Contract Administration – Tender and Contract Law Case Study

Question 1

On 10 April 2024, a government-linked agency (the Client) issued a tender to a select group of pre-qualified contractors for the restoration and adaptive reuse of an existing historic building in Singapore. This project involved extensive structural strengthening, façade restoration, and internal fit-out to convert the building into a modern arts and exhibition space.

Pinnacle Construction Pte Ltd (PCL) and Grand Heritage Builders Pte Ltd (GHB) were among the pre-qualified contractors who responded to the tender. They received the tender documents, which included the Invitation to Tender, Tender Form, detailed architectural and structural drawings, heritage preservation specifications, and other tender information.

On 30 June 2024, the tender closed. After a thorough evaluation process, the contract was awarded to GHB. PCL, despite submitting the lowest bid, subsequently expressed strong dissatisfaction with the outcome and threatened legal action against the Client, alleging an “unfair” evaluation process and a “misjudgement” in the award.

GHB, who submitted the second lowest bid, was to complete the complex restoration project within 18 months from the commencement date of 1 September 2024. The contract was valued at SGD$120 million, with monthly progress payments to GHB based on certified work done. A Superintending Officer (SO) was appointed as the contract administrator for this project.

As the Client’s Contracts Manager, you assist the SO in ensuring all procedures and requirements of the Public Sector Standard Conditions of Contract (PSSCOC) 2020 are strictly adhered to. 

Your Task

With reference to the case above, answer the following questions in the context of the PSSCOC and general contract law in Singapore. You are not expected to copy and paste clauses from the PSSCOC; you may cite the clauses and explain their essence in your own words to support your answers.

(a) In the context of contract law in Singapore, explain whether PCL’s tender submission constituted a binding offer to the Client. If not, why not? Discuss whether PCL would be successful in any legal action against the Client concerning the tender award process.

Support your answer with relevant legal principles and, if applicable, relevant case law concerning invitations to treat and tender awards.

(b) During the façade restoration works, GHB unexpectedly encountered extensive hidden dry rot and termite infestation within the original timber structural elements of the historic building. This issue was not evident from the pre-tender building surveys provided by the Client. Addressing this required specialised timber treatment, structural reinforcement, and additional work at significant extra cost.

GHB immediately wrote to the SO, detailing the unforeseen conditions, including their cost and time implications. However, this was rejected by the SO, as the SO believed the Contractor, being responsible for the works, should have anticipated such risks in a restoration project.

Assuming GHB duly provided written notice to the SO within the required timeframe as per PSSCOC, discuss whether GHB would be successful in their claim for additional payment and EOT. Provide reasons based on PSSCOC provisions regarding unforeseen physical conditions.

If successful, what specific relief (e.g. types of compensation, impact on contract time) would GHB be entitled to under PSSCOC?

(c) Based on the scenario in (b), the specialised dry rot treatment and timber reinforcement methods are new and unique, with no equivalent items or rates in the contract. Additionally, the exact quantity of affected timber cannot be measured until the work is actively underway due to the nature of the infestation’s spread. Advise the SO on the appropriate valuation method and the payment procedure for this work.

(d) Shortly after the structural strengthening phase, the SO instructed GHB to omit the specified installation of a large, custom-built glass skylight from the contract. The original contract sum included a significant allowance for this specific skylight.

Discuss whether GHB has the right to object to such an instruction. Explain the SO’s powers to issue such an instruction under PSSCOC.

If GHB later discovers that the omitted skylight was subsequently awarded by the Client to another specialist contractor at a significantly lower price than the original contract allowance, discuss what actions GHB should take to protect their contractual interests. Support your answer with relevant PSSCOC clauses and general legal principles regarding omissions.

(e) The project specified the use of custom-fabricated, heritage-grade roof tiles supplied by a specialist artisan workshop in Thailand (Heritage Tiles Co.). The tiles were to be delivered to Singapore in three shipments. After the first shipment was delivered to GHB’s site and duly installed, an unexpected political unrest in Thailand severely disrupted transport logistics, causing a significant delay to the second and third shipments.

GHB refuses to issue payment to Heritage Tiles Co. for the first shipment of tiles, arguing that they themselves have not yet received payment from the Client for the supply and installation of these tiles, and the overall project is now facing delays due to the disrupted supply chain. The supply contract between GHB and Heritage Tiles Co. stipulates payment within 30 days of delivery on-site.

Discuss whether GHB is contractually entitled to withhold payment for the first shipment of roof tiles, given the delay in the subsequent shipments and their own payment status.

Explain the general principle of ‘Pay When Paid’ clauses in supply contracts under Singapore law and whether such a clause, if present, would alter your advice.

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Expert Answers on Above Questions on Contract Law

Tender submission and legal action

In the given scenario, the submission of tender by PCL is not considered as a binding offer rather it can be a response to any invitation to treat. As per the Singapore contract law, the tender invitation is considered as an offer and the submission made by the contractor is an invitation that needs to be accepted by the client. It implies that there is no any obligation on the client to accept the lowest bid, unless it is stated clearly. In the given scenario, PCL is not likely to succeed until it proves the breach of procedural fairness, and the existence of a binding contract.

Unforeseen conditions claim

The claim under the unforeseen physical condition can be possible to GBP as per PSSCOC 2020 provided the conditions were not reasonably foreseeable and there was a proper notice provided. The chances of success of GHB depends on the additional payment, extension of time and the adjustment of contact amount.

Valuation method

The most appropriate method is the cost based evaluation or it can be the new rates that have agreed between the parties. The payment procedure can be to make an entry for labour, materials and equipment utilisation and provide a detailed breakdown of the entire cost.

Omission of skylight

It is difficult for GHB to refuse an instruction if it falls within the SO’s variation power under PSSCOC 2020. The power of SO suggests that he can omit work and vary the scope of work. However if the omitted work is assigned to another contractor, it will result in a breach of contract principles. GHB can therefore claim the loss of profit on the omitted work.

Payment for roof tiles

The option to withhold payment is not available to GHB because according to the contract, the payment needs to be made within 30 days of delivery, and the obligation for payment is independent of client payment.
Pay when paid clause – According to Singapore law, this type of contract is restricted or unforeseeable in many cases.

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