Collaborative Contracting Could Transform Singapore’s Construction Industry
Singapore’s construction industry has long relied on traditional lump-sum build-only contracting models, which define clear responsibilities but often struggle with inflexibility in managing unforeseen circumstances. The prevailing focus on awarding contracts based on the lowest bid discourages collaboration, fosters risk misallocation, and leads to a host of challenges, including rushed designs, underbidding, and project delays.
Trevor Lam, Partner (Asia), TBH Consultancy, discusses the current contracting landscape in Singapore and highlights the growing importance of collaboration in shaping the future of its construction industry.
Building Review Journal (BRJ): What are common mistakes in the industry that hinder collaboration?
Trevor Lam (TL): A major issue is the focus on awarding contracts based solely on the lowest price. This approach discourages collaboration and information sharing between stakeholders. In public sector projects, which make up a significant portion of construction work here, the government’s interests are often prioritised in risk allocation. This leaves contractors and subcontractors responsible for risks they might not be well-equipped to handle. A more balanced risk-sharing system is an urgent necessity for a sustainable and healthy construction industry in Singapore.
The intense competition based solely on cost makes it difficult for contractors to accurately price potential risks during the bidding process. The pressure to win bids with low offers often lead to unforeseen additional expenses later on. This forces contractors to manage unaccounted risks, creating tension and hindering collaboration. Underbidding exists in both the public and private sectors.
When contractors win bids with unrealistically low prices, they may lack the resources needed to complete the project properly, leading to delays or even abandonment. This affects both the project’s timeline and quality. Shifting away from this cost-centric approach could not only manage risks more effectively but also incentivise contractors to propose innovative solutions.
BRJ: What are the main challenges faced by construction projects before construction begins?
TL: One of the most pressing issues is the ambiguity around risk allocation. In the rush to meet tight deadlines, contracts are sometimes hastily drawn up, leaving room for interpretation when unexpected issues arise. This creates a situation where parties hope these issues won’t arise, or postpone addressing them, setting the scene for future issues.
Another significant challenge lies in the realm of design, due to the industry’s preference for lump-sum contracts. Combined with tight deadlines, it often results in a rushed design stage. This puts a lot of pressure on design teams, leading to blueprints that contain errors or ambiguities. These incomplete designs can become a cause of confusion and conflict during construction.
Current contracting models often don’t involve contractors early enough, and as a result, they find themselves inheriting plans that are difficult or expensive to build. Thorough planning, including scheduling, is crucial to identify potential risks before construction starts. Without a robust plan, the stakeholders are essentially in the dark, and lack the ability to track progress. Moreover, it also leaves the contractor vulnerable, as if they cannot prove that there was a delay, they are unable to claim additional time or compensation, even if the situation was out of their hands.
BRJ: How does Singapore’s current contract awarding process impact the risk distribution in construction projects?
TL: Singapore’s construction industry relies heavily on lump-sum build-only models. These models, such as those used by the Singapore Institute of Architects (SIA), Real Estate Developers’ Association of Singapore (REDAS), and Public Sector Standard Conditions of Contract (PSSCOC), clearly define responsibilities and risks. However, they can be inflexible when dealing with unforeseen circumstances, which is a pressing issue that needs immediate attention.
BRJ: How does the Building and Construction Authority (BCA) propose to shift towards a more collaborative contracting model?
TL: The Building and Construction Authority (BCA) is spearheading a shift towards more collaborative contracting models that hopes to transform the very culture of Singapore’s construction industry.
A significant milestone in this journey was the introduction of an optional module for collaborative contracting in the PSSCOC back in 2017, demonstrating its commitment to this approach. Recognising that change requires more than just new policies, the BCA has also invested heavily in education. The BCA Academy offers courses, including a certification programme, specifically in Collaborative Contracting. One key module, “The Need for Collaboration to Accelerate Industry Transformation,” underscores the urgency and importance of this shift in approach.
The BCA is also leveraging the public sector’s significant influence to showcase the benefits of collaborative contracting. By using iconic projects like the $650 million National Service Square (NS Square) at Marina Bay as pilot projects for the PSSCOC collaborative contracting model, they can serve as powerful demonstrations of how collaboration can lead to better project outcomes.
