Malaysia imposed a Movement Control Order (MCO) effective from 18 to 31 March 2020 as a measure to curb the spread of Covid-19. The MCO applied to building projects, except for critical works essential to safety.
On 22 March 2020, we published an article discussing the impact of the MCO on building projects that adopt the Pertubuhan Arkitek Malaysia (PAM) Conditions of Contract 2006/2018.
In this article, we consider Frequently Asked Questions (FAQs) from the standpoint of the FIDIC Yellow Book (First Edition 1999). The same principles generally apply to the corresponding provisions in the FIDIC Yellow Book (Second Edition 2017).
Projects—whether local or international—governed by FIDIC Conditions of Contract between Malaysian companies, between Malaysian and foreign companies, or even between foreign entities may find this article useful. However, local laws must always be taken into account, as they may affect interpretation.
Introduction
FIDIC Forms of Contract are commonly identified by colour codes:
-
FIDIC Green Book – Short Form of Contract for small or simple projects.
-
FIDIC Red Book – Conditions of Contract for Construction where the design is by the employer.
-
FIDIC Yellow Book – Conditions of Contract for Plant and Design-Build where the design is by the contractor.
-
FIDIC Silver Book – Conditions of Contract for EPC/Turnkey Projects, where both design and execution are carried out by the contractor.
FAQ (1): Does the MCO or a Lockdown Order entitle the contractor to an extension of time (EOT)?
Yes. The FIDIC Yellow Book provides for extensions of time when events like the MCO or a lockdown order occur. These rights are governed by several clauses.
FAQ (2): Which provisions govern EOT under the FIDIC Yellow Book?
There are several key provisions relevant to the MCO or lockdown situation:
(a) Clause 8.4(d) – Unforeseeable shortages of personnel or goods
This clause applies when there are unforeseeable shortages in the availability of personnel or goods caused by an epidemic or governmental action.
Since “personnel” is not defined, it can include consultants, public authority officers, or utility personnel. “Goods” is defined broadly to include equipment, materials, plant, and temporary works.
Because the MCO is a governmental action and Covid-19 is an epidemic, any unforeseeable shortage caused by them may entitle a contractor to an EOT.
(b) Clause 8.5 – Delay caused by authorities
This clause applies where:
- The contractor diligently followed the procedures laid down by public authorities;
- The authorities delayed or disrupted the contractor’s work; and
- The delay or disruption was unforeseeable.
If compliance with the MCO delayed works, and such delay could not have been foreseen by an experienced contractor at tender submission, an EOT may be granted under this clause.
However, for contracts entered during or after the Covid-19 outbreak, such delays may no longer be considered unforeseeable.
(c) Clause 13.7 – Change in legislation
If the MCO or lockdown order amounts to a regulation or law change, contractors may claim an EOT if performance was delayed as a result. This applies when the change occurs after the “Base Date” (28 days before the latest tender submission date).
(d) Clause 19.1 – Force majeure
Force majeure refers to exceptional events beyond the control of the parties, which could not reasonably have been foreseen or avoided.
Covid-19 and the MCO/lockdown order satisfy all four conditions for force majeure. Therefore, contractors may be entitled to EOTs under this clause.
If the lockdown results in a “lockout” (a suspension of work not caused by the contractor), it may also fall within the scope of force majeure.
FAQ (3): What must the contractor do to claim the EOT?
Two key requirements must be met: notification and submission of particulars.
-
Under Clause 20.1, the contractor must notify the Engineer within 28 days of becoming aware (or should have been aware) of the MCO or lockdown.
-
Within 42 days thereafter, a detailed claim supported by particulars must be submitted.
For force majeure claims under Clause 19.1, a Notice of Force Majeure must also be given within 14 days to the Employer, specifying the affected obligations.
FAQ (4): What if the MCO or lockdown order is extended?
If the MCO or lockdown is extended, contractors must submit monthly interim claims outlining cumulative delays. A final claim must be filed within 28 days after the end of the order.
FAQ (5): What is the extent of EOT entitlement?
The EOT period may not necessarily match the exact duration of the MCO or lockdown. There may be knock-on effects such as supply chain delays, workforce shortages, and remobilisation issues once work resumes. Each case will depend on its specific facts.
FAQ (6): Can the contractor claim additional costs or loss and expense?
Clause 1.1.4.3 defines “Cost” as all expenditure reasonably incurred by the contractor, including overheads but excluding profit.
Change in legislation (Clause 13.7):
Where a lockdown order constitutes a change in law, contractors may claim additional costs under this clause, provided they meet the notice and particulars requirements.
Force majeure (Clause 19.4):
If the MCO results in a lockout, contractors may also claim additional costs under this clause, subject to compliance with the notification procedures in Clause 20.1.
However, not all delay events entitle contractors to additional cost recovery. Cost control measures should still be observed during enforcement periods.
This joint publication is contributed by:
Foo Joon Liang FCIArb
Partner, Gan Partnership
Email: joonliang@ganlaw.my
Grace Chaw MCIArb
Partner, Grace Chaw & Co
Email: lawyer@gracechaw.com
Kaylee Tan Jin Yee
Associate, Gan Partnership
Email: kaylee@ganlaw.my
Disclaimer:
This article is for general information only and should not be relied upon as legal advice.
The information herein is accurate as of 24 March 2020.
For further enquiries, please contact:
Foo Joon Liang (joonliang@ganlaw.my) or Grace Chaw (lawyer@gracechaw.com)
