Govt to bring forward another S$700m of construction jobs

Singapore

RECOGNISING that the construction sector is undergoing a difficult time, the government is looking at measures to help local SME (small and medium enterprise) contractors, including bringing forward S$700 million in construction projects.

This is on top of the S$700 million worth of public infrastructure projects that the government is bringing forward to 2017 and 2018, as announced during the Budget this year, bringing the total amount to S$1.4 billion.

Minister for National Development and Second Minister for Finance Lawrence Wong announced this at the Singapore Contractors Association Ltd's (Scal) 80th anniversary gala dinner on Thursday.

During his speech, Mr Wong outlined three areas the government is looking at to boost the ailing sector - stimulating demand, building capabilities and reviewing regulations.

The construction sector has been contracting for four consecutive quarters, largely due to a sharp drop in private-sector projects, and many contractors are feeling the squeeze.

The new batch of projects that will be brought forward to stimulate demand will similarly be smaller, with a contract size of mostly below S$100 million. These will be public infrastructure projects such as upgrading of community and neighbourhood facilities, which SME contractors are able to take up.

Mr Wong said: "Some projects have already started, so contractors have already started to bid for them, but many of them will be rolled out later this year and in 2018. And contractors would have a chance to bid for these projects."(See amendment note)

These projects are expected to be launched over the next one to two years but some projects may take time and may even stretch to end-2019 because time will be needed for design and planning.

The government will continue to monitor the industry closely and adjust the pace of the public sector projects if necessary, he added.

Besides stimulating demand, the government will tweak procurement rules to better align incentives to strengthen capabilities via a focus on quality, productivity and safety.

One of the areas the government will adjust is the price-quality method (PQM) used by public agencies to evaluate construction tenders.

Currently, the price component is around 70 per cent for building projects, while the non-price or quality assessment is just 30 per cent, said Mr Wong. So the government is raising the weightage for non-price component to around 40-60 per cent.

He said: "For simple building projects, it can be 40 per cent, if it is more complex, it can go up to 50 per cent and even 60 per cent, more than the price component."

The quality portion will be assessed based on contractors' past performance, productivity and safety records, he noted.

To foster more collaboration among the various stakeholders in the construction process, a working committee for Collaborative Contracting, comprising industry associations such Scal and the Singapore Institute of Surveyors and Valuers, as well as various government agencies has been set up.

Mr Wong said: "We are very keen to encourage this sort of collaborative approach; so that it is not just a linear process but all the various parties can come together and there can be early upfront contractor involvement."

Lastly, one of the rules the government is reviewing is the requirement of having resident engineers (REs) and resident technical officers (RTOs) to supervise construction works on-site.

Mr Wong said as the intensity of work is generally lower at the start and end of a project, it is possible to reduce the requirement for REs and RTOs at these stages without compromising safety.

The revised regulations will come into effect later this year.

Reacting to the announcements, Kenneth Loo, president of Scal, told The Business Times that bringing forward another S$700 million worth of projects is a good gesture and could hopefully inject some positive sentiment to the sector.

He also lauded the tweak in PQM, noting that it will probably change contractors' behaviour. "Because if you see that you need to concentrate on these capabilities improvement to win tenders, then you will move into that to ensure your success," he said.

During his speech, Mr Loo announced that Scal will be developing a new Construction Hub to help the construction sector to be prepared in building for Singapore's future economy. The new hub, which will be built within three years, will house training facilities and showcase new construction methods and productive technologies, among others.

Amendment note: An earlier version of this article incorrectly stated Mr Wong's quote as "Some projects have already started, so contractors have already started to build for them." What he meant was: "Some projects have already started, so contractors have already started to bid for them". The article above has been revised to reflect this.