12 October 2003
BUILDING AND CONSTUCTION AUTHORITY
PACKAGE OF MEASURES TO AID THE CONSTRUCTION
INDUSTRY
1.
Minister for National Development, Mr Mah Bow Tan, announced today
details of a package of measures to help the construction industry tide
over this particularly difficult period, in which construction volume has
declined and many contractors are facing cash flow problems.
2.
The package includes the following:
(a)
Bringing forward about $600 million worth of construction projects
in FY03, FY04 and FY05 to boost construction demand;
(b)
Improving payments for main contractors, subcontractors and
suppliers;
(c)
More equitable risk allocation in public sector contracts; and
(d)
Improving timely delivery of public sector projects.
Boosting Construction Demand
3
More than 60 public sector projects will be brought forward to boost
demand, safeguard jobs and revive business confidence in the industry.
BCA’s records showed that 92% of public sector project contracts valued
between $10 million to $30 million were awarded to local contractors. As
most of the projects to be advanced are less than $30 million each in
value, local contractors will stand to benefit directly from this move to
help them tide over the current difficult period.
1
4
These projects, with a total value of about $600 million, comprise civil
engineering projects (roads, linkways, parks and drainage improvement
works) and building projects (educational institutions, market and food
centres, and improvements to community centres/clubs) in about equal
proportion. Close to $100 million worth of contracts will be awarded in
FY2003 (i.e. by March 2004). Another $360 million worth of contracts will
be awarded in FY2004. The rest of the contracts will be awarded in FY
2005 and their details will be announced later (refer to Annex A for list of
projects).
Improving Payments
5
Besides providing more jobs for contractors, measures will be taken to
improve the cash flow of main contractors, subcontractors and suppliers.
Improvements will be made to the Public Sector Standard Conditions of
Contracts (PSSCOC). BCA, in consultation with the industry, will also
work towards implementing a security of payment legislation.
Changes to Public Sector Conditions of Contract
Shorter timeframe for payment
6
The government will set prompt and clear timelines for the valuation and
payment of any changes to construction work (i.e. variation works).
Currently, the PSSCOC is silent on the response time for the valuation
of variation works. As a result, such work are at times not valued and
paid until the end of the contract.
The amended PSSCOC will
standardise the timeline to value the variation work within 60 days of
completion, and issue the payment certificate to the contractor within the
next 30 days.
2
7
The PSSCOC will also have a definite timeline to settle final accounts
earlier. Currently, there is no standard guideline to settle final payment
before the end of the defects liability period (DLP). There will be a new
timeline for an interim final account that covers all completed works,
except defects and liquidated damages due to delays. This interim final
account will be issued within 150 days of substantial completion of the
project. Also, there will be a provision to allow for progress claims and
payments after substantial completion as the final account is being
computed.
Removal of “set-off” clause
8
Currently, the PSSCOC allows government agencies to withhold
payments to contractors for on-going or completed projects, in order to
set-off debts in other projects involving the same contractors. This
provision will be removed.
This is to reduce any further financial
hardship on the contractor by withholding payments from him in another
contract.
Subcontractors informed of payments by public sector agencies
9
Public sector agencies will make known payments to contractors on
notice boards at the site office to inform subcontractors and suppliers.
This will prevent contractors from claiming that they have not been paid
in order to avoid or delay paying their sub-contractors and suppliers.
Security of Payment Legislation
10
To address the payment problems faced by contractors, subcontractors
and suppliers across the construction value chain, BCA has looked at
the feasibility of a security of payment legislation that has been
implemented in UK, New Zealand and some states in Australia. The
legislation provides a statutory right for any party across the construction
3
value chain to seek payment for work done and materials supplied. It
upholds the principle that one should be paid for work that has been
done. BCA has had several discussions with the industry on this.
11
The conclusion at this stage is that legislation is necessary because at
the lower end of the value chain, subcontractors/suppliers have limited
recourse for payment disputes, other than expensive litigation or timeconsuming arbitration.
Such prolonged settlements have resulted in
many becoming insolvent, bringing about disruption to projects and
financial hardship.
12
This legislation will allow progress payment disputes to be resolved via
adjudication.
Adjudication is faster and less costly than the current
system of arbitration because the adjudicator’s decision is made within a
short timeframe and the decision is legally binding.
13
However, some provisions in the legislation such as “the right to
suspend work” would require further consultation with the industry. Over
the next few months, BCA will discuss further with the industry on the
details of a security of payment legislation that will suit the Singapore
context.
Reallocating Contractors’ Risk in Unforeseen Soil Conditions and
Underground Services
14
Present market practice requires contractors to price into their tender
bids the risk of unforeseen soil conditions. For underground services,
public sector agencies usually pay for the diversion of such services, but
not for the cost of any resulting delays.
4
15
New guidelines will be incorporated into the PSSCOC requiring public
sector agencies to provide more information on soil profile and
underground services as part of the tender information. The agencies
will bear the cost of additional works, if the soil profiles or underground
