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Covid-19: Construction Industry Players, Start Your Engines!

16 April 2020

As Malaysia transits into the third phase of the Movement Control Order (‘MCO Phase 3’), the Malaysian Government has moved to allow additional economic sectors to operate during this period. This includes, among others, construction projects and services related to construction works. However, construction industry players who intend to resume operations during MCO Phase 3 should take note that they are required to comply with the provisions under the third set of Frequently Asked Questions (‘MITI FAQs-III’) issued by the Ministry of International Trade and Industry (‘MITI’). This Alert sets out key information from the MITI FAQs-III, which is of relevance.
 
Type of Construction Projects and Related Services Allowed
 
Construction Projects and Related Services
 
Pursuant to Appendix I of the MITI FAQs-III, only the following construction projects and services related thereto are allowed to operate during MCO Phase 3:
 
  1. Projects whereby the main contractors are registered with the Construction Industry Development Board of Malaysia (‘CIDB’) as Grade 1 or Grade 2 contractors;
  2. Projects that have achieved physical progress of 90% and above;
  3. Tunnelling works;
  4. Maintenance works;
  5. Sloping works;
  6. Emergency works that are consequent to contractual obligations;
  7. Maintenance, cleaning and drying of stagnant water, spraying of pesticides at construction sites which prevent the breeding of Aedes mosquitoes and other pests;
  8. Other works that, if left incomplete, may result in danger;
  9. Building projects with an Industrialised Building System (IBS) score of 70 and above;
  10. Construction projects with accommodation facilities for workers (such as centralised quarters for workers or workers’ camp); and
  11. Professional services related to the construction industry, including architects, engineers, town-planners, land surveyors, quantity surveyors, project managers, facility managers and other relevant services.
In addition, MITI has clarified that contractors carrying out works such as building construction, renovation of premises, and installation of machines may apply for approval to operate despite such works not being specifically listed in Appendix 1.
 
As a matter to note, items (c) to (h) above were previously identified as critical works and were allowed to be carried out during the first and second phases of the Movement Control Order, subject to the company carrying out such works having obtained prior approval from the Ministry of Works or other relevant authorities[1]. Companies with approvals to operate during the first and second phases of the Movement Control Order should be aware that they are now required to re-apply for approval from MITI in order to operate and/or increase their workforce capacity during MCO Phase 3.
 
Relevant Products, Works, and Services
 
MITI has clarified that companies not carrying out the types of construction projects or services listed in Appendix 1 may also apply for approval to operate during MCO Phase 3, on the basis that such companies provide relevant products or services. Examples provided in the MITI FAQs-III include:
 
  • Supply of products such as raw materials, components or spare parts;
  • Provision of logistic services and machine maintenance services;
  • Companies related to the machinery and equipment sector;
  • Service suppliers within the supply chain of a specific construction project.
Industry-Specific Application Requirements
 
Companies in the economic sectors listed in MITI FAQs-III are required to apply for approval from MITI prior to commencing their operations during MCO Phase 3 in accordance with the procedure set out thereunder[2]. In addition, there are certain application requirements which are specific to the construction industry. These are summarised below:
 
  1. Companies are required to apply for a separate approval for each and every construction project or related service which they are undertaking;
  2. Subcontractors may only submit their applications for approval after the main contractors have received approval; and
  3. Applications will be assessed by MITI based on the class of the contractor (that is, the contractor’s grade of registration with CIDB) and the list of criteria in Appendix 1 of the MITI FAQs-III.
Compliance with Health and Safety Protocols and Operating Conditions
 
Companies which are granted approval to operate during MCO Phase 3 will be subject to health and safety protocols. These protocols are available on the Covid-19 Intelligent Management System (CIMS 2.0), which is the online system through which applications for approval from MITI are to be made, and must be agreed to by the applicant companies before they can register in CIMS 2.0.
 
In addition, such companies are required to comply with the operating conditions imposed by MITI. Failure to comply with these conditions is a criminal offence under Regulation 7 of the Prevention and Control of Infectious Diseases (Measures Within the Local Area of Infection 2020) and a person convicted of such an offence will be liable to a fine not exceeding RM1,000, imprisonment for a term not exceeding six months, or both. Where the offence is committed by certain non-individuals[3], the directors, certain officers, partners and managers of the non-individual may also be charged severally or jointly with the non-individual offender.
 
Commentary
 
While the MITI FAQs-III provide that only companies involved in the types of construction projects and related services listed in Appendix I thereto are allowed to operate during MCO Phase 3, it would seem the Malaysian Government recognises that allowing the resumption of operations will only be meaningful if relevant suppliers or service providers for these companies are also allowed to operate. This move may also assist construction industry players with managing or resolving aspects of construction projects which have been impacted by the Movement Control Order, in particular project timelines and costs.
 
Further, construction industry players will have to give careful consideration with respect to their compliance with health and safety protocols. Given that the COVID-19 pandemic is still at a severe stage, the implementation and enforcement of such protocols is a necessary measure to protect the welfare of employees and workers as well as the community at large.
 
Our Construction and Engineering Practice Group will continue to keep you updated on the latest developments.
 
If you have any queries, please contact our Mr. Shannon Rajan (Partner) at shannonrajan@skrine.com, Ms. Rachel Chiah (Associate) at rachel.chiah@skrine.com or Mr. Jeremiah Ch’ng (Associate) at jeremiah@skrine.com.
 
 
[1] Our Alerts on critical works for the first and second phase of the Movement Control Order are available here and here.
[2] Our Alert on the overview of the MITI FAQs-III, including the application process for approval, is available here.
[3] A non-individual includes a company, limited liability partnership, firm, society or other body of persons.

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