Small building jobs restored to help SMEs

Source : Straits Times - 15 Jan 2009

Government will also speed up payments to firms for work done

SMALLER government construction projects that had been deferred since end-2007 amid a building boom are being brought back on stream to help ignite the now-slumping sector.

Restarting the projects, each worth up to $50 million, will help smaller building firms that are feeling the pain more than the construction giants.

The work, which will be outlined in next Thursday’s Budget, could include building schools and upgrading lifts in HDB blocks.

‘The purpose of these additional projects…is to help small and medium-sized contractors because…we are told that the larger firms have jobs in hand,’ said National Development Minister Mah Bow Tan yesterday.

One sign of the tighter market is the fact that the number of tenderers for small projects of up to $30 million has doubled compared with six months ago, added Mr Mah, the guest-of-honour at a construction and property prospects seminar.

To sustain the flow of jobs to smaller firms, the minister said that many of the projects will kick in towards the middle or end of this year. Other suitable work in the pipeline will also be brought forward.

Industry players lauded the move.

‘Most of the construction firms are small and medium-sized, which have recently handled mostly private sector projects,’ said the Singapore Contractors Association’s executive director Simon Lee.

Now that a lot of the private jobs have dried up, these firms would clearly welcome any small public sector projects, added Mr Lee.

If the Government is seeking to pump-prime the economy, smaller projects are good as local contractors can bid for them, said construction firm BBR Holdings’ chief executive Andrew Tan.

If the jobs are packaged as big parcels, few local firms can bid and they are likely to go to the foreign parties, he said.

The move will help to stabilise and boost the industry, said Davis Langdon & Seah Singapore’s director, Mr Seah Choon Meng, who spoke at the seminar.

This year will be a ‘challenging if not depressive year’ for the construction industry, both in terms of work demands as well as construction costs, he said.

Official data show a sector in slowdown. Private industry construction demand - the value of contracts awarded - will drop to between $5 billion and $9 billion this year, well down from $20.1 billion last year, according to Building and Construction Authority (BCA) data released at the seminar.

The projected fall - of 55 per cent to 75 per cent - will be the biggest slide since the 53.5 per cent decline in 1998.

Overall, construction demand is projected to reach $22 billion to $28 billion this year. This will be due to the value of public sector contracts like roads and MRT infrastructure possibly rising 31 per cent to between $17 and $19 billion.

Last year, the overall value of contracts rose 41 per cent to a record $34.6 billion.

Meanwhile, construction output, which records payments made for work done, was estimated at $25 billion last year, up from $17.87 billion in 2007.

While the BCA said it could peak at $28 billion to $30 billion this year, others think the figure is debatable because an increasing number of residential projects were deferred from the fourth quarter last year as home prices fell.

Tender prices, softening slightly now that private sector works are falling off the cliff, are likely to decline by between 15 and 20 per cent from the second or third quarter onwards, said Mr Seah.

Overall construction costs fell by more than 5 per cent in the fourth quarter of last year, according to feedback obtained by the BCA.

Yesterday, Mr Mah said that public sector agencies will be making more frequent, prompt and full progress payments to firms for work done. It will also lower the 5 per cent security deposit for public works by at least half.

Apart from MRT projects, other likely major public works this year include HDB flats, the National Heart Centre and the International Cruise Terminal, while PowerGas’ liquefied natural gas-receiving terminal and Wildlife Reserves Singapore’s new river-themed park and safari at Mandai are on the private sector’s horizon.