Singapore’s construction industry faces significant challenges with traditional contracting models. Cost overruns, project delays, and adversarial relationships between stakeholders have long plagued the sector, hindering efficiency and innovation. These issues are particularly acute in complex, high-risk public sector projects, where the stakes are high and the impact on citizens is direct.
The root of these problems often lies in the conventional contracting approach. Traditional models frequently lead to misaligned interests, with each party focusing on protecting their own position rather than working towards the project’s overall success. This adversarial mindset can result in disputes, inefficient problem-solving and a reluctance to share crucial information or innovative ideas.
Introducing collaborative contracting
A new paradigm is emerging in Singapore in response to these challenges — the concept of collaborative contracting. This approach — already gaining traction in countries like the UK, USA, Australia, and Hong Kong — emphasises open communication, mutual trust, and shared responsibility among all project stakeholders.
Collaborative contracting introduces features designed to foster cooperation, such as contractual commitments to good faith collaboration, early warning and risk management mechanisms, and incentive-based payment arrangements. By aligning all parties towards the goal of project success, this approach can potentially transform outcomes in Singapore’s public sector construction projects.
The benefits of collaborative contracting are significant. It enhances innovation through early contractor involvement, generates cost savings from proactive risk management, reduces disputes and associated costs, and increases flexibility to adapt to changes. This approach improves project outcomes and fosters a more positive and productive working environment for all involved.
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Singapore’s adoption of collaborative contracting
Industry leaders and government bodies in Singapore are taking notice. In 2017, the Building and Construction Authority (BCA) introduced an optional module for collaborative contracting in the Public Sector Standard Conditions of Contract (PSSCOC). More recently, they launched the NEC4 Engineering and Construction Contract (ECC), which was adapted for Singapore’s legal context to further facilitate collaborative contracting adoption.
Early results are promising. The Punggol Digital District, a pilot programme implementing collaborative contracting, achieved cost savings of around 10% compared to initial estimates and was completed approximately six months ahead of schedule.
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The $650 million National Service Square (NS Square) is another pilot programme utilising the PSSCOC optional module for collaborative contracting. Should this project return tangible cost and time savings, it will encourage other public sector agencies to adopt a collaborative contracting model, which should influence the industry in general.
Navigating potential pitfalls
However, the transition to collaborative contracting is challenging. The process of creating these contracts is complex, requiring extensive negotiations and careful planning involving all stakeholders.
Traditional insurance models may have potential difficulties and cost savings are not guaranteed. Success hinges on aligned goals and open communication among all parties, which can be challenging, particularly when stakeholders are accustomed to more traditional, adversarial approaches.
To navigate these potential pitfalls, strong leadership and a commitment to transparency from all stakeholders are crucial. It also demands a shift in mindset, moving away from the blame culture often associated with traditional contracting models towards a more cooperative, solution-focused approach.
Challenges remain in fully implementing collaborative contracting in Singapore’s public sector. Traditional negotiation practices still prevail, with contractors and employers often engaging in post-completion settlements rather than collaborative problem-solving during project execution.
Slow response times to contractor claims and uneven risk allocation in standard contracts also hinder progress towards a truly collaborative environment.
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Learning from international experience
Learning from international experiences can smooth the transition. Australia’s journey with collaborative contracting, which began in the mid-1990s, offers valuable insights for Singapore. Recognising the shortcomings of traditional adversarial models, particularly in complex, high-value infrastructure projects, the Australian government has actively promoted collaborative approaches.
Strategies such as Early Contractor Involvement (ECI), Incentivised Target Cost contracts, and cost-plus contracting for projects with many unknowns have helped address issues of unequal risk distribution and improved project outcomes. A prime example of Australia’s commitment to this approach is the Sydney Metro West Partnership, announced in 2022.
The future of construction in Singapore
As Singapore continues to invest heavily in its built environment, collaborative contracting is poised to play an increasingly more important role. It offers a path to more efficient, cost-effective, and harmonious project delivery. With ongoing support from authorities and growing industry adoption, the future of construction in Singapore looks more collaborative – and more promising – than ever before.
The BCA Academy now offers specialised courses in collaborative contracting, further supporting its integration into the market and helping to build the necessary skills and knowledge base within the industry. This investment in education and training is crucial for the successful implementation of collaborative contracting.
For C-suite executives in the construction sector, embracing collaborative contracting represents an opportunity to lead the transformation of Singapore’s built environment. By fostering innovation, appropriate distribution of risks, and aligning stakeholder interests, this approach has the potential to deliver superior outcomes and drive industry-wide improvements.
A paradigm shift in project delivery
The shift towards collaborative contracting is more than just a change in contractual terms. It represents a fundamental reimagining of how construction projects can be delivered, challenging industry professionals to think differently about their roles and relationships. As this approach gains momentum, it has the potential to not only improve individual project outcomes but also to elevate the entire construction industry in Singapore, setting new standards for efficiency, innovation, and cooperation.
In conclusion, while the path to fully implementing collaborative contracting may have its challenges, the potential benefits for Singapore’s public sector construction projects are substantial. By learning from international experiences, leveraging local successes, and committing to a more cooperative approach, Singapore’s construction industry can build a more efficient, innovative, and harmonious future. The time for industry leaders to embrace this collaborative approach is now, as it holds the key to transforming Singapore’s built environment for the better.
Trevor Lam is a Partner (Asia) at TBH
