BUILDING A WORLD CLASS CONSTRUCTION INDUSTRY IN SINGAPORE MOHAMMED. F DULAIMI, FLORENCE Y. Y. LING, GEORGE. OFORI, NAYANTHARA DE SILVA

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1 CIB World Building Congress, April 2001, Wellington, New Zealand Page 1 of 10 BUILDING A WORLD CLASS CONSTRUCTION INDUSTRY IN SINGAPORE MOHAMMED. F DULAIMI, FLORENCE Y. Y. LING, GEORGE. OFORI, NAYANTHARA DE SILVA Department of Building, School of Design and Environment, National University of Singapore, Singapore ABSTRACT The construction industry in many parts of the world has a poor image. This is the result of the industry s failure to achieve the expected performance level in delivering its finished product and its customer service. It can also be argued that the industry even fails to communicate effectively when it succeeds in improving the quality of its service. The accelerated change in nearly every aspect of the economy driven by technological developments in the manufacturing and service industries has fuelled several paradigm shifts in business management. However, construction is singled out as one that is still dominated by attitudes, technologies, processes, and more important, a culture that is at least half a century old. This paper investigates the challenges and opportunities for Singapore s construction industry as it strives to be a world-class quality provider. It has been recognised that if high quality is to provide a sustained competitive advantage, world-class organisations must go beyond the skilled application of tools and techniques to include a whole shift in culture, values, beliefs and assumptions guiding the organisational activities. The paper compares and contrasts the UK and Singapore s initiatives. Similar initiatives in Australia are examined as well. The paper highlights the main differences in the analysis and approach to the issue of construction industry development. The paper also reports the initial findings of a research project examining the engines of change in Singapore s construction industry, and identifies and examines the barriers that may prevent the industry from achieving the targets set by Singapore s C21 report. KEYWORDS: Construction Industry Development; Singapore; World-Class; Change; Culture. INTRODUCTION In Singapore, the difference between the performance of the construction industry and the rest of the economy in terms of quality, productivity and safety performance, among other criteria, has been highlighted in many reports and speeches. The most recent study is the government appointed investigation into the state of Singapore s construction industry undertaken by the Construction 21 Steering Committee comprising eminent practitioners representing all sections of the industry. Its report, titled Re-inventing Construction, best known as Construction 21 (C21) was published in October The performance of the construction industry in Singapore is seen to lag behind those in countries such as Hong Kong, Australia, Japan and the US. The C21 blueprint is underpinned by the strategic vision of Singapore industry, which is to be a world-class builder in the knowledge age. Under this vision, several recommendations were offered, under six strategic thrusts, to enhance performance on construction projects in Singapore. The C21 report is seen as a key milestone in the development of Singapore s construction industry. The report highlighted the main weaknesses and strengths of the industry and its recent historical

2 CIB World Building Congress, April 2001, Wellington, New Zealand Page 2 of 10 development. More importantly, the report examines the main initiatives that have been established to drive the industry to further improve its performance and image. The report provides key recommendations and targets for policies, legislation and key changes to the procedures and practices of the local construction industry and its main stakeholders should aim to achieve in order to realize set levels of improvements. This study builds on the works and conclusions of the C21 report. The main research question for this study was why the construction industry in Singapore is in such a state and how it can change and improve itself. The study also draws on the experience of two similar reviews that have been conducted in the United Kingdom and Australia. The aim is to learn from their experience in attempting to solve and address similar problems. REBUILDING CONSTRUCTION: AN INTERNATIONAL COMPARISON The last few years have witnessed several international initiatives to review the state of the construction industry. In 1998 and 1999, two reports were published in the UK and Australia that outlined the results of a national review of the challenges and problems facing the national construction industry. These reports have also recommended key targets and initiatives for the industry to achieve. The following is a brief review and comparison of the motivation, the identified problems and challenges, and the recommended solutions and engines for change and of these two reports. Rethinking Construction (UK) The Egan report titled Rethinking Construction details the findings of a construction task force (CTF) set-up by the British Deputy Prime Minister in response to the criticism of the construction industry in the UK of failing to provide a satisfactory service and showing an apparent inability to improve its effectiveness and efficiency. MOTIVATION The terms of reference of the CTF were to advise the government, from the clients perspective, on the opportunities to: improve the efficiency and quality of UK construction; reinforce the impetus for change; and make the industry more responsive to customers needs. PROBLEMS AND CHALLENGES The need for improvement was driven by, first, the need to modernise the industry to deal with key problems in low profitability, and low investment in R&D and training. Second, increased client dissatisfaction with the services and products of the construction industry was the major force driving this review, considering the membership of the CTF is mainly of clients. SOLUTIONS AND ENGINES FOR CHANGE Table 1 provides an outline of the recommended targets and how the report expects the industry to achieve these targets. Table 1 Outline of the Egan Report Recommendations for Improvement Year-on-Year Targets! 10% cut in construction costs.! 10% improvement in productivity.! 10% boost in profits & turnover.! 20% Number of Projects completed on time and within budget.! 20% Reduction in number of Defects on handover.! 20% Reduction in number of reportable accidents.