services deviate substantially from that provided in the tender
information. This will substantially reduce the risks borne by contractors
and enable more realistic tender bids.
Improving Project Delivery in Public Sector
16
To improve timely delivery of public sector projects, the BCA will finetune the construction procurement system with the following measures:(a)
Relax the track record requirement for construction companies to
renew their existing Contractors Registry System (CRS) grades;
(b)
Tighten financial reporting by construction companies in the CRS.
Relaxing track record requirement for renewal
17
Currently, contractors need to submit their track record of completed
projects in the last 3 years as a criterion to renew and maintain their
current CRS grade. With the reduction of construction demand in recent
years, some contractors may find it hard to meet the track record
requirement and some may even resort to submitting low bids or “suicide
bids” in order to maintain their grade.
18
Therefore, BCA will extend the qualifying period for CRS grading from
the present 3 years to 5 years to allow companies to add another 2 more
years of completed projects into their track record. In addition, on-going
projects will also be allowed. Hence, construction firms will be less
pressured to bid for contracts at untenable prices, just to satisfy the
required track record.
5
Tightening of financial checks on contractors under CRS
19
The BCA will also tighten its CRS to better reflect the financial standing
of contractors tendering for public sector projects.
With immediate
effect, the timeframe for submitting financial audited accounts will be
shortened:-
(a)
From 8 months to 4 months from the end of the financial year for
firms listed on the Singapore Stock Exchange; and
(b)
20
From 8 months to 6 months for non-listed firms.
This requirement will apply to the top three registration grades, A1, A2
and B1 contractors. It will affect companies with financial year closing on
and after 31 December 2003. The timely provision of financial health
reports will assist public sector agencies during the tender process to
select contractors capable of undertaking projects within their financial
capacity.
(Refer to Annex B for implementation timeline of measures to improve
payment, reallocate contractors’ risk and improve public sector project delivery)
Conclusion
21
The measures unveiled in this package will not solve all the problems in
the construction industry. However, it will provide some financial respite
for contractors, serve to improve payments through the value chain and
give greater assurance that public projects will continue to be completed
on time.
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ANNEX A
TABLE 1A - LIST OF PROJECTS TO BE ADVANCED IN FY 2003
No.
Project Description
Agency
1
Integrated Programme - Expansion of Raffles JC
MOE
2
Upgrading of West Coast Highway and Jln Buroh to Semi-expressway - Ph 3F
MOT
3
Widening of Farrer Rd
MOT
4
Widening of PIE from KJE to JAI
MOT
5
Bus Interchange -Temporary
MOT
6
Linkway Project Phase 3 Package 1
MOT
7
Linkway Project Phase 3 Package 2
MOT
8
Linkway Project Phase 3 Package 3
MOT
9
Linkway Project Phase 3 Package 4
MOT
10
Symphony Stage: Singapore Botanic Gardens
NParks
11
East Coast Park Interim Upgrading Phase 2
NParks
12
A Revamped Maintenance Programme for PA's Premises*
PA
Estimated Total for FY2003 (20 projects): $100 mil
* A total of 9 projects under this Programme will be advanced.
7
TABLE 1B - LIST OF PROJECTS TO BE ADVANCED IN FY 2004
No.
Project Description
Agency
1
Slope Protection @ Bukit Batok N3 (Pt3)
HDB
2
Road Culverts
HDB
3
Widening of Roads @ Strathmore, Dawson
HDB
4
Print Hub (part of super highrise project)
JTC
5
Infrastructural Works at Tuas Biomedical Park 2
JTC
6
Road Infrastructural Works
JTC
7
Refurbishment Works for Flatted Factories
JTC
8
Expansion of Workshop Facilities at Lim Chu Kang Regional Base
MHA
9
PRIME Phase 6 (10 schools)
MOE
10
Integrated Programme - Expansion of Anglo-Chinese School (Independent)
MOE
11
Integrated Programme - Expansion of The Chinese High School and Hwa Chong JC
MOE
12
Rebuilding and Upgrading of Markets and Food Centres
NEA
13
Hillview Park Connector
14
Extension to Kim Seng Community Centre
PA
15
Upgrading of Outdoor Stage & Minor Extension to Telok Ayer Hong Lim Green
Community Centre
PA
16
Improvement to Roadside Drains under Batch 3 of EUP*
PUB
17
Design Package T-Link Sewer Project Contract 2
PUB
18
Riverwall Improvement to Sungei Punggol - Contract 8
PUB
19
Riverwall Improvement to Sungei Punggol - Contract 9
PUB
20
Improvement to Tanglin Halt Outlet Drain - Contract 1
PUB
21
Mangrove Boardwalk at Changi Point
URA
22
Eastern Boardwalk at Changi Point
URA
23
Promenade at Changi Point
URA
24
Southern Ridges projects
URA
NParks
Estimated Total for FY2004 (About 42 projects): $360 mil
*This consists of 5 projects .
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ANNEX B
IMPLEMENTATION TIMELINE FOR PACKAGE OF MEASURES TO
IMPROVE PAYMENT, REALLOCATE CONTRACTORS’ RISK AND
IMPROVE PUBLIC SECTOR PROJECT DELIVERY
Measures
Implementation Timeline
Improve payment and reallocate contractors’ risk
Amendments to the Public Sector Conditions
of Contract (PSSCOC).
(a) Make payments to contractors known to
their sub-contractors and suppliers.

To be implemented with
effect from 1 January 04.
(b) Introduce new timeframes for progress
payments and settlement of variation orders
and final account.

To be implemented with
effect from 1 January 04.
(c) Remove the provision for agencies to
withhold payments to contractors to set-off
debts in other contracts.

To be implemented with
effect from 1 January 04.
(d) Reallocate contractors’ risk in public sector
construction projects.

To be implemented with
effect from 1 January 04.
Security of payment legislation.

Work
towards
the
implementation of a Security
of Payment Legislation.
Improve timely delivery of public sector projects
Relax the track record requirement for
construction companies to renew their
existing Construction Registry System (CRS)
grades.

To
be
immediately.
Tighten financial reporting by construction
companies in the CRS.

To
be
implemented
immediately and will affect
companies with accounting
year closing on and after 31
December 2003.
implemented
9