Steps Taken Across Agencies to Minimise Repeated Lapse in Contract Variations and Star Rated Items

Parliamentary Question by Mr Gerald Giam Yean Song:

To ask the Deputy Prime Minister and Minister for Finance with regard to the Report of the Auditor-General for FY 2021/22 and in view of repeated lapses across various agencies concerning contract variations and star rate items (a) what steps have the Ministries taken in previous years to minimise such lapses; (b) whether those actions have been effective; and (c) whether the Ministry will consider setting up a task force to look into this matter and propose policy changes to prevent future lapses..

Parliamentary Reply by Deputy Prime Minister, and Minister for Finance Mr Lawrence Wong:

Contract variations and star rate items, or items for which rates are not listed in the original contract, are common for construction contracts due to circumstances such as unexpected site conditions. In a typical construction project which can span a few years, there can be many contract variations and star rate items. In order to keep to the project schedule, these need to be processed expeditiously. The high volume and time pressure are contributing factors to the lapses observed.

The Ministry of Finance (MOF) and the Building and Construction Authority (BCA) have been continually refining the public sector construction contract management policies and processes. For example, MOF and BCA issued a good practice guide on construction contract management for all agencies in 2019. The guide includes measures on identifying irregularities and fraudulent quotes for star rate items. In 2021, we allowed tenderers to submit a more comprehensive schedule of rates before contract award to reduce the occurrence of star rate items downstream. Where star rate items are still required after the tender is awarded, agencies can adopt a risk-based approach to assess cost reasonableness, such as doing sampling checks. We are also updating the training and capability development programmes for public officers.

Through these efforts, we have observed improvements in public sector construction contract management.  For example, the proportion of contracts with timely approval of variation works has improved from about 70% in 2018 to 90% in 2020.  

We already have an inter-agency taskforce looking into the issues of public sector contract management, and will continue to review and improve our processes.