3 CIB World Building Congress, April 2001, Wellington, New Zealand Page 3 of 10 The Egan report also indicated how the construction industry in the UK should change in order to achieve the targets. In essence, the design and construction processes should be integrated, the level of standardisation increased, and lean construction techniques utilised. There should also be an end to competitive tendering, and the phasing out of formal building contracts. The CTF identified the following drivers for change based on the experience of the manufacturing and service industries: committed leadership; a focus on the customer; integration of the process and the team around the product; a quality driven agenda; and a commitment to people. One of the key distinctive characteristics of this initiative is that it is customer driven. In addition the use of demonstration projects to disseminate good practices were to be pioneered and led by some of the industry s main customers. Building for Growth (Australia) In 1997, the Australian government appointed the national building and construction committee to advise the government on the areas in which Australian construction industry needs to be strengthened and improved. This was part of a wider government exercise under an action agenda initiative to provide a vehicle for collaboration between government and industry (ISR 1999). MOTIVATION The main aim of Action Agenda is to analyse the state of the industry and identify areas for improvement in order to become an international leader and provider of world-class products and services. Therefore, this review is seen to be proactive rather than reacting to any pressure from dissatisfied customers. However, this should not be seen as evidence that there isn t such problem within Australia s construction industry. PROBLEMS AND CHALLENGES The main problems identified included the following: 1. The government need to play an active role in the development and improvement of the technical support infrastructure. 2. The low level of investment in education and training. 3. The significant change in technologies, processes and roles instigated by changing regulatory role and, more importantly, the decline in the dominance of the public sector in major projects. 4. The low level of investment in R&D. 5. The low penetration of IT in the industry. 6. Firm-based approach to export and the lack of coordinated approach to marketing the industry. SOLUTIONS AND ENGINES FOR CHANGE The report has identified several challenges facing firms involved in the construction activities. 1. Integrating the supply chain. 2. Industrialisation and increasing the knowledge base. 3. Constantly benchmarking to maintain competitiveness. 4. Adopting new project delivery mechanisms that would build trust and close relationships with clients. 5. Greater involvement and investment in innovation R&D. 6. Regulation as motivators for greater improvement. 7. Alignment of national and international standards. Construction 21: Re-inventing Construction (Singapore) The Construction 21 (C21) process was the result of the merger of the Construction Manpower 21 initiative of the Ministry of Manpower (MOM) launched in May 1998, and that of the Ministry of

4 CIB World Building Congress, April 2001, Wellington, New Zealand Page 4 of 10 National Development s (MND) Committee on Practices in the Construction Industry. The C21 process was jointly led by the MOM and MND. MOTIVATION The terms of reference of C21 were: To arrive at a vision and role for the construction industry in the 21 st century To examine the current status of the construction industry with regard to techniques, manpower, management practices and others and benchmark it against the best standards in the world To set concrete targets for the construction industry and its workforce in Singapore by taking into account the gaps between current reality and the intended vision To recommend strategies to meet the targets and move the construction industry and workforce towards the intended vision. PROBLEMS AND CHALLENGES The C21 report identified the following main problems of Singapore s construction industry: low productivity and negative productivity growth for nearly five years; heavy reliance on an unskilled foreign workforce which has given rise to some social problems; and a poor safety record with a rising number of fatalities. Factors which contribute to these problems include: the segregation of design from construction which does not encourage the consideration of buildability, maintainability and safety; and the large number of small construction firms constrained by costs, time and expertise which hinders the efforts of the industry to upgrade. SOLUTIONS AND ENGINES FOR CHANGE To achieve the stated vision, the C21 report stressed that it would be necessary to affect a paradigm shift in the image, processes and purpose of the construction industry. It formulated six strategic thrusts for the development of the local construction industry, under which it presented 39 recommendations. The strategic thrusts are as follows: 1: Enhancing the Professionalism of the Industry 2: Raising the Skills Level 3: Improving Industry Practices and Techniques 4: Adopting an Integrated Approach to Construction 5: Developing an External Wing 6: A Collective Championing Effort for the Construction Industry. Desired Outcomes The Steering Committee highlighted the need for Singapore s construction industry to be transformed into a knowledge and high-value-added industry. It outlined the following desired outcomes for the industry: A professional, productive and progressive industry A knowledge workforce Superior capabilities through synergistic partnerships Integrated process for high buildability Contributor to wealth through cost competitiveness Construction expertise as an export industry. Differences and Similarities There are clear differences between the different initiatives. These differences stem from the immediate reasons and motivation to carry out such a review. The UK initiative was mainly driven by and championed by major customers and clients of the British construction industry whom were frustrated by the slow pace of improvement of the industry. Hence the improvement targets where very closely linked to the final product. The Australian initiative was part of a much larger initiative

