Transforming Singapore’s Construction Industry: A Shift Towards Quality and Collaboration

In a strategic move to revolutionize Singapore’s construction industry, the government is set to implement significant changes aimed at reducing risks for consultants and elevating the overall quality of public sector projects. Minister for National Development, Desmond Lee, recently unveiled a series of initiatives, emphasizing fair compensation, risk-sharing, and a heightened focus on quality in the tender evaluation process within the construction sector.

Key Changes

Quality-Centric Tender Evaluation in Construction Projects

BCA refined the Quality Fee Method (QFM) Framework, which provides government agencies guidelines on the evaluation of construction-related consultancy tenders. The government is poised to increase the merit-based selection of construction projects over random ballot picks. Bids falling below a specified threshold will be disqualified to discourage underpricing. The Standard Consultancy Agreement, the cornerstone contract in the construction sector, will undergo amendments to ensure fairness and progression in the procurement process. BCA refined the Quality Fee Method (QFM) Framework, which provides government agencies guidelines on the evaluation of construction-related consultancy tenders.

Clarity in Construction Project Scopes and Timely Remuneration

Consultants operating in the construction industry will benefit from a clearer definition of project scopes, ensuring better understanding and seamless execution. Minister Lee underscored the importance of fair and timely remuneration for construction consultants, reinforcing a more equitable working relationship.

Risk-sharing Measures in Construction Contracts

A groundbreaking development is the introduction of cost-sharing for consultants in the construction industry, particularly in cases of substantial delays beyond their control. This aligns with collaborative contracting principles and aims to mitigate the financial impact on construction consultants.

Adapting to Construction Industry Challenges

Reflecting on the challenges faced during the COVID-19 pandemic, where construction costs soared, the government is addressing financial difficulties experienced by construction companies. The cost-sharing measures will bring flexibility to contract prices based on changes in key construction materials, marking a pivotal advancement in the construction sector.

Construction Industry Outlook

The Building and Construction Authority (BCA) anticipates a nominal construction demand ranging from S$32 billion to S$38 billion for 2024. Minister Lee emphasized the increase in tender prices as a significant factor contributing to this estimate, stressing the need to normalize values to pre-COVID levels.

Public Sector Contribution to the Construction Industry

Public sector demand is expected to constitute approximately 55% of total construction demand in 2024, ranging between S$18 billion and S$21 billion. Private sector demand is projected to contribute between S$14 billion and S$17 billion, underscoring the pivotal role of the public sector in driving growth within the construction industry.

Property Market Update Impacting the Construction Industry

Minister Lee provided insights into the property market, noting signs of moderation in both the private and public residential sectors, directly influencing the construction industry. The application rate for Build-To-Order (BTO) flats among first-timer families in 2023 decreased to 1.9, significantly lower than the pre-COVID rate of 3.7 in 2019. In the Housing and Development Board resale market, the proportion of buyers paying cash over valuation (COV) decreased from almost 30% in Q4 2022 to about 15% in Q4 2023, indicating a reduction in asking prices.

Conclusion

Singapore’s proactive measures to transform its construction industry underscore a commitment to quality, fairness, and collaboration within the sector. The upcoming changes are poised to create a more sustainable and resilient environment for construction consultants, driving innovation and growth in Singapore’s construction industry.