Oral Answer by Ministry of National Development on tenders for coffee shops in HDB estates

Jul 11, 2018

Er Dr Lee Bee Wah: To ask the Minister for National Development

(a) what measures are being taken to keep the cost of food sold at coffee shops affordable;

(b) whether the Ministry will consider removing minimum rent in coffee shop tender exercises; and

(c) whether e-Bidding in coffee shop tender exercises drives up the rent and subsequently the cost of food sold at coffee shops and, if so, whether there are measures taken to mitigate this.

Answer:

To provide residents with access to affordable food options, HDB ensures that there is a good supply of coffee shops in HDB estates to maintain healthy price competition.  There are presently close to 750 HDB-built coffee shops, of which 70 were completed in the last five years.  A further 31 are in the pipeline and will be completed in the next five years.   

To find suitable operators for new coffee shops, HDB has used an online tendering system since 2004.  This system makes bidding more transparent as it allows prospective bidders to see all bids in real time, and adjust their bids accordingly ahead of the close of tender.  We are continuously reviewing the tendering mechanism to see how it can be made more effective in ensuring affordable food for residents. 

For example, instead of simply awarding to the highest price bids, HDB has been piloting the use of the Price-Quality Method (or PQM) to tender out several coffee shops.  Under the PQM, quality score accounts for 50% of the evaluation, and operators with affordable food options will score higher.  That is why HDB recently awarded a coffee shop in Choa Chu Kang to a food operator with affordable food options and with initiatives to improve productivity, even though their rental bid was 40% less than the highest bid.

We have seen good outcomes from this tendering approach. So I am happy to share that HDB will be replacing the e-bidding system with the PQM tender for all coffee shops later this year.