IMPEDIMENTS FACED BY CONTRACTORS IN RECOVERING SMALL QUANTUM CLAIMS IN THE SINGAPORE CONSTRUCTION INDUSTRY

Abstract

A construction project typically involves many parties, such as the owner, architect, consulting engineers, main contractor, sub-contractors and suppliers. The value as well as the complexity of the transactions between the different parties varies greatly. For example, the obligations as well as the values involved in the two main contracts, namely the design contract between the owner and the architect or engineer and the construction contract between the owner and the main contractor could be different from a supply contract between a specialist sub-contractor and its suppliers.

While there are numerous standard forms of contract which can be utilised for main construction works and the contracts between the owners and the architects/engineers, there has been little focus on developing such boiler plate contracts for contractual transactions involving sub-contractors, suppliers and other service providers. This may be due to the paltry sums involved. However, one must note that each main contract would result in a high volume of sub-contracts as well as supply contracts. While the Building and Construction Security of Payment Act has been developed to improve the cashflow in the construction industry, such move may not benefit contractors with small quantum claims due to the lack of documents supporting such claims and also due to the legal costs involved.

The lack of written evidence concerning smaller claims in the construction industry which involve minor players such as the small sub-contractors, suppliers and casual labour/service providers, may also impede the dispute resolution process. A survey conducted for this dissertation reveals that the lack of documents is a major issue in companies contracting in the lower hierarchies of the construction industry. Respondents have also indicated that the high cost of recovery of owed payments deter them from recovering legitimate claims. Further research reveals that in England, the New Engineering Contracts (NEC) has developed a standard form of contract, named the Supply Short Contract as part of the NEC 3 family of contracts. This dissertation recommends that a similar form specifically for small quantum claims be developed under the charge of a related construction industry association. A dispute resolution method is proposed as part of the contract to provide speedy and efficient settlement at a nominal cost.