Monday, June 26, 2017

Encourage the construction industry to use technology

Minister Desmond Lee asked the construction industry to use technology and improve efficiency.

This kind of message has been repeated many times in the past. Why are our construction companies still so backward?

I suspect that the tender system is the root cause. If we go on competitive tender for projects, the main contractors and sub contractors are unsure about the flow of their jobs. So, they will find it difficult to invest in technology.

To give them the confidence, they should be assured about the future flow of jobs at sustainable prices. This can be done when we change our competitive tender system.

This is how it can be done (just my thinking aloud). The government can use professional quantity surveyors who can make a good estimate of the cost of the project. This price can be indicated in the tender.

If a contractor is able to accept the project at this price, they can be assessed base on the quality of their technology and standard of work for past projects.

Here is an example. The professional QS estimated the job to be $100 million. If it is based on competitive tender, the lowest bid might be $95 million. If the project is awarded to this lowest tender, the contractor may fail (i.e. declare bankruptcy) or find ways to press down the wages and subcontractors.

However, if the project is awarded for $100 million, based on my new criteria, the main contractors and their subcontractors will be willing to invest in technology and develop a skilled workforce for the long term.

I wonder if my approach can work?

1 comment:

Anonymous said...

Depends how the QS calculates the cost. They are usually conservative & will base on current & previous actual costings. These may be from environment of low-cost labour and manpower-intensive methods. But initial technology investment PLUS training of appropriate manpower to maximize the technology will be huge upfront cost. The estimate by the QS may be too low to cover the initial investments. Perhaps the govt will need to add on say 20% to the QS estimate for the award.

Also this method can only initially work for large projects, due to economy of scale. For small projects, the large upfront tech investments will not be cost effective.

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