5 CIB World Building Congress, April 2001, Wellington, New Zealand Page 5 of 10 to improve the national economy. Therefore, the review and its recommendations were focused on creating and enabling mechanisms that would allow the Australian construction industry to improve its competitive, especially on the international markets. The C21 in Singapore addressed similar problems to the previous two. However, the main motivation seems to be influenced by concerns that the current state of Singapore s construction industry would have a negative effect on the whole economy. This maybe explained by the great emphasise on foreign workers and the image of the industry. RESEARCH METHOD AND DATA COLLECTION The research has developed a questionnaire with two main parts. The first part requires respondents to indicate their perception of the main problems and challenges facing their organisation. The questions addressed eight fundamental issues such as! Technological leadership.! Strategic development and utilization of IT.! The industry s image and commitment to change.! Corporate development and innovation.! Approach to procurement.! Human resource management.! Developing a collaborative culture.! Performance evaluation and benchmarking. The second part requires respondents to indicate the motivators and enablers that would allow their own organisations to achieve the objectives and targets set by the C21 report in becoming a world class organisation. The questions addressed nine areas, such as:! Professional standards.! Skills level.! Buildability.! Construction safety.! Maintainability.! Quality.! R&D.! Integration.! International construction. The target population of general contractors, specialist contractors and suppliers was identified based on companies that are registered with the Building and Construction Authority (BCA) under the relevant workheads. The sub contractor s target population was obtained from the Singapore List of Trades Subcontractors (SLOT) registry. The total number registered are 1919 general contractors (building and civil engineering), 360 of SLOT registered sub contractors, 1597 of specialist contractors for piling, air conditioning, lift cont., plumbing, electrical and mechanical contractors and 2189 of suppliers; precast concrete, building material, metal & timber, sanitary products, finishing material, mechanical and electrical suppliers were identified. A random sample was chosen to include 354 general contractors (200 and 154 for general building and civil engineering), 200, 287 and 404 for sub contractors, specialist contractors and suppliers respectively. A pilot study and interviews with contractors were conducted to ensure the clarity and relevance of the questionnaire. A total of 1245 questionnaires were mailed with a covering letter and a pre-stamped and self-addressed envelope. Results and discussion SAMPLE PROFILE The profile of the different groups in industry participated in this study is presented in table 1. The response rate of the different groups was low. Although these rates are considered normal in Singapore these low rates may reflect the low level of awareness of the C21 report that was highlighted in the covering letter to be the main focus of the study.

6 CIB World Building Congress, April 2001, Wellington, New Zealand Page 6 of 10 The questionnaires were addressed to the Managing Director of the organisations. However, the designation of the participants varied from Engineer/Architect or Quantity Surveyor and including Managing Director. However 43% of the sample can be classified to be at a senior management level. While 36% of them are grouped into middle management level that included managers, project managers etc. The respondents were actively involved across the different sectors of contracting activities from new building projects to maintenance projects. Among the different type of projects, new building projects have highest percentage and maintenance works obtained lowest percentage. The figure 1 shows the detail profile of projects carried out in the past three years by the respondents. Table 1: Distribution of questionnaires and response rate Respondent Sent Out Usable returns Unusable Returns Frequency Frequency (%) Frequency (%) General building contractors Civil engineering contractors Specialist contractors Suppliers Subcontractors (SLOTs) LEVEL OF AWARENESS OF C21 REPORT To identify and examine the barriers that may impede the industry from achieving the targets set by the C21 report the research has considered the industries knowledge and familiarity with the report recommendations to be crucial. The respondents were asked to indicate their familiarity with the C21 report on a scale 0f 1-7 (1=very familiar, 4=neutral, 7=not familiar) Percentage Private Public 0 BDG CVE A&A MCE Project Figure 1: Profile of construction projects in past three years BDG- New building projects CVE Civil engineering projects A&A- Refurbishment, additions and alterations MCE- Maintenance work.

