Cost Management for Large-Scale Infrastructure Projects

Parliamentary Question by Mr Kwek Hian Chuan Henry: 

To ask the Minister for Finance what are the efforts to review cost-efficiency of our large-scale infrastructure projects. 

Parliamentary Question by Ms Sun Xueling: 

To ask 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. 

Parliamentary Reply by Senior Minister of State for Law and Finance, 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.
 
2.    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 the Ministry of Finance (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.

3.    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. 

4.    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.

5.    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 the Land Transport Authority are approved by its governing Board. 

6.    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.