SINGAPORE - Construction companies working on Housing Board projects have been thrown a lifeline to help lock in prices and supplies for some raw materials, in a move by the Government to ensure that construction progress remains on track and to minimise delays for home buyers.
Measures include extending the duration of steel price protection provided by HDB for a total of nine additional months so that contractors do not have to worry about the fluctuation in steel prices, said the Ministry of National Development (MND) in a written parliamentary reply on Monday (Sept 13).
HDB will also provide additional supplies of concrete materials to contractors for local pre-cast production, going beyond the amount that contractors had earlier opted for in their tender, said MND. This refers to cement, sand and other aggregates.
Previously, steel price protection provided by HDB was for either 18 or 22 months, typically covering the duration of structural works which are now taking longer to be completed due to the Covid-19 situation.
With the nine-month extension, a contractor who started structural works in January 2020 can now be protected against fluctuations in steel prices until March 2022.
The HDB said in a separate statement on Wednesday that about 35 projects could benefit from this extension.
Since January this year, the prices of steel have risen by about 25 per cent and those of concreting materials by 15 per cent, it noted.
HDB has also received feedback from the Singapore Contractors Association that the quantities of steel ordered by contractors remain low due to the slower progress of construction works.
At the same time, in the light of Malaysia's movement control order (MCO), contractors here are relocating their precast production back to Singapore or switching to the cast-in-situ method of construction.
These contractors may have previously opted for a smaller quantity of concreting materials from HDB, given that their precasters were overseas, HDB noted. But they may now require more materials, which the HDB will provide them with and at the same price committed in the tender.
For contractors who wish to relocate some of their precast production back to Singapore, HDB will assist them in their application for land under a temporary occupation licence for the production and storage of the precast components.
Contractors will be able to apply for additional supplies from October 2021.
The move comes after the main contractors of five Build-To-Order (BTO) projects went bust last month, which caused around 2,900 buyers to face long delays for their homes.
The affected projects are Sky Vista @ Bukit Batok, Senja Heights and Senja Ridges in Bukit Panjang, Marsiling Grove in Woodlands and West Coast Parkview in Clementi.
The five projects are at various stages of completion, with the two Bukit Panjang projects near completion, said MND.
The main contractors, Greatearth Corporation and Greatearth Construction, along with three other related companies, are currently in the process of liquidation.
The construction industry has been one of the sectors worst hit by the Covid-19 pandemic.
Construction costs have risen, with increased foreign manpower cost due to tightened border measures and increased raw materials costs. Companies have also racked up additional costs to adhere to safe management measures that are meant to curb the transmission of Covid-19.
On Monday, MND said HDB is working with Greatearth and their provisional liquidator PricewaterhouseCoopers to bring onboard new contractors to take over and complete the five BTO projects as soon as possible.
Discussions are ongoing for the potential new main contractors and existing subcontractors to work together.
"This will allow affected subcontractors the opportunity to work out a suitable arrangement to remain on the projects and complete the remaining works. It will also minimise the extent of delays for flat buyers," said MND.
Just before mid-August, on the feedback from a project consultant, HDB had checked with Greatearth and was informed that they had run into financial difficulties and were exploring options to continue with the projects.
Slightly more than a week later, Greatearth informed HDB that they were unable to complete the five BTO projects, despite the government assistance provided to all construction firms over the past year.
Prior to this, work at the sites had been progressing satisfactorily, and there were no signs of work slow-down, said MND.
HDB had explored possible options to resolve Greatearth's challenges, such as providing advance payments to allow them to continue with the projects.
However, Greatearth did not have the financial ability to continue operations and made the decision to undergo liquidation, said MND.
Home buyers of the five affected BTO projects have not yet been informed of their revised completion date. HDB said buyers will be informed when the replacement contractors have been appointed and the construction schedule worked out.
In June last year, a $1.36 billion construction support package was announced to help construction companies co-fund some of the extra costs they have to incur to comply with safe management measures at the worksites.
Under the Covid-19 (Temporary Measures) Bill, construction companies can also get reprieve from legal and enforcement action for their building and supply contracts, although the relief period is set to end at the end of this month.
HDB said on Wednesday that it has been releasing advance payments to contractors and has exercised flexibility in recovering the advance payments to help ease cash flow.
As at August, a total of $170 million cash advances has been disbursed to 36 contractors for 74 residential projects under construction, said HDB.
HDB has also helped co-share the increase in non-manpower related operating expenses such as the rental of equipment and site maintenance costs, as well as co-share the increase in foreign manpower salary costs.
Given the severe strain that the construction industry is going through, HDB said it will “go some way” to help contractors deal with the challenges and stand ready to provide more support where necessary.