AGGREGATE LOSS BY GOVERNMENT AGENCIES RESULTING FROMINSOLVENCY OF BUILDING AND INFRASTRUCTURE CONTRACTORSSINCE COVID-19 PANDEMIC

Anecdotally, we noted a number of business failures since the pandemic that impacted on building and infrastructural projects of the Government. I filed a PQ to find out, as a result of these failures, how much additional costs the Government incurred to get replacement contractors and what steps have been taken to minimize these losses. In his reply, DPM Lawrence Wong informed that an additional $450 million was required to get replacement contractors to complete the outstanding works. My PQ and DPM Lawrence Wong’s answer may be accessed below.

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Mr Murali Pillai asked the Deputy Prime Minister and Minister for Finance from the commencement of the COVID-19 pandemic (a) what is the aggregate loss arising from the premature termination of building and infrastructural contracts issued by Government bodies and statutory bodies due to the insolvency of contracting counterparties, including the re-issuance of contracts for remaining work to other parties at higher unit prices; and (b) what steps are being taken to minimise such losses.

Mr Lawrence Wong: About 2% of government construction contracts have been prematurely terminated due to contractor insolvency since the start of the COVID-19 pandemic. For these contracts, which involve essential infrastructure and building projects, government agencies have taken steps to minimise the costs incurred. In total, an additional $450 million was required to secure the services of replacement contractors to complete the remaining works.

The new contractors were selected based on competitive bids, which were assessed against prevailing market rates. Where possible, agencies negotiated with replacement contractors to further lower the prices. As part of contractual terms, the agencies had also called on the performance bonds of the insolvent contractors to offset some of the cost increases.