Perhaps most importantly, the BCA is advocating for a shift in mindset. While some local players have historically relied on strong personal relationships, such an approach isn’t sustainable long-term. This is particularly crucial as the industry faces generational changes and becomes more international. This is why the BCA advocates for wider adoption of collaborative contract forms like the PSSCOC optional module and the NEC4 (a type of contract widely used in the UK and HK).
BRJ: What are the anticipated benefits of collaboration in the public and private construction sectors?
TL: There are two distinct benefits. First, it leads to improved project outcomes and reduced costs through early identification and mitigation of risks, as better planning and scheduling helps keep it on track. Second, it creates a more positive and productive work environment. Collaboration fosters trust and open communication, leading to a more enjoyable and efficient work experience for everyone involved.
In the private sector, successful projects have emerged, especially in the biotechnology and data centre sectors, where collaboration isn’t even formally written into the contract. When there’s a high level of transparency and a shared goal of completing the project on time and within budget, everyone benefits. This approach translates to better margins and higher profits for contractors. It also leads to increased revenue for owners as the project is delivered closer to the original operational date. The key is identifying risks early through effective project planning and scheduling practices.
In the public sector, a collaborative contracting model can help distribute risks more evenly. Traditionally, the government places most of the commercial risk on the contractor, which can create tension. Collaborative contracting allows for prompt addressing of claims, keeping everyone informed and enabling the contractor to work with all stakeholders to minimise delays. In a competitive bidding scenario with tight margins, this can be the difference between profit and loss for a contractor.
BRJ: Can you provide examples of successful collaborative projects in Singapore and their outcomes?
TL: The Punggol Digital District (PDD) serves as a prime example of successful collaboration in Singapore. This was the first pilot to implement the PSSCOC collaborative contracting module, achieving a cost savings of around 10 percent compared to the initial estimates and was completed approximately six months ahead of schedule. This success strengthened the case for BCA to continue promoting this form of contract.
TBH has been working with the largest global data centre providers out of our Singapore office since 2021. In one case, our client faced significant delays on a project which could have easily escalated into an adversarial conflict. However, the client recognised that the contractor lacked robust project planning capabilities, hindering optimal decision-making for a timely delivery.
We advised our client to prioritise collaboration over conflict. Instead of resorting to a strictly contractual route – reviewing and rejecting schedules, essentially putting pressure on the contractor – our client took a collaborative approach. TBH was brought in to work openly with the contractor, providing hands-on support in planning the construction completion, transparently monitoring progress, mitigating issues, and managing emerging risks. The client openly shared their key priorities, ensuring the contractor focused on achieving those goals.
While the contractor did miss some initial contractual deadlines, the collaborative communication and shared focus on the client’s priorities prevented a costly contractual dispute.
BRJ: Can you elaborate on the role of innovation in promoting collaborative practices in Singapore’s construction industry?
TL: Innovation plays a crucial role in promoting collaborative practices in Singapore’s construction industry. However, the construction industry, both in Singapore and globally, has traditionally been slow to adopt new technology and innovation. The implementation of innovative technologies can greatly improve collaboration and productivity in Singapore’s construction industry.
Singapore has been proactive in bridging the digital skills gap and promoting technology adoption within the industry. For example, its Productivity Innovation Project (PIP) incentive scheme co-funds up to 70 percent of the costs of technology adoption and innovations that help improve productivity at construction sites.
TBH integrates advanced software and digital tools to improve collaboration and efficiency in construction projects. By implementing these technologies, we streamline communication, facilitate real-time data sharing, and enable better decision-making among stakeholders. The adoption of robust planning and scheduling practices, Building Information Modelling (BIM) and other cutting-edge solutions like 4D modelling also ensures that all project participants have immediate access to up-to-date information, promoting transparency and coordination.
Currently, TBH’s Sydney office is focused on developing AI software that can initially compare periodic programme updates and report on trends, aiming to replace the current time-consuming manual process. This will allow us to provide detailed critical analysis to our clients in a shorter timeframe, further enhancing project efficiency and collaboration.
BRJ: How does Singapore’s reliance on the public sector for construction demand influence industry practices and standards?
