HDB'S MAIN CONTRACTORS AND SUB-CONTRACTORS

Dr Amy Khor Lean Suan asked the Minister for National Development, in view of the recent problems experienced by the Housing and Development Board (HDB) with its construction and upgrading projects and in order to avoid the future occurrence of such problems, what steps have been taken or are being taken in relation to (i) the HDB's internal systems and processes to evaluate tenders and manage main and sub-contractors, (ii) its communication with affected lessees; and (iii) the tendering procedures and registration of contractors for HDB and other public sector projects administered by the Building and Construction Authority.

Miss Penny Low asked the Minister for National Development whether the recent failures of the HDB's main contractors and sub-contractors are due to a systemic problem on how HDB awards and manages its contracts in relation to (i) its tender system and (ii) its timing of payments to these contractors for services rendered that may have burdened the cash flow of these contractors.

Mr Chiam See Tong asked the Minister for National Development (a) why about 560 HDB flats at Punggol Field were not completed on time and abandoned by the contractor; and (b) whether compensations were paid or will be paid by the HDB to purchasers of those flats.

The Minister for National Development (Mr Mah Bow Tan): Mr Speaker, Sir, may I have your permission to take Question Nos. 7, 8 and 9 together?

Mr Speaker: Yes.

Mr Mah Bow Tan: Sir, the construction industry is currently going through some very tough times. The demand is weak and competition in the industry has become more intense. As a result, some contractors are facing financial difficulties and have been unable to fulfill their contractual obligations. This has disrupted some public sector construction projects.

Members have asked whether these problems are due to HDB's tender system. Let me first explain the HDB's process for selecting contractors. There are three steps in the procurement process:

First, contractors are pre-qualified based on their financial resources, their professional and technical qualifications and track record, using the Building and Construction Authority (BCA)'s Contractors Registry as a guide. HDB will specify the category of contractors who are eligible to participate in the tender based on the estimated project value.

Second, after the close of the tender exercise, HDB will verify that the tender proposals fully comply with the tender requirements. The tender proposals are then evaluated based on their price competitiveness, their conformance to the required specifications, the tenderer's ability to undertake the project, his financial solvency and his performance in other public sector projects.

The third and last stage of the process is for the HDB to conduct due diligence on the tenderers and their tender prices. All things being equal, HDB will award it to the lowest tenderer who can do the job. If HDB finds that the lowest tender price is significantly below the other tender bids as well as its own estimates, it will interview the tenderer and ask him to re-examine his bid. If he decides to withdraw from the tender, HDB will recall the tender or award it to the next lowest bidder.

Sir, the objective of the tender system is to award the contract to the company that offers the best combination of price, quality and reliability; in other words, best value for money.

It has to do so in a way that is objective and fair, to ensure that there is transparency and accountability in the use of public funds. On the whole, the system is sound and working well, as shown by the large number of contracts which have been awarded and successfully completed.

While HDB has put in place a rigorous selection process, there is no guarantee that selected firms will not run into difficulties later, especially during this economic downturn. HDB will monitor the contractors' performance closely during construction. If any contractor is in trouble, HDB will take immediate action to minimise the impact on residents. For upgrading projects, HDB will activate a contingency contractor to complete the essential works. It will also keep residents informed through circulars and house-to-house visits. For construction projects of new flats, HDB will keep buyers informed early if there are changes in the estimated completion date.

Nevertheless, in view of recent concerns, MND and BCA are presently seeking views from industry representatives and key Government agencies, to see whether and if so, how the system can be further improved.

Let me now address the specific questions raised by Members. Dr Amy Khor asked about the management of main and sub-contractors. In HDB's projects, the main contractor will choose and manage his own sub-contractors, but they must be registered either with BCA or the Singapore Contractors' Association Limited (SCAL).

Miss Penny Low asked about HDB's timing of payments to its contractors. HDB is prompt in its progress payments and usually pays its contractors within two to three weeks after they have submitted their claims and their claims are validated. If the Member has any specific information to the contrary, she can let me know.

