Adequacy of Paid-up Capital as Key Metric in Assessing Construction Companies for Public Sector Construction Projects

Mr Yip Hon Weng asked the Minister for National Development (a) whether paid-up capital is adequate as a key metric for assessing construction companies tendering for public sector construction projects; and (b) whether additional criteria can be implemented, such as accounts receivable turnover ratio and operating cash flow, as well as limiting the number of concurrent projects the construction companies may take up.

Mr Desmond Lee: Construction companies must register under the Building and Construction Authority's (BCA's) Contractors Registration System (CRS) and meet the relevant requirements before they can tender for public sector construction projects. These requirements cover areas, such as financial health, track record, and personnel. The requirements are tiered, according to the project value.

Under the CRS, paid-up capital is not the only metric used to assess the financial health of construction companies. BCA also considers the companies' net worth if they are tendering for higher-value construction projects.

Beyond the CRS requirements, in the evaluation of tenders, Government agencies may consider additional financial indicators, such as credit rating and liquidity ratio and a company's operational capacity including its existing project load and ability to deliver the project successfully. BCA and the Ministry of Finance will continue to conduct regular reviews, including whether additional metrics are required in assessing tenderers, to ensure Government procurement processes remain cost-effective.