TL: Singapore’s public sector contributes more than half of the total construction demand in the country, and as a result, it is extremely influential on the industry. The supply chain’s practices and standards in Singapore are often tailored to respond to requirements set out by the various public sector agencies.
The public sector often prioritises long-term benefits in its projects. This focus on sustainability, resilience, and infrastructure development incentivises construction companies to adopt practices that meet these goals. Such practices might involve using prefabricated building techniques that reduce waste and construction time or incorporating eco-friendly materials for a lower environmental footprint.
Government agencies like BCA set standard forms of contract, such as the PSSCOC, for public projects. These contracts outline expected practices and quality standards. By following these guidelines in public projects, construction companies become accustomed to these practices and often implement them in private projects as well. This creates a standardised approach across the industry.
The government also plays a role in driving innovation and technology adoption within the construction industry. Public funding for R&D in construction technologies fosters advancements in areas like modular construction. In 2020, the government invested $120 million to promote modular building techniques. The HDB projects use a precast concrete building system which has been perfected over the years.
Public agencies often partner with training institutions to develop a skilled construction workforce. These programmes establish benchmarks for worker qualifications, influencing hiring practices across the industry. Singapore’s public sector acts as a powerful force in shaping best practices and high standards throughout the construction industry; it sets the tone for the entire industry to follow.
BRJ: What are some key differences between Singaporean construction projects and those in other global regions?
TL: The construction industry in Australia presents a stark contrast to many Asian markets, including Singapore. Australia boasts a highly skilled workforce with specialised trade qualifications, resulting in greater individual productivity but higher labour costs. Singapore, on the other hand, often relies on a larger pool of lower-skilled foreign workers, leading to higher staffing levels to achieve comparable output. This model, while keeping labour costs down, tends to be more resource-intensive.
Another key difference lies in dispute resolution practices. In Australia and the West, public sector contractors commonly pursue formal legal channels such as litigation or arbitration. However, this approach is less common in Singapore, where commercial settlements are often negotiated privately. My experience as a delay expert confirms this trend. I’ve represented clients in arbitration across Southeast Asia and supported litigation against government entities in Australia, and our Singaporean public sector clients generally prefer to resolve issues internally.
Lastly, project planning and scheduling maturity varies significantly. Australian and Middle Eastern clients prioritise these aspects throughout the project lifecycle. In Singapore, while the Land Transport Authority demonstrates strong planning practices, many other government and private sector entities place less emphasis on it. This often leads to project delays and costly reactive measures.
BRJ: What factors typically cause budget challenges in Singaporean construction projects?
TL: Budget challenges are multifaceted. Recent external factors like the pandemic, geopolitical climate, and a strong Singapore dollar have exacerbated issues like labour shortages and rising material costs.
One common cause is rushed designs, which can lead to a cascade of costly changes later. TBH emphasises collaboration, ensuring designs are well-developed before construction begins. In almost all of the mixed-use developments where we act on behalf of the owner or contractor, we have observed delays caused by design changes. These additional costs are often not included in the initial budget.
Another factor is contractors with tight bids that lack contingency for unforeseen issues. This occurs frequently, especially on public sector projects where the bid was competitive. Some foreign contractors here in Singapore do not make a profit on public sector projects simply because their bid did not account for unforeseen risks.
TBH addresses budget challenges proactively by implementing robust project controls and cost management processes. These systems enable us to assess the cost and schedule impact of any changes quickly and accurately. For instance, a biotechnology company enlisted TBH’s services from the project’s inception to ensure effective cost management. TBH conducted a cost risk analysis for each major project milestone, providing real-time data to the company’s head office in the USA. Equipped with this information, our client could make well-informed decisions to prevent or minimise budget and schedule overruns.
BRJ: How does TBH define a collaborative approach in a traditionally hierarchy-based industry like construction?
TL: A successful collaborative approach relies very heavily on the mindset of all project stakeholders, and this is often largely influenced by the project owner. Accordingly, where we have been engaged by the project owner, we dedicate time to promoting the benefits of a collaborative approach.
Having worked extensively with both owners and contractors, TBH understands the key business drivers for owners, contractors and subcontractors. We are well-equipped at breaking down barriers and fostering collaboration in the construction industry. We bring clients, architects, engineers, and contractors together early to engage in open dialogue and planning. By being transparent, we aim to eliminate blame-shifting and focus on making projects successful for everyone.