Mr Chiam raised a question on the delay of flats at Punggol Field. HDB is legally required to complete new HDB flats and deliver them to flat buyers by the Delivery Possession Date (DPD), which is provided in the Agreement for Lease. Besides the DPD, HDB also informs flat buyers of an Estimated Completion Date (ECD), which it reviews and updates as construction progresses.

In the case of the flats at Punggol Field, the novated contractor ran into financial difficulties and stopped work in January 2003. After several unsuccessful attempts to resume work, HDB terminated and re-tendered the contract. A new contractor was engaged, and the blocks are now expected to be completed between January 2004 and September 2004, instead of August 2003 to October 2003, which was the original estimate. HDB notified all affected buyers of these changes in February 2003, so that they could adjust their housing plans. Those who require urgent alternative accommodation can approach HDB for assistance.

The flats will all be completed before their respective DPDs, which range from August 2004 to October 2004. Thus, the issue of compensation to flat buyers does not arise.

Dr Amy Khor Lean Suan: Sir, I would like to ask the Minister on the registration of contractors by the BCA. How is financial standing and solvency of a firm evaluated? I would also like to ask the Minister if it is indeed the case, as reported, in the press that the current registration system, which is fundamentally sound and rational, is subject to abuses and, inadvertently, encourages some unhealthy practices, such as the contractors who are financially unsound shifting their monies around just for registration as well as bidding for jobs at very low or tiao lao bids. Again, this is just to ensure that they can qualify for registration.

Mr Mah Bow Tan: Sir, the BCA's Contractors' Registration Scheme (CRS) was aimed at making sure that there is a certain minimum qualification before contractors are allowed to tender for public sector jobs. I believe the CRS is also being used as a basis for contractors to tender for private sector jobs but, essentially, it is for the public sector to find a way to prequalify contractors. Contractors are graded based on several factors - financial strength is only one of them. Other criteria include track record, whether they have been debarred in the past, etc. So, financial strength is only one of the factors but it is a very important factor. Because, as the Member would probably realise, the construction industry is very much driven by cash flow. And if contractors do not have the requisite financial strength, they would find themselves in trouble. That is the reason why the BCA requires a certain minimum financial strength before they are put on the registry. And then within the registry, there are different grades - A1 to C3. A1 and A2 would be the highest grades, followed by B1, B2, etc.

A question arises: what happens if a company qualifies for the registry and thereafter shifts its funds around? There are certain mechanisms in place, eg, accounts have to be audited at certain regular intervals. Obviously, within those regular intervals, something can still take place but the BCA does try to ensure that those intervals are reasonable for the contractors as well as reasonable for the BCA to check. Having said all that, of course, it does not guarantee that the system is foolproof. It is a fact that there have been some abuses of the system but, like all systems, if abuses are detected, then severe penalties will result.

What about the so-called tiao lao bids or suicide bids? I must say it is not a good practice in the industry to have such bids. I am equally concerned about such bids which are unrealistically low. But having said that, I think we must realise that the contractors are professionals. They are going in for a bid with the intention of getting that contract. They do not go putting in a bid which they would have to withdraw subsequently. So, it can be for several reasons.

One is that they are trying to buy market share, or they could be trying to establish a track record, or they could be going in because they want cash flow, or they may have made a genuine mistake. So, for these reasons, HDB takes the view that it does not benefit anybody to award a tender to a bid which, in its opinion, is too low. That is the reason why if a bid comes in which is below the others or which is way below HDB's own estimates, it will, as I explained earlier, call up that tenderer and conduct an interview to see whether the bid that has been put in is a genuine bid. In some cases, the tenderers, after going through the specifications, decide to withdraw their bids. If the tenderer had proceeded with the bid, the chances are that he will not be able to complete that job. And who would benefit from such a situation? HDB would not benefit. The contractor would not benefit and, certainly, the residents would not benefit. I think it is in nobody's interest to award a tender to such a bid. Because of this, the present procurement process does allow for the tender evaluation committee not to award the tender to such a bid.

