SINGAPORE: The civil service needs a “mindset change” if it is to deliver on a promise to help local contractors and consultants venture abroad, Member of Parliament Lee Bee Wah has said.
There is stiffening competition in Singapore’s construction industry due to the entry of foreign players and rising costs, against the backdrop of lower tender prices due to a smaller volume of projects. Expanding overseas has been cited as a way local firms can ride out the current business environment in Singapore.
In a recent interview with Channel NewsAsia, Nee Soon GRC MP Lee questioned: “Is enough being done for these contractors? Sadly, my answer is no. When I first graduated in 1985, I heard of this problem and today in 2018, we are still talking about the same problem.”
Local contractors and consultants welcome the opportunity to go regional and benefit from the booming infrastructure projects in the region.
For one, the China’s Belt and Road Initiative is projected to create billions of dollars’ worth of infrastructure projects in the construction of roads, railways, ports and waterworks.
It’s a huge pie that Singapore contractors and consultants are craving for a slice of, but some of them lack the pre-requisites, one of which is having a proven track record of having taken part in multi-million dollar projects in Singapore.
Dr Lee, a professional engineer who is involved in several public-listed companies in the real estate and construction sector, said: “It’s just that our own system does not give them the opportunity because we have such a thing as a ‘pre-qualification’. If our ministries and government are really determined to want to help our local companies to go overseas, we need to have the mindset change of everyone involved … all those in the various ministries, whenever they have any projects, to think of our local contractors first.”
PRE-QUALIFICATIONS CALLED FOR GOVERNMENT PROJECTS ARE “SO ONEROUS”
During the recent parliamentary debate on the Ministry of Trade and Industry’s budget, Dr Lee said that contractors have told her that some of the pre-qualifications called for government projects are “so onerous” that none of the local contractors or consultants can qualify.
Mr Kenneth Loo, president of the Singapore Contractors Association (SCAL), agreed with Dr Lee on the difficulties faced in fulfilling the requirements specified in these government project tenders.
“What they require is that you’ve done a similar project of that nature. And more often than not, a much bigger scale than what is required. A lot of our people don’t have that track record so they can’t even get to the starting point to submit a competitive tender to have a go.”
However, it’s a different story for foreign contractors and government-linked companies.
For example, the contract to build the 19-storey Outram Community Hospital was awarded to Japanese contractor Penta Ocean for some S$674 million. This marked the company’s fifth successful tender for the construction of large healthcare facilities in Singapore, like the upcoming Sengkang General Hospital, contributing to the Japanese firm’s track record in building this particular type of infrastructure.
As a result, smaller local contractors and consultants are left to scrap for residential and commercial projects, such as the construction of international schools and redevelopment of residential buildings.
Some of these companies have been more fortunate and have clinched sub-contractor roles, or positions lower in the value chain, in government projects, but securing that main contractor position, Mr Loo and Dr Lee said, is tough.
Although local contractors and consultants are eager to move up the value chain, SCAL said its member companies also understand that the government needs to be risk-adverse and safeguard its investments.
Local contractor Straits Construction is the contractor for the Nexus International School’s (Singapore) new site located at Aljunied Road. (Photo: Brandon Tanoto)
Mr Loo said: “Of course, if you give it to somebody which has a proven track record, it’s in safer hands in a certain way, but if you look at it from a national point of view, I think we should actually try to build our own internal capabilities. This is actually a form of national defence, you can look at it from that angle as well. At the end of the day, it’s a mindset issue.”
Dr Lee echoed Mr Loo sentiment, saying: “Somehow we have this ‘kiasu’ syndrome, so much so that whenever we do a project, we cannot fail. We want to make sure that we only give to those contractors that are proven.”
INFRASTRUCTURE OFFICE TO FACILITATE GREATER COLLABORATION
However, steps are already being made to address these concerns.
It was announced during Budget 2018 that Enterprise Singapore and the Monetary Authority of Singapore will set up an Infrastructure Office to help Singapore firms tap on infrastructure opportunities in Asia.
To be launched in October this year, the Office will bring together local and international firms across the value chain – from developers and institutional investors to legal, accounting and financial services providers – to develop, finance and execute projects in the region.
Precise details about the initiative have yet to be furnished, but Minister for Trade and Industry (Industry) S Iswaran said in his speech at the fourth Annual Asia-Pacific Energy & Infrastructure Finance Forum on Mar 21 that for the benefits of the Infrastructure Office to be realised, collaboration is key.
“The Infrastructure Office will facilitate greater collaboration by being the convening point for the different players across the industry ecosystem, the multilateral development banks, as well as the public sector. It will also help to deepen our understanding of the region’s infrastructure needs and project pipeline,” Mr Iswaran said.
Industry leaders on their part are also offering suggestions on how the Office can help local contractors in their bids for projects overseas.
Mr Chong Kee Sen, former president of The Institution of Engineers, suggested that the government could carve out some projects specifically for smaller local contractors and consultants to develop their competency and track record.
“The Government can do that instead of having the traditional way of open competition. The other way is that when going overseas, our Government-linked companies can help our local contractors and consultants by partnering with them, or bringing them along to go to other countries.”
Looking ahead, the Building and Construction Authority says the total value of contracts awarded this year is estimated to be between S$26 billion and S$31 billion – an improvement from the S$24.5 billion figure last year.
The increase is due to a projected rise in demand for institutional buildings and civil engineering works, as well as a slate of government projects that have been brought forward in response to the slowdown in the industry in the previous years.
These contracts include the 21km North-South Corridor of transport routes and national water agency PUB’s deep tunnel sewerage system.
