Tuesday, July 22, 2008

Another $1.7b Of Public Building Projects Deferred To Ease Construction Demand

Source : The Straits Times, July 22, 2008

ANOTHER $1.7 billion worth of public-sector building projects will be pushed back to ease the pressure on the construction industry's costs, which went up by 30 per cent last year.

This brings the total value of projects that the Government is postponing to 2010 and beyond to $4.7 billion.

The latest projects identified for deferrment include the main building of the proposed Jurong General Hospital, which will be pushed back to 2010, and other 'less urgent' improvement works.

National Development Minister Mah Bah Tan disclosed this in his written reply to a question from an MP in Parliament on Monday.

But he gave the assurance that projects that are essential to meet Singapore's economic and social needs, such as key infrastructural development, will proceed as planned.

Prices of new Housing Board flats will also not be affected and will continue to be sold at a discount so that buyers can enjoy the subsidy, said the minister.

A statement from the Building and Construction Authority's (BCA) on Tuesday said public housing and upgrading programmes are not affected.

'The additional deferment will allow the existing construction capacity and resources to be channeled towards the timely delivery of some big projects such as the Integrated Resorts, Marina Business Financial Centre and the Downtown MRT line', said BCA.

'Most of these projects are expected to be completed around end 2009. The construction resources freed up then would then be available for the deferred public sector projects, thereby achieving a better spread of construction resources and activities beyond 2009.

The Government has earlier pushed back $3 billion worth public sector projects to after 2009 to help moderate construction demand as the building boom is stretching resources and capacity to the limit.

These delayed projects include the National Addiction Management Centre and a section of the Changi Prison Complex, planned for next year and 2009, extensions to the Asian Civilisations and Peranakan museums, and a new complex to house the Communicable Disease Centre.

Replying to MP Cynthia Phua of Aljunied GRC, Mr Mah said the Building and Construction Authority's (BCA) Building Tender price Index, which tracks mainly manpower and equipment costs, rose by 19 per cent last year, and by 4 per cent more in the first quarter of this year.

But feedback from leading quantity surveyor firms showed that the increase in the overall construction was about 20 to 30 per cent in 2007, and about 3 to 5 per cent in the first three months of 2008.

Mr Mah said the sharp increase in construction cost was driven mainly by the high demand for construction resources and materials worldwide, and exacerbated by the surge in fuel prices.

For example, the price of steel bars has risen by 85 per cent since June last year, while concrete now costs about 18 per cent more than last year.

On its part, the Government has implemented several measures to ease the tight resource supply situation.

The Ministry of Manpower has relaxed the construction sector dependency ratio from 1:5 to 1:7 and raised the S-pass quota from 15 per cent to 25 per cent. Experienced foreign workers are also exempted from the Man-Year-Entitlement requirement.

BCA is also working closely with the industry to expand its contracting capacity, including bringing in contracting resources from overseas. For a start, it has organised two joint-industry trips to China.

HDB flat prices unaffected
On the impact of rising construction costs on HDB's building programme and prices of flats, Mr Mah said as new HDB flats prices are not based on cost, they will not be directly affected by the construction cost increases.

'New flats will continue to be priced at a discount to their equivalent market prices, so that buyers enjoy a generous subsidy', he assured, pointing out that new flat prices had risen by a slower pace, in tandem with the prevailing market trends.

But he acknowledged that the construction cost increase does pose a strain on HDB's budget for new building projects.

HDB has implemented various measures to mitigate the extent of cost increases as far as possible.

For example, HDB is stepping up overseas promotional efforts to attract more foreign contractors to participate in HDB tenders, and it is also buying cement and sand in bulk to cushion HDB contractors against price increases of these raw materials.

BCA is also advocating more efficient concrete design to reduce concrete usage, and promoting the use of recycled materials in construction.

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