As I said earlier, the objective of the tender system is to get the best value for money on the basis of quality, reliability and price. For quality and reliability, we have to base on the track record. We have to base on the past. But price is what is on the table. If the price is not realistic then, obviously, that tender should not be awarded. And the record shows that there have been several cases where the lowest tenders have not been awarded. In the case of Government agencies, as much as 25% of tenders are not given to the lowest tenderer. In the case of HDB, about 10% of contracts are not awarded to the lowest tenderer.

Mr Othman Haron Eusofe (Marine Parade): Sir, I would like to ask a question regarding the case of Marine Terrace MUP Batch 14, because I think that the lessons that we have learnt from this particular experience are relevant to the matters under discussion. Firstly, I would like to ask the Minister whether the Ministry and HDB have identified the reasons why the main contractor for Marine Terrace MUP Batch 14 suddenly abandoned the project. I believe this contractor took over from the previous contractor. In fact, there were two other contractors earlier on, who bid for this project well below the HDB's estimates.

Secondly, why was the HDB project management unable to anticipate the problems which the project faced? And what measure will the HDB take to ensure that the project will resume quickly without undue delay, and also help to minimise inconvenience to residents? Will the Minister give an assurance that the project will be completed without any more delays?

Finally, the question of payments to sub-contractors. Many sub-contractors have complained that they have not been paid by the main contractors, although they have completed the projects. Could some arrangements be made by HDB, or the Government for that matter, for payments to be made directly to the sub-contractors when the projects are done and completed satisfactorily?

Mr Mah Bow Tan: Mr Speaker, Sir, Mr Othman asked about the Marine Terrace upgrading project. First of all, the tender was awarded in 2001 to a company known as Seatown Construction. The performance record of Seatown Construction was good and acceptable. It was a G8 contractor, meaning that it was a contractor which was in the highest category of the BCA's CRS. So, no question about its financial strength or its track record at that time. It was not debarred and there were no adverse reports on the contractor. However, Seatown Construction went into financial difficulties and the project was novated to Hong Lai Huat Construction in August 2002.

Hong Lai Huat Construction was an A1 contractor. The CRS had been changed, and A1 is equivalent to G8. Again, it was the top of the range. Again, it had a good performance record. It was not debarred. There were no adverse reports. So, by all accounts, it was a good contractor. Hong Lai Huat went into difficulties and the project was novated to Sum Keong Construction on 18th March 2003. Sum Keong Construction is an A2 contractor - not the top but the next level down. A2 means that it can tender for jobs between $30 million and $65 million. So it was more than qualified to do the Marine Terrace project - good track record, no debarment status, etc.

Up till the 2nd June, the progress of works of Sum Keong was ahead of schedule. It was not just on schedule, but it was ahead of schedule. I think it was doing something like 55% of the project, which was more than what was on the time-line. On 2nd June, HDB's site management team found that the contractor had suddenly stopped all works inside the flats. And on 3rd June, the contractor had stopped all works outside the flats very suddenly. There was no indication by the contractor that such a thing was going to happen. I spoke to some of the grassroots leaders who indicated the same thing to me because they obviously were on the ground and they could sense when work was being slowed down or delayed.

From all accounts, this was a very sudden stoppage. Why? I can only go by what the contractor told the newspapers. Apparently, the contractor said that he had run into major financial difficulties and he had no choice but to stop work. So, the contractor had to face the consequences of the stop-work. And the residents on the ground had to face more disruptions and inconveniences. HDB on the same day, 3rd June, took the necessary measures to try to minimise these disruptions. A circular was sent to the residents on the same day, 3rd June, to inform them that there had been a stoppage of work by the contractor, and also to inform them about what other measures would be taken by HDB to recover, including, for example, the appointment of contingency contractor to quickly take over the emergency works and to complete them. It also appointed the same contractor to make sure that housekeeping and the conservancy works in the area were properly carried out - mosquito control, rodent control, security in the area, and so on. This was done virtually straightaway. The very next day when works were stopped, all these were put into place.

