Reasons for Change of Main Contractor in HDB Projects Midway through Construction
Ministry of National DevelopmentSpeakers
Summary
This question concerns Dr Tan Wu Meng’s inquiry into HDB projects changing main contractors midway through construction and the lessons learned. Minister for National Development Desmond Lee stated that 19 out of 383 projects required such changes since 2010, primarily due to financial distress. HDB maintains quality by selecting experienced replacement contractors and conducting stringent checks, while the Price Quality Method evaluates tenderers' financial health and safety records. Underperforming contractors face tendering suspensions, and HDB monitors indicators like payment promptness and adjudication cases to detect and manage potential contract failures early.
Transcript
34 Dr Tan Wu Meng asked the Minister for National Development since 2010 (a) how many HDB projects have required a change of main contractor midway through construction; (b) how many such changes have been due to (i) unsatisfactory progress or (ii) the contractor's financial difficulties; (c) what is done to ensure work quality is maintained in such situations; and (d) what lessons have been learned regarding tender specifications and the selection of main contractors.
Mr Desmond Lee: From 2010 to 2023, 19 out of 383 Build-To-Order (BTO) projects awarded have required a change of main contractor midway through construction, either by termination or novation. These changes were due to unsatisfactory progress by the contractors, typically arising from financial difficulties.
To ensure that the quality of work is not compromised in such situations, the Housing and Development Board (HDB) requires the replacement contractor to (a) have a strong performance track record on other BTO projects, and (b) the necessary capacity to take over. HDB also connects the replacement contractor with existing sub-contractors for the affected project and works closely with the replacement contractor to ensure that critical milestones are met, without compromising safety and quality. Like in all other BTO projects, all flats are put through stringent and thorough quality checks before the keys are handed over to flat owners.
When selecting main contractors, HDB uses a rigorous tender selection process to minimise the risk of contract failure and to ensure the timely delivery of flats. All BTO project tenderers must be registered with the Building and Construction Authority under the required financial grade, meet the minimum credit rating and have prior experience with high-rise building projects. The Price Quality Method (PQM) is then used to score tender bids, according to price and quality attributes. This approach takes into account a contractor's current and past projects' performance, safety records, financial health assessments, CONQUAS assessment and safety scores.
To prevent contractors from overstretching their resources, contractors with better performance will be allowed to undertake more projects. In contrast, contractors who do not perform well in their current projects will be temporarily suspended from tendering for new BTO projects until they improve.
Although HDB assesses the financial health of contractors at the point of tender evaluation, it is also possible for contractors to subsequently run into financial difficulty down the line. Therefore, in order to identify contractors who run into financial distress, HDB monitors contractors' financial health through multiple indicators, such as the contractors' current performance, number of Security of Payment Act adjudication cases, adverse reporting from the ground, credit rating and promptness in payments to subcontractors and suppliers. Such information alerts HDB early to potential difficulties that contractors may face, so that HDB can engage the contractors early on the necessary steps to be taken.