We advocate for the creation of realistic schedules that account for anticipated material shortages, labour problems, or delays in permit approvals. We also ensure efficient resource allocation to prevent bottlenecks. Additionally, we identify schedule risks and develop contingency plans to adapt to unforeseen changes quickly and maintain project momentum. We implement a central platform where all parties have real-time access to project documents, plans, and schedules. This helps facilitate informed decision-making and adjustments when needed.
BRJ: How does TBH facilitate collaboration with subcontractors to streamline project execution?
TL: We focus on optimising contractor margins, which indirectly benefits the entire project. Delays from subcontractors can have cascading effects, leading to increased costs for both main and subcontractors. By addressing these challenges proactively, we encourage a more collaborative approach.
Main contractors oversee the entire project lifecycle, while subcontractors often have a shorter, more focused role. Effective collaboration requires clear communication and short-term planning. Given the interdependent nature of subcontractor tasks, coordination is paramount. Ultimately, fostering strong relationships not only with the main contractor but also among subcontractors is crucial for project success.
BRJ: What measures does TBH recommend to mitigate risks associated with adopting a collaborative contracting model?
TL: Collaborative contracting models offer numerous benefits, but these models have inherent complexities, including “no-fault” clauses, problems with traditional insurance, and no guaranteed cost savings. Creating effective contracts takes careful negotiation and planning from all involved. This upfront time and resource investment is crucial for setting up successful contracts. Introducing and implementing new contracts will definitely have some initial challenges and a learning curve. Specific contract details may be unclear and need adjustments as we go along.
To mitigate risks, we recommend several measures. Firstly, it’s critical to ensure that all stakeholder’s mindsets align with the delivery model’s intent. TBH’s dedicated Change Management can assist organisations in navigating this process. Furthermore, stakeholders should work together to establish common objectives and maintain open communication throughout the project.
Clear processes for addressing and resolving conflicts should also be in place, and it’s also important to encourage and reward behaviour that fosters trust and cooperation among all involved parties. Another essential aspect of risk mitigation is carefully assessing project suitability. It’s important to realise that collaborative contracting might not be appropriate for all projects. This model is generally unsuitable for small-scale projects.
BRJ: What are the future trends in construction project management that TBH sees impacting Singapore’s market?
TL: One of the most pressing issues across the Asia-Pacific region, including Singapore, is the critical and persistent shortage of skilled labour. This shortage impacts project timelines and costs. As a result, there is an increasing need for efficient project management solutions.
Sustainability is another major trend. Singapore has made significant commitments to sustainability goals, with the BCA aiming for 80 percent of buildings to be green-certified by 2030. The construction sector plays a crucial role in achieving these targets, with sustainability becoming a key consideration in project planning and execution. Construction firms will need to integrate sustainable practices and technologies into their projects, potentially requiring new expertise and management approaches.
The construction industry is also grappling with fluctuating raw material costs and supply chain disruptions, impacting project budgets and profitability. While specific price fluctuations may vary over time, the overall trend of volatility in material costs is expected to continue. For instance, the price of steel has risen by 50 percent over the past four years due to global supply chain disruptions and increased demand. This challenges construction firms to adopt strategic procurement practices and technological solutions to mitigate cost escalations effectively.
TBH also anticipates an increased demand for advanced project management techniques and technologies such as the adoption of artificial intelligence and machine learning for more accurate project forecasting, the use of Building Information Modeling (BIM) for improved collaboration and efficiency, and the implementation of lean construction methodologies to optimise resource usage.
_________________________________________________________________________
About the Author
Trevor Lam, Partner (Asia) at TBH, leads the Commercial Claims and Dispute Resolution team in Asia. As a testifying Delay Expert in formal proceedings, Trevor’s comprehensive knowledge and over 20 years of extensive experience in project planning, scheduling, project controls, and forensic delay analysis across Asia, Australia, the Middle East, and Europe make him a valuable asset to clients at any stage of a project. His expanding presence in Malaysia in recent years is a testament to his commitment to growing the business throughout Southeast Asia.
