Government to share diesel and bitumen cost increases with contractors for key public projects

SINGAPORE – The Government will share cost increases directly related to the price of fuel for critical public projects, said Senior Minister of State for Finance Jeffrey Siow on April 7.

Announcing this in Parliament, Mr Siow said that the Government was doing so “as a responsible buyer”, adding that the qualifying projects include those where any delays or stoppages would clearly affect public interest.

Giving more details in a Facebook post on the same day, National Development Minister Chee Hong Tat said that the Government would bear half the additional cost incurred by contractors arising from the use of diesel and bitumen.

Mr Siow said examples of the qualifying projects include the Cross Island Line and new public housing projects, while the Building and Construction Authority (BCA) said in a circular that the financial support would cover additional costs incurred from March 1 to May 31, 2026.

The move is among a suite of measures that the Government announced on April 7 to cushion the impact of the war in the Middle East on Singaporeans.

In his Facebook post, Mr Chee said the cost increases in diesel and bitumen “have a significant impact on some of the contractors”. “It will be difficult for these firms to fully absorb the cost increases over a sustained period,” he added.

BCA said in its circular that the Government’s cost-sharing move will cover contractors that carry out four types of construction activities – earthworks, foundation or piling works, roadworks and reclamation. The agency said that these activities are among the most severely hit by the price spikes due to their heavy reliance on diesel-powered machinery, vehicles and vessels.

According to data on motoring website Motorist.sg, diesel prices have mostly remained at around $2.50 to $2.60 per litre in the past 24 months, before hitting $2.70 per litre on March 4, just after the conflict in the Middle East broke out.

As at April 6, diesel prices are between $4.42 and $4.68 per litre, which is more than the $4.10 to $4.20 per litre for premium petrol.

In its circular issued to the built environment industry, BCA added that the cost sharing will cover 50 per cent of the direct additional cost from the use of diesel and bitumen, on an ex-gratia basis. BCA said that public agencies in charge of critical projects will inform main contractors of their eligibility.

It added that main contractors should collate the diesel and bitumen usage for all relevant subcontractors and suppliers involved in providing works for the contract for the relevant month before submitting this information to the respective public agency.

Responding to The Straits Times’ queries on how significant diesel and bitumen costs are in a construction budget, a BCA spokesperson said that these costs are highly variable due to contracts between contractors and suppliers, as well as project type.

“While the cost of diesel and bitumen may not form a substantial component of the overall cost of a project, the sharp increase in diesel and bitumen prices would disproportionately affect contractors involved in fuel-intensive works such as earthworks and roadworks,” the spokesperson added.

In his Facebook post, Mr Chee urged private sector developers to similarly support their contractors by sharing the diesel and bitumen cost increases.

He noted that the Government has existing schemes to help built environment firms, such as contractual clauses to share cost escalations for essential materials such as concrete and steel reinforcements.