Could it have been anticipated? As I said, the procurement process tries to conduct due diligence on all the successful tenderers. In this particular case, there was no indication that the contractor would not have completed the job. But, for various reasons, it went into financial difficulties. And, unfortunately, in the case of Sum Keong, it went into difficulties so suddenly that HDB could not warn the residents earlier. But having had its attention brought to the problem, I believe it acted swiftly, promptly and efficiently to try and recover and to make sure that the disruption to the residents was minimised.

I am glad to inform the Member that to-date, the outstanding internal works that were the most disruptive to the residents in 15 of the flats - these were works pertaining to the works in the bathrooms and the toilets - had been completed in that week. Similarly, the internal works for the remaining units in the blocks have also been completed and external works are going to be started by the contractor in July, and they expect that they will finish it by the end of August. As for the remaining balance of the works, HDB will be calling a re-tender. This re-tender will be expedited and works will resume on site by the new contractor by August 2003.

The Member asked whether we can guarantee that there will be no further delays. I wish I could. But, to be realistic, while we will do whatever is necessary this time in selecting a tenderer, I cannot promise that there will be no further breakdowns or delays. But I can promise the Member that such a possibility will be minimised. I can also promise that, if there is such a thing happening again, the recovery will be as swift and efficient as it was in the first episode.

The Member also asked about sub-contractors. The problem with sub-contractors is that the contract that they have is between them and the main contractors. It has nothing to do with HDB. But having said that, I do sympathise with the sub-contractors because they are, as it were, at the lowest end of the food chain. When HDB pays the main contractor, the main contractor is supposed to pay the sub-contractors. But when the main contractor gets into difficulty or trouble, invariably the sub-contractors suffer. So we will have to look into the possibility of how this problem can be solved, because it is a problem. If sub-contractors, which are part and parcel of the whole construction industry, are not paid or treated properly, then I think the industry as a whole must suffer.

I have asked BCA and other Government agencies to look into the system and to see in what way we can minimise this problem of sub-contractors not being paid, including the possibility perhaps of legislating such payment. But such changes, if any, must be practical and doable and it is something that the industry as a whole must accept.

Mdm Cynthia Phua (Aljunied): Mr Speaker, what is the Ministry's response to the call by the contractors for the security bond to be reduced to 10% of the initial amount upon obtaining TOP for contractors, the accounts to be finalised after six months, after the TOP has been obtained, and also the 5% retention sum to be waived? As regards the suicide tender bids, will the contractors be penalised if they withdraw the suicide tender bids, if it is really a genuine mistake being made?

Mr Mah Bow Tan: I think nobody goes into business to commit suicide. They all go in with the hope of winning the tender. So, if a tender bid is low, as a result of a mistake, then we would definitely look at the waiver of the penalty sympathetically. We are not going to penalise somebody who has, say, added an extra "0" or has subtracted an extra "0" from one of the line items. So, if it is a genuine mistake, we will waive the penalty.

As far as the other issues are concerned, eg, the performance bond, the accounts being finalised quickly, the retention sum, etc, basically the common denominator in all these is that there must be a certain guarantee in the form of a performance bond or an insurance bond or a banker's guarantee, to ensure that the contractor completes the job within the time that is specified and to the specifications that he has promised. If he does not meet this promise and does not fulfill his obligation, then the performance bond will be forfeited. So, it is a matter of how much performance bond is a reasonable amount. In the case of HDB or Government agencies, it ranges from 5-10%. In the case of the private sector, I believe the norm is 10%. These are issues which, again, the industry would have to sort out. And I have asked BCA to also look at these issues of performance bond, retention sum, etc. But bear in mind that all this, while it incurs a cost, is part and parcel of the contractual obligation between buyer and seller of that service. Without the performance bond, without any retention sum, the balance must be tilted on the side of the contractor. For example, what is to prevent a contractor from not fulfilling his obligations, if there is no performance guarantee? What is to stop a contractor from not finishing his job to the complete satisfaction of the owner, if there is no retention sum? The contractor just walks away. You call him back to rectify certain works, even within the one-year defect liability period, he does not show up. What do you do?

