Speech by Minister Lawrence Wong at the SCAL 80th Anniversary Gala Dinner

Sep 28, 2017

I am very happy to join you once again for this gala dinner. Let me start by congratulating Singapore Contractors Association Ltd (SCAL) on its 80th Anniversary celebration.
 
SCAL started from humble beginnings in a Chinatown shophouse in 1937. For 80 years, you have served as the voice of the construction industry in Singapore, speaking out for contractors and working closely with the Government. I thank SCAL and all its council members – past and present – for your many contributions. I would also like to thank everyone – all the contractors who are here – for helping to build our nation over the past 80 years. 
 
The construction industry has always been subject to cyclical ups and downs – it is the inherent nature of the industry. But SCAL and its members have persevered through these many cycles over the years. Each time we face a challenge, we work together, rally together and emerge stronger. 
 
Now, we are going through one of these cycles.  We have seen the construction sector going through some difficult times. It has been contracting for 4 consecutive quarters so far. It is largely due to a sharp drop in private sector projects. I know many of you are feeling the pressure. I assure you that the Government will do its best to support the industry through this period.
 
This evening, I will share with you three areas which we have been working on together with SCAL, and which we think we can get the industry to move forward. First, the Government will continue to lead demand for new projects. We cannot completely make up for the shortfall in private sector projects, but we will try to do more so that we can cushion the impact.
 
As I have said before, we have a strong pipeline of public infrastructure projects coming through over the medium term. This includes major projects like Changi Airport Terminal 5, Tuas mega port, and the new developments in Jurong Lake District, Punggol and Woodlands. These are big projects which will take time to come onstream.
 
We will also try to generate additional demand – new projects – in the near-term. In fact, earlier in the Budget this year, the Government announced that it would bring forward $700 million worth of public sector infrastructure projects in 2017 and 2018. These are generally smaller projects – most of them are below $100 million in contract size – which our SME contractors are able to take up. Some projects hve already started and some contractors have already started to bid for them, but many of them will be rolled out later this year and in 2018. Contractors will have a chance to bid for these projects.
 
This evening, I am glad to announce that we will do more. We have looked around within the government sector and we have decided to bring forward another $700 million in projects. This will effectively double the stimulus that was announced in the Budget this year. And once again, for this new batch of $700 million worth of projects, we have sized these to be smaller projects like the upgrading of community and neighbourhood facilities that will benefit SME contractors.
 
We will do our best to launch these projects over the next 1-2 years. We are getting the agencies in charge of these projects to work as fast as possible so that they can roll out the tenders soon. But some projects may take time and they may even stretch to end-2019 because they need time for design and planning. But overall with these additional projects, particularly projects that are smaller in scale, I believe they will help the industry, especially the SME contractors. Meanwhile, we will continue to monitor the industry closely, and if necessary, we will continue to further adjust the pace of public sector projects.
 
The second strategy, besides stimulating demand, is that we should all take this opportunity to strengthen industry capabilities. By capabilities, we are focusing on quality, productivity and workplace health and safety. We have many ongoing efforts in these areas. We have a whole industry transformation map (ITM) for the construction sector. Second Minister for National Development Desmond Lee oversees this committee that looks at the ITM. There are many measures in place to raise and strengthen industry capabilities. We recognise that government procurement can make a difference in raising capabilities too because many of the projects that are coming up are public sector projects. Government procurement rules can help set new standards and norms for the industry. So we will make some adjustments to procurement rules.
 
Public agencies use the Price-Quality Method (PQM) to evaluate construction tenders. Currently, the price component is around 70% for building projects; which means that the non-price, or quality, assessment is just 30%. We will raise the non-price weightage to around 40% to 60% - so there is a range. For simple building projects, it can be 40%. If it is more complex, it can go up to 50%, and even 60% – more than the price component. When we say non-price, we will be looking at quality based on the contractors’ past performance. We will assess their productivity and safety records.
 
We are doing this alongside all the other measures that we talked about. Hopefully, this would send the right signal to the industry that we must strengthen our capabilities and focus on quality, productivity and safety. It is not all based on price. Price is important, but we should not get into a situation of unhealthy price competition. Let us work instead to strengthen capabilities in all these areas, and hopefully the procurement rules – the changes we are making – will also align better with the incentives in the private sector.
 
Finally, the current environment is also an opportunity for us to review our own work practices and find new ways to do things better. One area which we can do better is to foster more collaboration amongst the various stakeholders in the construction process. We all know that the current process is very linear – it goes from the developer to the architect to the engineer and to the contractor. Each time it passes from one party to another, there is a bit of duplication and inefficiency.
 
BCA has set up a Working Committee for Collaborative Contracting, comprising industry associations like SCAL and the Singapore Institute of Surveyors and Valuers, as well as various Government agencies. The Committee will look into different collaborative contracting models that can be adopted in Singapore; and also fine-tune our existing Early Contractor Involvement framework. We are very keen to encourage this sort of collaborative approach to build, so that it is not just a linear process, but all the different parties can come together and there can be early upfront contractor involvement. So we hope you will work with us to make this happen.
 
Besides contracting, we are also actively reviewing our rules. One of the challenges the industry faces is increased regulatory controls. I understand, and in fact, I have listened to many of your feedback. Rules are necessary because they ensure the safety and quality of our infrastructure. But we are always prepared to look at ways to streamline regulations so long as we do not compromise safety. We believe if we can do so, it will help to cut compliance costs and may even help to shorten project duration – all of which would benefit contractors.
 
I will mention one example which we are changing. Most of you are familiar with the requirement of having Resident Engineers and Resident Technical Officers (REs and RTOs) to supervise construction works on-site. Currently, the minimum number of REs and RTOs required is kept constant throughout the duration of a project. But we know that the intensity of works at the start and end of a project are generally lower. You do not need to maintain the same level of officers on the ground. It is possible to reduce the RE and RTO requirements at these stages without compromising safety.  We have worked with BCA to allow for this. The revised regulations will be effected later this year.
 
We have done one round of review for this, but we are reviewing other regulations as well – taking in your inputs and inputs from SCAL. We hope to continuously find ways to streamline regulations. That is our third approach.
 
These are three areas we are looking at – stimulating demand, building capabilities and reviewing regulations. If we all work together, we can overcome today’s difficulties. We know that these are not easy times. MND and BCA are actively looking for ways to help you. The challenging times that we face can perhaps also be an opportunity for us to change, transform and improve. I hope we can continue to work together to improve the way we build and transform the construction sector in Singapore into one that is more sustainable and productive.
 
Finally, let me end by thanking SCAL for your many contributions once again. Your role as the industry’s voice and the bridge to the Government has been most crucial. For 80 years, you have played this role most effectively and I believe in these current times, your voice is much needed. Let us continue to work together to overcome today’s challenges and secure a brighter tomorrow.
 
On that note, thank you very much for having me. Congratulations to SCAL once again on your 80th anniversary.