7 CIB World Building Congress, April 2001, Wellington, New Zealand Page 7 of 10 The mean value obtained for the industry s familiarity with C21 is 4.54, which is just over the neutral point of 4 moving into the unfamiliar zone. This indicates that the construction industry level of awareness of the report is not high and can be considered as moderately low. This would prove to be a great impediment to the effectiveness of the C21 report. The research carried out an analysis of variation (ANOVA) that indicated that there are no significant differences between the different groups (i.e. general contractor, subcontractor, specialist contractor and supplier) involved in the construction activities. The research has also collected data regarding the perceived potential of the C21 report to improve the performance of the construction industry in Singapore. On a scale of 1-7 (1 being strongly agree and 7 strongly disagree) the industry gave an average of 3.38 of the potential of the C21 to improve performance. In addition, respondents were asked to indicate the effectiveness of the C21 report in addressing the problems of the construction industry. The results show the industry gave an average of 3.66 (1 being very effective and 7 not effective at all). It is interesting to find that even thought the industry was not very familiar with C21 report they still expressed their belief that it s recommendations have the potential, and is effective, in improving the ability of the construction industry to become a world class organization. PROBLEMS AND CHALLENGES FACING THE CONSTRUCTION INDUSTRY The principle question of the first part of the questionnaire was concerned with identifying the perceived problems and challenges experienced by the different organisations in their attempt to improve its business activities. In this section, the respondents were asked to indicate the extent to which they agree or disagree with various statements. A seven-point Likert scale was used in which 1 indicates that the statement refers to a problem or challenge that is strongly affect the organisation while the 7 indicates that the problem has no effect at all on the organisation. The study has listed 41 statements under this question. The one sample t-test (at 5% significance) is used to rank the different statements. Table 3 shows the top ten statements. The study carried out an ANOVA test on the top 3 statements. The results show that the there were no significant differences between the different groups in the sample, i.e. contractor, subcontractor, specialist contractor and supplier. Rank Key Factors Table 3: Practical barriers and challengers 1 Clients focuses on lowest price at tender stage 2 Allowing too many companies to tender for any single job or project 3 Narrow profit margins in construction business activities 4 It is relatively easy for poor performing companies to enter the market 5 Extensive use of competitive tendering in construction contracts 6 Current standard conditions of contracts do not create positive working relationships on projects 7 Lack of strong leadership from major clients to improve performance of the construction industry 8 Lack of formal code of conduct for contractors, developers and some professionals in industry 9 Lack of incentives to encourage creativity and innovation in construction 10 Ability of construction companies to develop a long-term business strategy In examining the top ten problems and challenges identified above two main issues can be identified. The first is the lack of leadership within Singapore s construction industry. The criticism of clients (item 7), the absence of incentives to innovate (item 9) and the inability of construction firms to identify their strategy (item 10) give great weight to the call for major clients and major contractors to

8 CIB World Building Congress, April 2001, Wellington, New Zealand Page 8 of 10 play a key role in identifying the agenda for change and development within the industry. The second issue is the need to rethink procurement in construction. Most of the other statements identified the need for a significant shift from the current practices in construction procurement that are seen to be the main challenge for improvement in construction. MOTIVATORS AND ENABLERS The second section of questionnaire is set to identify the motivators and enablers that are seen to be key to improving performance of the organisation. Earlier in the paper nine different areas where the construction industry would be required to achieve improvement. Several statements were used for each of the issues. A total of 84 statements were used. A 7-point Likert scale was used. Respondents were asked to indicate the extent to which they believe the statement describes what would enable or motivate their organisation achieve a particular improvement (1 being very effective and 7 very ineffective and 4 neutral). The top ten motivators/enablers are shown in table 4. The one sample t-test (5% level) was carried out to rank the factors. Table 4: Motivators and Enablers Rank Key Factors (In brackets are the issues under which the statements have been listed) 1 Closer cooperation among designers, contractors, specialist contractors, material suppliers and component manufactures during the design stage. (Buildability) 2 The government should provide incentives to help employers to invest in training programmes. (Skills Level) 3 Developing better coordination between contractors and suppliers during the construction stage. (Buildability) 4 Contractors, subcontractors and suppliers to adopt construction management systems that are compatible to ensure smooth running of projects. (Integration) 5 Company should identify strategic allies to form consortiums, to pool resources and knowledge together. (International Construction) 6 Increase tax incentives for companies, which invest in new construction technologies and management systems. (R&D) 7 More information and intelligence about the international markets and opportunities to be made available by BCA, EDB, and TDB. (International Construction) 8 Provide training and development programmes on maintainability. (Maintainability) 9 Earlier involvement of specialist contractors in projects. (Integration) 10 Government to provide further financial help and support to companies seeking to work internationally. (International Construction) To explore the difference among the views towards the first three factors (motivators) given by four different respondent groups an ANOVA test was used. The results in table 5 show that there are significant differences between the motivators (statement 2) identified by different parties.