So I think there has got to be a balance between the interest of the buyer and the seller of the service. But, of course, that balance has to be struck in such a way that everybody in the industry understands, and this is one of the issues which the industry is now trying to grapple with. And I hope that there will be a consensus reached on a new equilibrium.

Dr Amy Khor Lean Suan: Sir, with regard to the registration of contractors by BCA, will the Ministry consider further tightening the measures, together with inputs from the industry, as regards, say, financial standing and solvency of the firm where specific projects are analysed, like profitability ratios or breakeven analyses? Because if the contractors appear to have suicidal tendencies, as every project is a loss, then some alarm bells must ring with regard to their financial standing.

Mr Mah Bow Tan: Sir, I am not sure where the Member gets this idea that people go into business to commit suicide. I do not believe so. The so-called suicide bids, I think, are the result of several factors, but let us leave that aside for the time being. Specifically, to answer the Member's question on whether we will consider tightening the Contractors Registration System, let us bear in mind that the more you tighten the less will be the number of contractors who will be on that list. You will find that the contractors will not be too happy with this. Of course, that does not mean that we do not do it. But I am just pointing out that we will have to again make sure that the criteria are sufficient to pre-qualify the good, suitable contractors and not to be so tight as to preclude many contractors who would otherwise have been able to do the job. So the CRS has undergone a lot of reviews and examinations. I am sure that there will be another round of review some time. But we have just done the last review last year. I would like to seek the Member's cooperation for us to examine the results of that past year. If she has any inputs for us to improve the system any further, we will be happy to hear from her, including how much to tighten.

Dr Teo Ho Pin (Holland-Bukit Panjang): Sir, I have two supplementary questions for the Minister. First, may I ask the Minister, over the last two years, how many HDB contracts were not completed according to the stipulated completion time and how much liquidated damages were imposed on those contractors who failed to complete the project on time? Secondly, will the Ministry consider reviewing the public sector standard contract form so that the interests of the third parties, especially consumers, sub-contractors and suppliers, are better protected?

Mr Mah Bow Tan: I can give the Member an indication about how many contracts were not completed over the last year. I believe it is something in the region of 4%. 4% of the total number of contracts awarded by HDB were not completed on time for some reason or other. As to how much liquidated damages were forfeited, I do not have the figure offhand. But I will be happy to provide it to him at an appropriate forum.

As far as the review of the public sector tender form is concerned, yes, this is one of the issues that is being discussed by BCA and the industry. The objective is to make sure that the terms in the public sector procurement system and the form are transparent and fair to all the parties involved and I include, in this case, the sub-contractors, in response to Encik Othman's question just now, and the consumers as well.

Mr Ang Mong Seng (Hong Kah): Sir, may I ask the Minister about the problem concerning the main contractor and sub-contractor. When the main contractor gets the contract, usually he will sub-contract to the sub-contractors who sometimes sub-contract to so many sub-contractors. Has the Ministry any form of control on the main contractor, ie, after getting the contract, how many percent of it should be carried out by the main contractor and how many percent by the sub-contractor? The Minister mentioned that the contract was not awarded to the lowest tenderer. Could he enlighten the House, for the last two years, how many contracts under MUP and IUP were not awarded to the lowest tenderer?

Mr Mah Bow Tan: The issue of main contractor awarding jobs to sub-contractors is a peculiarity of the construction industry in Singapore. I am not saying that it does not happen in other countries. The prevalence of such a practice in our industry is quite unique to us. As the Member suggested, it is not just one level but maybe several levels down where the main contractors will appoint sub-contractors, sub-contractors will appoint their own sub-contractors, and so on. Why is this so? There are several reasons. One perhaps is the fact that the barrier to entry of contractors in Singapore is very low and we do not require too much qualifications nor other prerequisites.

