COS 2015 - Speech by SMS Lee Yi Shyan "Increasing the Momentum on Raising Construction Productivity"

Mar 10, 2015

Mr Chairman, let me continue on the subject of productivity for the construction industry. I thank Er Dr Lee Bee Wah for her passionate comments about improving the productivity for the industry.

Current Industry Structure

At $36 billion, the construction industry accounts for 5% of our GDP. It comprises about 12,500 firms and employs 320,000 workers. However, 5% of the large firms contribute half of the total Value-Add (VA) of the industry. The remaining are many small and medium firms, so there is a great disparity in productivity between large and small firms.

The construction industry is characterised by the practice of “multi-layer sub-contracting”. Externally, building contractors also have to interface with developers, prefabricators, architectural and engineering firms. The many interfaces often add to the complexity of project design and implementation. To raise the industry’s productivity, we need to address these inefficiencies.

The first Roadmap – 3Ms

We conceived the first Construction Productivity Roadmap in 2010. The roadmap adopts a “3M framework” – Manpower, Machines, and Methods to raise productivity.

The first M is on Manpower. Construction is a manpower-intensive industry but it need not remain so. International best practices elsewhere show that when workers are skilled or multi-skilled, construction projects typically require fewer workers and the resulting quality is also higher.

To create a conducive environment for skill upgrading, MOM has progressively tightened MYE (man year entitlement) allocated to projects. MOM has also raised foreign workers’ levies. As a result, we see more firms willing to invest in technology and workforce development.

To enhance the skill levels of our workforce, BCA is helping to expand the industry’s training capacity. Between 2010 and 2014, BCA has set aside funding to help the industry to upgrade more than 74,000 in-service personnel from 6,000 firms.

The second M is about Machine, or mechanisation. Between 2010 and 2014, about 880 firms received funding from the Mechanisation Credit scheme. The use of the right tools in mechanisation, automation and Information Technology has helped firms to raise workers’ productivity. In addition, some 135 of these firms also received Investment Allowance, a tax credit, for purchasing productive machineries.

The third M is about Method of construction. In this area, we are helping the industry to acquire the latest knowhow for adoption in our own environment.

Public Sector taking the lead

As the public sector is a large procurer of construction services, it is well-positioned to encourage the industry to acquire new and advanced construction capabilities, by specifying productivity requirements in their tenders.

Consider, for instance, MOH is piloting the use of Prefabricated, Prefinished Volumetric Construction (PPVC) for a nursing home in Woodlands Crescent; NTU is considering the use of Cross Laminated Timber (CLT) for its indoor sports hall; while MOE has specified the use of pre-fabricated modules and a Design-and-Build approach for industry to propose the most suitable technology for a small office block.

Also consider, for example, the use of an innovative hybrid structural system to build Yishun Community Hospital. The use of steel structures and top-down construction method in this project has shortened the project duration by three months. The entire process is also cleaner and quieter.

Enhanced funding

To support companies through their productivity journeys, we launched the $250 million Construction Productivity and Capability Fund (CPCF) in 2010. In 2014, we topped up the fund to $335 million to quicken the pace of re-structuring.

Industry’s response has been positive. As at January 2015, almost 6,000 firms have tapped on the CPCF; 85% of the 6,000 are small and medium-sized firms. In addition, more than 5,000 firms have tapped on the Productivity Innovation Credit (PIC) scheme. We are encouraged by the fact that smaller firms are taking steps to embrace technology and invest in workforce upgrading.

In the COS debate, a number of Members have spoken of the need for industry-specific productivity indicators. Indeed, site productivity has been improving at 1.4% per annum since 2010. This is encouraging but we can certainly do more.

Second Construction Productivity Roadmap (CPR)

In our second roadmap, beyond the 3M framework I spoke about earlier, we have added two important thrusts.

Design for Manufacturing and Assembly

The first thrust is the adoption of Design for Manufacturing and Assembly (DFMA). Simply put, DFMA requires the industry to manufacture as many building parts as possible in a factory. Prefabricated parts are then assembled on site. To embrace DFMA well, our firms need new capabilities in design, engineering and manufacturing.

To reduce the inefficiency associated with multi-layer subcontracting, we will look for ways to integrate and improve communications amongst all parties in the value chain. BCA introduced Building Information Modelling (BIM) in 2012. Since then, more than 80% of the larger consultancy firms and 60% of the larger contractors have adopted BIM. The adoption of BIM has standardised the digital communications amongst all parties in the value chain. BCA will push BIM usage to all players ultimately.

To encourage concurrent engineering, the public sector will push on with Early Contractor Involvement (or ECI). This approach enables the project owner and his consultants and contractor to undertake the project as an integrated team, resolving many construction details at the early stage which can save months from the overall project schedule.

Stronger firms and highly-skilled workforce

The second thrust is to develop deep capabilities in the industry that Er Dr Lee Bee Wah talked about. It is important that our progressive firms benchmark themselves against the international best practices. We will find ways to help them move up the value chain by acquiring R&D, engineering and design capabilities.

Our progressive firms must develop new expertise in in-house cross-functional teams comprising architects, engineers and project management professionals. They should have a larger proportion of skilled workers, professionals and a stable workforce.

Conclusion

To support these initiatives that I have just mapped out, we will set aside another $450 million for the Construction Productivity and Capability Fund under the second roadmap for the next three years.