Construction costs have skyrocketed since the start of the COVID-19 pandemic. The price of materials has shot up, wages have increased and the cost of bringing in foreign workers is also elevated. The construction industry’s confidence has been shaken of late, resulting in shorter payment terms and demands for higher upfront payments.
Against this backdrop, it is not surprising that recent bid prices for town improvement projects, like the Neighbourhood Renewal Programme (NRP), are up to 50% higher than pre-tender estimates. Yet HDB’s grants to town councils have not kept up with these price increases.
Some may suggest that town councils’ existing funds can be used to cover the cost increases. However, doing so will be unfair to the majority of residents, as each project mainly benefits residents living in a particular precinct. It is also unfair for residents in those precincts if the new projects are pared down to meet the original budget.
I have three suggestions.
First, can HDB temporarily increase its NRP grants to town councils to cover these short-term cost increases?
Second, can HDB provide contractors and subcontractors for town improvement projects some price protection for raw materials like steel and concrete, similar to that of HDB’s BTO projects. This will better ensure residents receive comparable amenities regardless of market conditions at the time of tendering.
Third, can the Ministry explore more measures to restore confidence among construction firms so as to ameliorate the need for onerous upfront payment terms. This could help to temper price increases across the industry.
This is a “cut” I made for the Ministry of National Development’s Committee of Supply debate on 8 Mar 2022.