Avoiding Pandemic Panic – A Guide for the Construction Industry during the MCO – Part 2

Part Two – The Covid-19 Pandemic and Movement Control Order – It this an EOT event in PAM and PWD Standard Form Contracts?

In Part 2 of our update, we will examine the commonly used standard form contracts in Malaysia – Pertubuhan Arkitek Malaysia (PAM) and Public Works Department (PWD) standard form contracts to assess whether the MCO and pandemic will give the contractor the right to apply for an extension of time. 

The PAM Standard Form Contracts

Under the standard form PAM Contract 2006 (Without Quantities) and PAM Contract 2018 (Without Quantities), a contractor may be able to apply for an extension of time on account of the Movement Control Order (MCO) or the Covid-19 pandemic. 

Article 7(ad) of the PAM Contract 2006 reads as follows:

“…Force Majeure means any circumstances beyond the control of the Contractor caused by terrorist acts, governmental or regulatory action, epidemics and natural disasters…”
(Emphasis added) 

Clause 23.1 of the PAM Contract 2006 allows a contractor to apply for an extension of time if there would be delay to the works beyond the completion date caused by any of the relevant events stated in Clause 23.8.  Under Clause 23.8(a), Force Majeure is one of the specific relevant events. There are similar provisions in the PAM Contract 2018 edition.

The PWD Standard Form Contracts

The PWD forms take a slightly different approach.  In the standard PWD Form 203 (Rev. 1/2010) and PWD Form 203A (Rev. 1/2010), it seems, at first glance, that the MCO and pandemic are not automatically grounds for a contractor to apply for an extension of time as both MCO and pandemic do not fall under the definition of ‘Force Majeure’.

1. Clause 43.1(a) provides that force majeure can be an event to allow an extension of time.
2. Clause 58 is the force majeure clause. However, pandemic, epidemic and government restrictions or lock downs are noticeably not included under ‘Event of Force Majeure’ under Clause 58.2.

Note, however, that Clause 43.1(i) states that “the Contractor’s inability for reason beyond his control and which he could not reasonably have foreseen at the date of closing of tender of this Contract to secure such goods, materials and / or services as are essential to the proper carrying out of the Works;…” is a ground on which an extension of time may be applied for and granted. Such wording is similar to the wording of many force majeure clauses.  

This clause may potentially be used as a ground to seek an extension of time, since it may arguably be said that the MCO and the pandemic may have prevented the contractor from obtaining the required resources, and is a reason beyond his control and which could not have been reasonably foreseen. However, it must be borne in mind that Clause 44.1 on Claims for Loss and Expense does not list delays covered by Clause 43.1(i) as a ground for a claim for loss and expense. 

In the standard PWD Form DB (Rev. 1/2010), the provisions for force majeure and extensions of time are similar to those found in PWD Form 203 and 203A.  

1. Clause 49.1(a) provides that force majeure can be an event to allow an extension of time.
2. Clause 67 is the force majeure clause. However, pandemic, epidemic and government restriction or lock downs are again not included under ‘Event of Force Majeure’ under Clause 67.2.
3. Clause 49.1(i)  is similar to Clause 43.1(i) in PWD Form 203 (Rev. 1/2010) and PWD Form 203A (Rev. 1/2010).
4. Clause 49.2 similarly does not include delays arising from Clause 49.1(i) as a ground to claim loss and expense.

Other Important Considerations 

While it appears that the MCO and the pandemic may give rise to grounds to apply for an extension of time under the PAM and, probably, the PWD standard forms, the procedures and conditions stipulated thereunder must still be complied with. In both contracts, there are no provisions that waive or relax procedural and conditions precedent compliance even with the occurrence of force majeure. Parties ought to be mindful of the following:

1. To apply for an extension of time under the standard form PAM Contract 2006 (Without Quantities) and PAM Contract 2018 (Without Quantities), a contractor shall:
   • within 28 days of the MCO (or the pandemic affecting the works, whichever is earlier), give written notice supported with particulars and an estimation of the extension of time required to the Architect to notify him of the intention to apply for an extension of time (Clause 23.1(a));
   • gather supporting documents, if any, to assist the Architect in assessing the extension of time application (Clause 23.1(b));
   • within 28 days of the end of the MCO (or the pandemic affecting the works, whichever is earlier), send to the Architect the final claim for extension of time supported with the particulars and/or supporting documents, if any (Clause 23.1(b));
   • where applicable, prepare to respond to the Architect’s query or request for further particulars (Clause 23.3);
   • where possible, mitigate to prevent any further delay (Clause 23.6);
2. To apply for an extension of time under the standard form PWD Form 203 (Rev. 1/2010) and PWD Form 203A (Rev. 1/2010), a contractor shall:
   • within a reasonable period of the MCO (or the pandemic affecting the works), give written notice to the Superintending Officer with relevant information and supporting documents, if any (Clause 43.1);
   • where possible, mitigate to prevent any further delay (Clause 43).
3. To apply for an extension of time under the standard PWD Form DB (Rev. 1/2010), a contractor shall:
   • within a reasonable period of the MCO (or the pandemic affecting the works), give written notice to the Project Director with relevant information and supporting documents, if any (Clause 49.1);
   • where applicable, mitigate to prevent any further delay (Clause 49).
4. It is also important to note that for the PWD standard forms, as every project is different in terms of programming and construction period, what constitutes a “reasonable period” for the purposes of the extension of time clause may differ from one project to another. Parties are recommended to exercise diligence and be expeditious in giving notice to the Superintending Officer or Project Director, as the case may be. At the very least, as a matter of good practice, if certain procedural provisions cannot be complied with due to the suddenness and immediacy of the MCO, such limitations must be made known at the onset or as soon as possible.

Contributed by:

Joshua Chong (Partner)
(E): joshuachong@rdl.com.my
(D): 03-26329876

Chen Huan Yung (Associate)
(E): hychen@rdl.com.my
(D): 03-26329947