But it is, by and large, I would say, an efficient system. It is efficient in the sense that after getting the job the main contractors find, on their own accord, the best people to help them to do the job. They either appoint sub-contractors, or they hire people to do the job. Some contractors prefer to hire their own staff. They train the staff and keep them for the long-term. Others prefer to virtually hire all sub-contractors. But should the Government get involved in deciding how much sub-contracting they should do, how much of their own direct workers they should employ? I do not think so. I think the main contractor is the one who knows best how to get the job done at the price that he has tendered for. For us to specify these things is virtually to manage the project for him. How can the Government be in a better position than the contractor to actually complete the job? And if we were to do that, the contractor would have every reason to come back to us if the job is not done properly and say, "You are the one who told me to do all these things. Now it is not done." It is a system that has generally worked well.

There are certain problems in the system, one of which is this issue of non-payment. But this is a problem that has surfaced now when the construction industry or the construction pie has shrunk rapidly. This was not such a problem when the construction industry was booming. The sub-contractors were paid, suppliers were paid, and nobody faulted the system. So we have to be careful that we do not try and come out with the wrong solutions to the problems that we are facing. I have indicated earlier that the issue of payments between the main contractor and sub-contractors is something that needs to be looked at. The industry is now looking at it together with the Government agencies and I hope that there will be some practical solutions arising out of this discussion. But I would not advocate the Government getting involved in running the construction companies or running the contracts for the main contractors. I would leave it to them.

His second question was on the number of contracts under MUP and IUP which have not been awarded to the lowest tenderer. I am afraid I do not have the information offhand. But if the Member would file a Question, I will be happy to answer.

Miss Penny Low (Pasir Ris-Punggol): Does HDB set a timeframe for halted projects to resume work? In the case of Punggol 21, some projects were stopped for a considerable period of time before work resumed. In a particular case where the blocks of flats were all completed and in fact inhabitants had already moved in, some sub-contractors took away some installations at the void deck, leaving exposed steel wires and all because the main contractor could not pay them. That is a safety hazard.

Mr Mah Bow Tan: As far as resumption of work is concerned, HDB will endeavour to make sure that the work resumes as quickly as possible. As quickly as possible can range from one or two months to probably four, five, or six months. The difficulty is mainly when there are legal difficulties involved in the winding up of the current contractor. This, of course, is no comfort to the residents. So I would like to assure the Member that HDB, even within this constraint, will endeavour to engage the new contractor as quickly as possible, but it would not be sooner than, say, a couple of months. In the case of Punggol Field, the example that was mentioned, the delay will ultimately be in the range of anything from two months to as long as 10 months from the original estimated completion date.

Mr Speaker: Dr Wang, last question.

Dr Wang Kai Yuen (Bukit Timah): Thank you, Mr Speaker, Sir. Would the Minister consider that, despite his assertion that nobody goes into business to commit suicide, for a company which is already in "terminal" difficulty, it is possible that such a contractor will tender with a suicide bid and, not only that, he will tender as many bids as possible so that it will go down with a big bang rather than with a whimper? And having looked at this evidence, would he take this into consideration as a lesson learnt when he reviews the tendering system?

Mr Mah Bow Tan: The Member said that the contractor is already "terminal". I do not know whether ---

Dr Wang Kai Yuen: I mean "terminal" internally, but not known outside.

Mr Mah Bow Tan: My statement was apropos a company that starts off in business. Nobody, when you start off in business, goes into a tender and puts in a suicide bid. But, yes, a company which is in great difficulties probably would. The safeguard of course for us is that we do not have to automatically accept such bids. The IM does not require HDB to accept the lowest bid irregardless, our own internal systems do not require us to do so, and common sense tells us that if the bid is really too low, if we accept that bid, it is not the contractor alone which is committing suicide, we are also committing suicide because the amount of work involved in trying to recover is not insignificant. So it is not in anybody's interest to accept such so-called suicide bids.