9 CIB World Building Congress, April 2001, Wellington, New Zealand Page 9 of 10 Table 5: ANOVA Results Factor F Sig Therefore, the research decided to examine the top three motivators/enablers identified by the different groups. A t-test was again carried out within each group and the results are outlined in table 6. The results show that general contractors, subcontractors, specialist contractors and suppliers were all keen to achieve greater cooperation and closer integration to enable them to improve their performance. General contractors see there efforts to improve performance hampered unless clients take more interest and be involved in playing a key role during the design and construction phases. This may indicate that general contractors effort to improve their performance is hampered by the lack of client driven agenda. Subcontractors expressed similar needs. In addition they identified the need to invest more in training. However, they want to see the government intervene to provide incentives for them to invest in training. It would be expected that the incentive for any business to invest in training should be improving their competitiveness. This response may indicate that current contracting environment with very low margin is curtailing efforts to invest in the future. Regarding the specialist contractors and suppliers although they shared concerns about integration and closer cooperation across the supply chain they were also concerned about their ability to compete internationally. Specialist contractors in particular have identified international construction as one of the top key motivators. This indicates that as far as the construction industry in Singapore firms with technical expertise and manufacturing capability are being attracted to the international market. Hence the drive for greater participation in the international market should concentrate on enabling such firms to spearhead this initiative. CONCLUSION The international wide concern at the state of the construction industry and its ability to keep pace with wider changes in the economy are, clearly, one of key forces that have driven several countries to examine ways to enable change. The results of this investigation have indicated that so far the C21 recommendations still needs to effectively penetrate the different sectors of Singapore s construction industry to reach the people most capable of change. These results reported by this paper show that there are two key changes that are required to enable improvement in Singapore s construction industry. First, there is a clear need for an effective leadership in the contracting sector to bring about change of current contracting practices. Second, greater emphasise on the role of the client, especially of the public sector i.e. the government, is crucial to enable the industry to catch-up with the changes in the economy. This will be key to achieving a world-class status.

10 CIB World Building Congress, April 2001, Wellington, New Zealand Page 10 of 10 Table 6: Motivators and Enablers Identified by the Different Groups Rank Top Key Motivators/Enablers identified by General Contractors 1 Closer cooperation among designers, contractors, specialist contractors, material suppliers and component manufacturers during the design stage 2 Designers to develop more buildable designs 3 Clients to be more interested and involved during the design and construction stages of the project Rank Top Key Motivators/Enablers identified by Subcontractor 1 The government should provide incentives to help employers to invest in training programmes 2 Developing better coordination between contractors and suppliers during the construction stage 3 Establish a new maintainability score similar to that for measuring buildability Rank Top Key Motivators/Enablers identified by Specialist Contractor 1 Closer cooperation among designers, contractors, specialist contractors, material suppliers and component manufacturers during the design stage 2 Government to provide further financial help and support to companies seeking to work internationally 3 Further tax changes to be introduced to reward companies who take the risk of working overseas Rank Top Key Motivators/Enablers identified by Suppliers 1 Contractors, subcontractors and suppliers to adopt construction management systems that are compatible to ensure smooth running of projects 2 Closer cooperation among designers, contractors, specialist contractors, material suppliers and component manufacturers during the design stage 3 Further tax changes to be introduced to reward companies who take the risk of working overseas REFERENCES ISR (1999) Building for Growth, Ministry of Industry, Science and Resources, Australia. Construction 21 (1999) Re-inventing construction, Construction Task Force, S&P, Singapore. Department of the Environment, Transport and the Regions (1998) Re-thinking Construction, Construction Task Force, UK. Latham, M. (1994) Constructing the Team, HMSO, UK.