Cost Efficiency of Large Infrastructure Projects

The following question stood in the name of

Mr Kwek Hian Chuan Henry –: 3 **** To ask the Minister for Finance what are the efforts to review cost-efficiency of our large-scale infrastructure projects.

Ms Sun Xueling asked the Minister for Finance what are the specific measures in place to ensure that costs are judiciously managed in the construction of large infrastructure projects such as Changi Terminal 5, Tuas Mega Port and the Jurong Lake District.

Ms Rahayu Mahzam (Jurong): Question No 3.

The Senior Minister of State for Finance (Ms Indranee Rajah) (for the Minister for Finance): Mr Speaker, may I take Question Nos 3 and 4 together?

Mr Speaker: Yes, please.

Ms Indranee Rajah: There are comprehensive measures in place to ensure the cost-efficiency of publicly funded infrastructure projects, with greater scrutiny on projects that are of higher value or risk.

Projects that exceed $100 million, which make up over two-thirds of our infrastructure expenditure, are subject to scrutiny by the Ministry overseeing the project as well as MOF before they are allowed to proceed. To help MOF perform this role, the Centre for Public Project Management (CP2M) was set up in 2011 with a multi-disciplinary team of architects, engineers and quantity surveyors who review the scope, design and cost reasonableness of the proposals. Changes may be made to revise the project scope or optimise the project design to achieve greater value-for-money. After the project passes the review by MOF, approval must be obtained from the Development Planning Committee (DPC), which comprises three Cabinet Ministers.

If a project is estimated to cost above $500 million, it is put through a rigorous Gateway Process. This includes projects like Changi Terminal 5 and Tuas Port. Such projects undergo a few stages of reviews by the Development Projects Advisory Panel (DPAP) supported by CP2M, before it is submitted to the DPC for approval. DPAP comprises senior public officers, academics and industry practitioners with deep technical expertise and experience in major infrastructure developments. This allows us to draw on the expertise and best practices in both the public and private sectors. The first stage of review assesses the strategic business case of the project and allows MOF and DPAP to be involved upstream in project planning. The second stage seeks to refine and optimise the overall design, including the space take-up, construction method and procurement approach, to achieve greater value-for-money.

The Gateway Process also allows agencies to work with DPAP to come up with alternative solutions that can achieve better or similar outcomes at lower costs over its life-cycle. One example is the construction of the Tuas Terminal Phase One where the Maritime and Port Authority of Singapore (MPA) came up with a method of reusing excavated and dredged materials from other sites for its land reclamation. This saved a few hundred million dollars by reducing the amount of sand needed.

The measures to manage large infrastructure project costs do not end at project approval. When a tender is called by the project agency, this is usually done through competitive open tender which allows price discovery. There is also a robust assessment of the cost-benefit trade-off before an award decision is made by the tender approving authority, which typically comprises senior officials. For example, the award decisions for large infrastructure contracts called by LTA are approved by its governing Board.

At any stage after a project is approved, re-approval is required if there are material changes to the project scope, or cost increases exceeding 10% or $100 million, whichever is lower. The agency involved is required to provide justifications for the changes, which are scrutinised again by MOF before seeking re-approval from DPC.

Ms Sun Xueling (Pasir Ris-Punggol): I thank the Senior Minister of State. Should the public be interested to track the yearly outlay on these mega infrastructure projects, how would they be able to see that in the yearly budget release, given that the combined infrastructure spending budget for the Ministries of MND and MOT was only $15 billion in 2016, whereas the expected spending on these mega infrastructure projects are in the tens of billions?

Ms Indranee Rajah: Mr Speaker, the projects are reflected in the Budget Book, which is year by year. So, each year, you look at the relevant Ministries' budgets. For mega projects, it is spread out but, typically will be found in the budgets for MOT, MND and for MEWR. If the Member is asking whether the Budget Book sets out the expenditure in the next 15 or 20 years, you will not get that. What you will get is the expenditure for that year but you can track it on a yearly basis.

Mr Pritam Singh (Aljunied): A point of clarification for the Senior Minister of State, in view of the comments made yesterday about the funding of T5, and the views of the International Air Transport Association (IATA) that T5 should not be pre-funded with taxes or a tax levied on passengers, for example. Does the Ministry have any position on this?

Ms Indranee Rajah: Sorry, can I just check: when the Member referred to comments yesterday, whose comments yesterday? Or was he referring to The Straits Times report this morning, I think?

Mr Pritam Singh: These comments were made yesterday. It was also reported today in The Straits Times, and I believe it was a senior official of IATA who made those comments.

Ms Indranee Rajah: I think what the official had commented on was something about how you should not have pre-funding. Is that what the Member is referring to?

Mr Pritam Singh: That is correct.

Ms Indranee Rajah: Okay. My comments at this stage would simply be that when it comes to mega projects, we have to look at what is the most optimal way to do the funding. We are still in the process of doing that. We do not rule out different ways of doing the funding but we are not committed to a single model. So, in short, we will try and find the most optimal way to do the funding and spread it out over the proper period of time.

Dr Tan Wu Meng (Jurong): I thank the Senior Minister of State for her answers. I was wondering, in terms of cost efficiency, to what extent the lifetime maintenance cost of a large infrastructure project is considered as part of that efficiency, given that these projects may last many years and the design of the project may impact the on-going cost required to upkeep and maintain it for future years.

Ms Indranee Rajah: That is a very valid and pertinent question, and it is something that MOF is studying. Because our view is that when you look at the cost of a project, you must consider not just the initial development but how much that project is going to cost you over time. So, we are looking to see how that should be dealt with and reflected.