Case Study: “New Normal” for Singapore’s Construction Sector

As we prepare for the restart of our economy following a 2 month lockdown, Singapore’s construction sector is trying to adapt to the “new normal”. There are a few uncertainties that is creating confusion and uncertainty for the industry.

You may refer to the latest media release dated 15 May on the expected direction given by our Building and Construction Authority (BCA) https://www1.bca.gov.sg/about-us/news-and-publications/media-releases/2020/05/15/gradual-resumption-of-construction-work-from-2-june-2020

Impact of Covid-19 on the Construction Industry

Pre-Circuit Breaker

2 months of Circuit Breaker has hit the construction sector badly, even before that, we were already starting to feel the strain of Covid-19 from Malaysia’s MCO as well as China’s earlier lockdown. This is because most of our construction materials have come from these countries and their shutdowns would have impacted on the availability of resources and materials.

Travel restrictions have also caused some inconvenience to the labour intensive industry. Workers who commute from Malaysia daily have to find alternatives in accommodations in Singapore. Workers who were on home leave in China, India and Bangladesh were unable to come back to Singapore due to travel restrictions.

This had led to the reduced pool of available workers in Singapore that is able to work since January. This has slowed progress in a few projects that I was directly or indirectly involved in. Some in the industry were actually relieved that the CB was activated. This is because the shortage of manpower and materials has caused a lot of difficulties in their ongoing projects.

Post Circuit Breaker

The coming months will be a huge financial stress test on construction related companies as they are looking at a controlled and gradual restart that may drag for months before we can see a 100% resumption of works. It is also likely that some projects, subjected to BCA’s approval, might not even resume until August or September.

The table above is an estimation done by The Singapore Contractors Association Ltd (SCAL). It shows the approximate cash outlay during the CB. The companies are categorized in their respective construction workhead, which is their project tender limit (A1>A2>B1>B2)

If you are vested long term in listed construction companies like OKP, Lian Beng, Tiong Seng etc, you might want to be prepared for it. There are also companies that are already in financial distress pre-Covid. This cost stated above does not include the expected cost required to implement the safety measures for restarting works on site (eg. building temporary worker quarters, disinfection services etc). I don’t want to speculate but things are looking pretty bad here and more colour on this should be out in the next ER.

Adapting to the New Normal

As per BCA’s latest advisory, companies and employers must start to implement Safe Accomodation, Safe Worksite and Safe Worker measures.

Safe Workforce

Employers and companies must establish a system to track daily health status of workers

• Testing and decanting of healthy workers
• Ensure Safe Accomodation
• Education of good hygiene practice
• No communal activities like cooking

We know that the authorities expect fortnightly testing of workers and the cost is to be borne by the employers. This will have a huge financial impact on these companies. Let’s say if each test costs $200, 100 workers would mean additional expense of $40,000 per month.

Safe Accommodation

The main aim of this is to reduce the risk of infection between workers working at different work sites. Some of the controls to be implemented include

• Dedicated transport between accommodation and worksite
• Controlled entry/exit
• Room arrangements by teams/groups/worksites
• No communal activities
• Emergency response plan in place for suspected cases.

Dormitory operators would have to work extra hard for their money. New guidelines are also issued with requirements such as minimum livable space per occupant, bed spacing, occupancy per block, density ratio etc etc. For some operators, they have to increase the number of common essential facilities like toilets to reduce inter-mixing across rooms/units/floors/blocks.

These new dormitory requirements to provide housing for workers on site will be an added cost to contractors. Construction cost for these facilities has gone up due to material and labour supply shortage during this period. For worksites that do not have space to build worker quarters, I have heard that some companies are thinking of renting out rooms of budget hotels for their workers.

I’m also not sure for all dorm operators nationwide, but the dorms that my company is using charges per room instead of per worker.My company would have to rent more rooms from the dorm operator if the max number of worker per room is reduced,. Again, possibly more expenses for construction companies.

Safe Worksite

This is probably what most contractors are racking their brains about right now. Here are some measures that are required;

• Pre-screening of inbound workers
• Transport to and from site
• Site entry and exit
• Safety measures and facilities (ie quarantine centre, worker quarters) set up
• Cleaning and disinfecting of worksite
• Delivery and Logistics Procedures
• Emergency preparedness in dealing with suspected cases

If not done properly, this might cause inefficiencies in the work site and affect the progress. Issues such as zoning of worksites to prevent intermixing of different groups of workers must be planned in stages so that things can run smoothly on site

Conclusion

Covid-19 has changed the way we live and work, it will also change the way we build. The whole industry must be ready to adopt the “new normal” (telecommuting, safe distancing measures etc). Most companies will need to re-examine their financial positions and cut excess and unnecessary spending to keep them afloat.

For the post Covid era, the virus has exposed the industry’s weakness. Things like over reliance on manual labour, overleveraging and lack of technology usage have to change. I think that we have to expect further tightening of supply of migrant workers. This is because I have heard on the ground that some workers wish to return to their families. This is coupled with the tight restrictions of incoming workers.

Of course, on the bright side, companies which can adapt well to the changes will emerge stronger. I have joked before that construction industry is like a dinosaur with a lack of new construction technology in most work sites for decades. Hence, it will be a good time to start embracing technology and innovate to achieve higher productivity.

Industry output will be expected to be much lower this year with additional delays and higher expenses expected. We might even see some construction companies going under. However, this is not the end. Singapore can never stop building and improving its infrastructure. With a large pipeline of projects (both public and private) coming up, I am still hopeful of a recovery by end 2020. The additional costs mentioned above should be eventually priced into these new upcoming projects.

Cheers.

Note: Credits to https://www.scal.com.sg/ for some of the information presented in this post.