Mr Chiam See Tong (Potong Pasir): Sir, I have two supplementary questions. One is in regard to Marine Terrace and the other is in regard to Punggol Field. In regard to Marine Terrace, can I have some clarifications? Is this an MUP? And if it is, how much has each resident there co-paid for the works? There are three contractors involved in Marine Terrace - Seatown, Hong Lai Huat and Sum Keong - and even the Minister says that he is not sure whether Sum Keong can finish the job. I am just wondering whether HDB has been soft on all these contractors and has not been rigorous in enforcing the contract.

The other supplementary question is in regard to Punggol Field. It is quite obvious that, for Punggol Field, the contractors had breached the contract. They were unable to complete the job on time and even abandoned the project. I heard one complaint from a purchaser that, in fact, she had already sold her flat and could not get the replacement flat at Punggol Field in time. She had to go and find accommodation somewhere else. Such a case is clear cut that she has suffered damages. I am a bit surprised when the Minister says that HDB has not paid any compensation at all. In fact, I would also imagine that the HDB has the right to claim damages from the contractors. So, out of these 560 purchasers, how many have been compensated in regard to their claims, if any?

Mr Mah Bow Tan: Yes, Marine Terrace is an MUP project. And like all MUP projects, the residents pay only a fraction of the total cost. It depends on the particular project itself. It depends also on what is involved in that particular MUP. It could be $10,000. It could be less, or it could be more, depending on whether there is an SAI. But it is heavily subsidised. In fact, in all MUP projects, the Government foots 70% or 75% and for the smaller flats, as much as 90% of the total cost. I am not sure what is the point of the question. That is a fact.

Whether the HDB has been soft on these contractors, as I explained earlier, the works of both the first contractor and the second contractor were satisfactory until the point of time when they felt that they could not carry on. HDB has a system in place to monitor the works, ie, regular monitoring of the progress of works to make sure that disruption to the residents is kept to a minimum and there are regular site meetings. I have seen records of these site meetings. I am satisfied that HDB has carried out its work diligently and properly. Notwithstanding all these, the contractors did get into difficulties, and once they got into difficulties and they could not carry on, HDB had to take the necessary steps to recover.

In the case of Marine Terrace, the first disruption was when the first contractor could not finish and it went to the second contractor. There was a novation. The second contractor could not complete, and it novated to the third. In Sum Keong's case, it was not able to carry on. So, instead of novating to yet another contractor, HDB has decided to terminate the contract and to call for a new tender. In calling for the new tender, the chances of the work being completed in time will be that much better. Of course, in calling for a new tender, the cost involved would be much higher.

Mr Chiam See Tong: Would damages be paid?

Mr Mah Bow Tan: Why should damages be paid? In the case of Marine Terrace, the work is going on as scheduled. It will be completed, but with a minimal delay of about two or three months, as I have explained to Mr Othman Haron Eusofe.

In the case of Punggol Field, again the issue of compensation does not arise because, first of all, the contractual obligation of HDB is very clear - that in the lease agreement that is signed between the buyer and the seller, this flat would be delivered by a certain date, in what is known as the development completion date. That obligation will be fulfilled. In so far as delays are concerned and residents getting alternatives, anybody who is in urgent need of a flat as a result of the flat not being completed as originally estimated can approach HDB for assistance, and such assistance will be given. So, again, I do not see any reason why there should be any question of a compensation. Many of the residents in Punggol Field have asked for and have been given assistance in the form of an alternative flat if they are really in need, and in the form of transitional rental housing if they do not want an alternative.

So, in that respect, HDB has taken great pains to ensure that the effects of this delay, even though it is not its fault, are minimised.

Mr Othman Haron Eusofe: Sir, can I seek a clarification on the Minister's reply to the supplementary question by Mr Chiam?

Mr Speaker: Yes.

Mr Othman Haron Eusofe: Sir, the Minister said that the cost of the project will increase. But can I have the Minister's assurance that residents will not pay more than what was indicated to them when they voted for the project?

Mr Speaker: This sounds more like a question than a clarification, Mr Othman.

Mr Mah Bow Tan: Yes, I am happy to give him that "clarification", that this additional cost would not be passed on to the residents.