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Building productivity grants 'temporary': minister
NATIONAL Development Minister Lawrence Wong says construction productivity grants may not be always available.
Speaking to reporters at the site of Crowne Plaza Changi Airport's new 10-storey extension on Thursday, he said: "We see the grants as a very temporary measure in order to kick-start (the industry). Because, without this, nothing will move and it will be chicken-and-egg and nobody does anything.
"Grants are needed as a temporary measure to kick-start the industry and catalyse adoption . . . Over time, we can taper off the grants, and I think it will be economical and people will want to do this because it makes business sense."
Listed project developer OUE Ltd had gotten funding from the Building & Construction Authority's (BCA) Productivity Innovation Project (PIP) scheme under its Construction Productivity and Capability Fund.
An OUE spokesman declined to disclose how much funding support it received, but said that the amount helped to cover part of the additional costs of using the more productive Prefabricated Pre-finished Volumetric Construction (PPVC) technology instead of the conventional method.
Currently, the PPVC method costs 10-15 per cent more than the traditional building method. The PIP scheme caps funding support at S$10 million per application.
Asked then how helpful the grant is, the spokesman added: "The grant is a significant incentive. It is substantial in defraying the additional costs. It is an incentive for you to think about using PPVC, but it is not the only incentive.
"We didn't decide to go with PPVC based on the grant alone. There were other things that we had savings from by using PPVC that made our business case worthwhile to consider.
"You can do it faster, for example. You have to consider it from a holistic point of view. Requiring less time to build means you can open (the hotel) and get revenue in earlier."
The PPVC building process involves building entire hotel rooms in factory conditions, then assembling them on-site. The construction is currently at its halfway mark. About 112 of the 252 modules have been installed.
Using PPVC helps overcome constraints of the "difficult" building site, Irene Meta, senior vice-president of development and projects at OUE, told reporters.
The extension site is very small with limited access due to its location within the airport, aggravated by stringent traffic control restrictions.
With PPVC, fewer vehicles (75 per cent less) were required to deliver the materials. Assembly of the modules is also quieter than conventional methods, which means less disturbance for hotel guests.
Ms Meta said time savings for the construction of the rooms alone were about 50 per cent, but for the overall project - including the foundations and the transfer level - time savings were about 17 per cent. Manpower needs were also cut by about 40-45 per cent.
Mr Wong said that it is because of existing grants that projects like the Crowne Plaza extension are viable. The minister believes that cost differentials will come down with greater adoption of PPVC. "The premium is due to prototyping, but with more repetitive adoption, with greater economies of scale, costs will come down and technologies like PPVC will eventually become very economically viable, even without the grants," he said.
BCA chief John Keung added: "The learning curve is very steep. That's why we need to incentivise the industry to move in this direction."
Asked how much scale productive technologies must achieve before grants can be removed, BCA did not respond directly.
But it said that apart from grants, the government has also used other means to generate lead demand for productive technologies - such as by necessitating their use in certain government land sales tenders.
"Once there is a critical mass of adoption and a robust ecosystem in place, we should see the industry naturally adopting these technologies. BCA will continue to monitor the effectiveness of the Construction Productivity and Capability Fund in helping firms improve their productivity," it said in an e-mail reply.
BCA has committed S$335 million in funds from 2010-2015, and another S$450 million from 2015-2018 to help industry players adjust to the new building methodologies to up their productivity game.