A SLEW of changes will be introduced to reduce the risks that construction players bear and increase the quality of built environment projects in the public sector. 

Tenders for these projects submitted by consultants, such as those from architectural and engineering firms, will be evaluated with a greater emphasis on quality.

For instance, the government will increase the number of projects shortlisted by merit rather than ballot. Bids which fall below a certain threshold will also be disqualified, to discourage fee diving. 

The Standard Consultancy Agreement, which is the standard contract used for consultancy services for public sector projects, will also be amended to ensure that the procurement process remains fair and progressive. 

Consultants will have a clearer definition of what the scope of services are, benefit from fair and timely remuneration and share risks for unanticipated events, said Minister for National Development Desmond Lee, announcing the moves at the BCA-Redas Built Environment and Property Prospects Seminar on Monday (Jan 15).  

“For example, we will grant consultants cost-sharing for significant construction delays where the delays are due to issues beyond consultants’ control. This is in line with collaborative contracting principles,” he said.

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More details will be announced in the coming months and are expected to be rolled out later this year. 

Such cost-sharing measures already exist in contracts between government agencies and construction companies, which allow contract prices to be adjusted according to changes in key construction materials.

Construction costs rose sharply during the Covid-19 pandemic, causing some construction companies to run into financial difficulties. Notably, Greatearth, which was working on five Build-To-Order (BTO) projects, went into liquidation, and was unable to continue with construction works despite government assistance. This led to about 2,900 buyers facing long delays for their homes.

For 2024, the Building and Construction Authority (BCA) expects construction demand to fall between S$32 billion and S$38 billion in nominal terms, an increase from 2023 figures. 

Lee said that the upper bound of this estimate is higher than the preliminary demand of S$33.8 billion in 2023.This is in part due to an increase in tender prices, Lee said. 

“If the estimate is normalised to real values, BCA estimates that the 2024 construction demand would still be lower than pre Covid-19, or 2019 levels.” 

In 2024, public sector demand is expected to contribute about 55 per cent of total construction demand, or between S$18 billion and S$21 billion, while private sector demand will account for between S$14 billion and S$17 billion. 

Giving an update on the property market, Lee said both the private and public residential markets are “showing signs of moderating”.

“Demand is beginning to stabilise and transaction volumes across both markets have come down.” 

The rate of application for BTO flats among first-timer families for all flat types was 1.9 in 2023, much lower than the pre-Covid-19 rate of 3.7 in 2019. 

Lee noted that in the Housing and Development Board resale market, the proportion of buyers who paid cash over valuation (COV) also went down significantly in 2023, halving from almost 30 per cent in Q4 2022 to about 15 per cent in Q4 2023. COV is the amount a buyer has to pay in cash for the difference between the resale price of an HDB flat and its valuation by HDB, with lower COVs pointing to lower asking prices.