2020 Malaysia Movement Control Order (Perintah Kawalan Pergerakan Malaysia 2020) or MCO refers to a cordon sanitaire implemented as a preventive measure of the federal Government of Malaysia towards the 2019-2020 Corona Virus Pandemic (COVID-19) on 18 March 2020, thus a “movement control” was implemented throughout the country. The order was commonly referred to in some local and international media as the “Malaysia partial lockdown” or “Malaysia lockdown”. Malaysia later extended the movement control order II (MCO II) by two weeks until Apr 14 to contain the further spread of COVID-19, said Prime Minister Muhyiddin Yassin on Wednesday (Mar 25). On 10th April 2020, Malaysia has decided to further extend the movement control order III (MCOIII) by another 14 days until Apr 28.
I. Movement Control Order Impact on Contractor
The Government of Malaysia has gazetted the Prevention and Control (Measures Within the Infected Areas) Regulations 2020 (“Regulations”) which take effect from 18 March 2020 to 28th April 2020 (“Restriction Period”). Under the Regulations, the whole of Malaysia has been defined as an infected area. Any person found to contravene the Regulations faces the prospect of a fine not exceeding RM1,000.00 or to imprisonment for a term not exceeding 6 months or to both.
Malaysia Government take MCO very seriously, and on 19 March 2020, it has been reported that a construction firm in Kuala Lumpur was compounded for not adhering to the ongoing MCO. The firm was imposed with a RM50,000.00 fine for carrying out work despite having been given notice to stop work for two weeks.
A Contractor or any person who ignores or refuses to comply with a suspension order will not only risk breaching its contract with the Government but will additionally incur more costs in the form of fines under the Street, Drainage and Building Act 1974 (“SDBA”). Under the SDBA, any person who resumes performance of works which have been suspended, may be liable on conviction to a fine not exceeding RM50,000.00 or to imprisonment for a term not exceeding 3 years or to both and shall also be liable to a further fine of RM1,000.00 for every day during which the offence is continued after conviction. The foregoing does not include fines and imprisonment arising from other laws and regulations such as the Regulations.
II. Cost Impact on Contractor
In line with the MCO, all premises including, inter alia, government and private premises have been ordered to close, with the exception of any premises involved in the provision of essential services. Unfortunately, Under the Regulations, construction, operation and maintenance is not consider as essential services unless it is confirmed by Kementerian Kerja Raya (KKR) as critical work.
To provide clarity, the Ministry of Works (“KKR”) has made a further announcement that all construction work shall be subject to the MCO. Accordingly, all construction and maintenance work must stop. Only critical works are allowed to continue. Examples of critical works cited by KKR are:
- Slope Repairs;
- Pothole Repairs;
- Traffic Management Control (TMC);
- Periodical checks of lifts/travellators/escalators and other critical mechanical and electrical equipment;
- Repairs of lifts/travellators/escalators and other critical mechanical and electrical equipment;
- Maintenance works at premises of critical services;
- Upgrading works at premises of critical services;
- Traffic Light Repairs;
- Construction of Bailey Bridge at location of any collapsed bridge;
- Tunnelling Works;
- Other emergency works as specified under the contract; and
- Other works which if not completed would result in danger.
We know that in construction work, contractor had already estimated certain amount of budget to construct the specific project. The basic amount of money will go to the Material, Manpower, machineries and other daily or regular expenses such as office, utilities and etc. All this expenses are connected to the “TIME” or construction period of the project. Construction Cost is parallel to the construction period, the longer the construction work the more money need to be spend to the project. Some of the money can be claimable to the client or paymaster under “lost and expense” clause, however some of the it the contractor need to absorb the monitory loses.
The contractor loses under the unutilised Manpower at site
The Ministry of Human Resource published a statement on 19 March 2020 stating the following:
- The workers shall be paid throughout the Restriction Period. The contract of service shall continue notwithstanding the implementation of the MCO;
- The employers shall pay full salary to the workers based on the agreed rate under the contracts of service. Where there is no fixed rate, the employers shall ensure that the salary of workers does not fall below the minimum basic salary prescribed under the Minimum Wage Order 2020.
- Employers cannot force their workers to utilise their annual leave.
This will definitely increase the project cost as there will be no physical work will be construct on site. However, the contractor or the employer need to pay their workers salary as mentioned above. On some the site, the employer that use foreign workers need to provide food, drink, facilities and utilities due to the workers restricted movement.
The contractor loses under the unutilised Machineries at site:
There is no specific guideline issued on what the contractors should do with the machineries at the construction site. For any loss and damages incurred during the MCO, including loss and damages to the machineries, the KKR published a statement on 18 March 2020 which takes the position that the Government shall not be held liable because the Covid-19 contagious disease is deemed as a supervening event.
Thus, the idle machineries at side are under the responsibility of the contractor. However, under PWD203 Contract, the contractor must state their intention to “Claim For Loss and Expense” for any losses such as cost of manpower, machineries and etc under Clause 44 PWD 203, shall within 30 days to write to the Superintending Officer on his intention to claim and as soon as practicable or not later than 90 days to submit the mentioned claim together with the chronology and amount to be ascertained by the Employer.
III. Construction Duration
Arising from the MCO, there will be delays in the performance obligations thus resulting in a delay to the project as a whole. The Contractor can apply for an extension of time (“EOT”) to the Superintending Officer and it shall be made in accordance with the procedure and provisions of the underlying contract executed between the parties. Under the PWD203, this is under the Clause 43. Delay and Extension of Time, Sub Clause C. Suspension of Works under Clause 50.
As a conclusion, there is no other alternative for the contractor during the MCO except to follow the Government and the Superintending Officer instruction to stop their operation and construction activities. It is the best for the contractor to minimise their expenses, restructure and rearrange their planning and schedule for the project. Some of the contractor need to study their contract and their subcontracting agreement to minimise their loses. As mentioned earlier, the Clause 44 PWD “Claim For Loss and Expense” and Clause 43. Delay and Extension of Time can be study and claim accordingly. It is however a grey area on the “Claim For Loss and Expense” for the MCO issues, but the EOT is definitely should be awarded to the effected contractor.
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