't alone. A Feb 18 report by Reuters said some local construction organizations are seeking legal services on invoking the force majeure clause in their building contracts. Force majeure identifies unexpected external circumstances that prevent a celebration from meeting contractual obligations.

Ms Spring Tan, partner at Withers KhattarWong, said regulations firm has spoken to four clients with “preliminary inquiries, not especially on the option of invoking force majeure but if they can get EOT to complete their projects”.

These businesses either employ Chinese personnel or subcontractors, or have factories in China that contain had to close. Struggling to meet production and delivery deadlines, they are worried, said Ms Tan.

“Our clients tell us they are not feeling the entire brunt of the impact currently as the situation is still evolving, and for now owners (and) developers remain understanding,” she added.

“However, construction firms are and really should be exploring their options in case the situation worsens.”

Invoking force majeure clauses may be an option, nonetheless it remains an unknown “whether or not (it) will succeed as grounds for EOT under these situations”, Ms Tan told CNA.

Amid concerns about possible project delays due to COVID-19, the Building and Construction Authority (BCA) has informed contractors involved with public sector projects that they could submit claims for EOT beneath the contract provisions.

It has additionally advised government procuring entities to be prepared to evaluate such claims for EOT and has sought the support of the true Estate Developers' Association of Singapore (REDAS) for private sector projects that are similarly affected, a BCA spokesperson said.

Separately, SCAL said it'll be meeting REDAS to discuss this issue.

SECTOR’S GROWTH OUTLOOK 

The near-term woes of builders in Singapore also have tossed up questions about the growth outlook of the industry, which includes been named as one of the bright spots for the Singapore economy this year.

After 3 years in contraction, the construction sector returned to full-year growth of 2.8 % in 2019. Amid an overall dim outlook for 2020, policymakers expect it to keep the recovery with “steady growth” on the back of a solid rebound in construction demand.

Estimates from BCA expect between S$28 billion and S$33 billion worth of contracts to be awarded in 2020, with around 60 per cent being public sector projects.

Maybank Kim Eng economist Lee Ju Ye told CNA that she will not expect the bubbling worries as a result of COVID-19 to derail the sector’s recovery. For this year, she actually is penciling in growth of between 2 to 2.5 %.

But she cautioned that the sector could have a hit in 2021 on the trunk of newly announced tighter quotas on skilled foreign labour.

Last week, Deputy Prime Minister Heng Swee Keat announced in his Budget statement that the S-Pass sub-Dependency Ratio Ceiling (DRC) will be cut for the construction sector. This will be achieved in two steps: from 20 % to 18 per cent on Jan 1 next year, and 15 % on Jan 1, 2023.

Ms Tan echoed these concerns: “There already are COVID-19-related manpower and material delays and today, in conjunction with these foreign manpower cuts, (our clients) are incredibly worried about completing current projects."

SCAL’s Mr Ng said the brand new foreign worker curbs enhance the disappointment felt by some smaller construction organizations about Budget 2020.

These smaller players, which is the most vulnerable if the COVID-19 outbreak is dragged out, were longing for some targeted help to tide through the labour crunch and offer disruptions but saw their hopes dashed.

“Next year’s reduction will surely have a huge impact on us as over fifty percent of the construction supervisory staff are S-pass holders,” said Mr Ng, adding that it remains a challenge to recruit locals who shun jobs from the industry.

"We just can’t find Singaporeans to fill these jobs at the work sites."

To greatly help, the association said it will continue to work with firms to find answers to attract, retain and retrain more locals with different skillsets to become listed on the construction industry. Additionally it is working with BCA to complement mid-career professionals to the sector.

In a bid to assist companies within their manpower needs amid the COVID-19 outbreak, the Manpower Ministry on Tuesday announced that manufacturing and services sectors will soon manage to hire work permit holders who already are in Singapore. The short-term scheme will run for half a year.