For long-term sustainability, the construction industry needs to look beyond Cotma relief and reinvent itself.
With an illustrious history that traces back to 1912, Greatearth has had a hand in building some of Singapore’s best-known landmarks, such as Marina Bay Sands, the National Library and Mount Elizabeth Hospital.
Sadly, last month marked the demise of this prominent construction firm, as it crumbled under over S$70 million worth of debt – a figure that has not even accounted for the anticipated liabilities it faces from contracts it cannot fulfil. These include construction of two public projects, and five Build-To-Order housing estates that will leave almost 3,000 households facing delays for their keys.
Greatearth’s winding up was despite the Covid-19 (Temporary Measures) Act 2020, or Cotma, which the Government conceived last March to help keep contractors afloat. Cotma grants them temporary reprieve from legal action and performance bonds enforcement, as well as mandatory co-sharing of additional construction costs by employers. The initial six-month relief period was extended five times, with the most recent being a three-month extension from 30 September. The programme is now slated to end on 31 December.
Yet, the industry remains severely affected by the pandemic. Construction consisted four per cent of Singapore’s GDP in 2019, plunging to 2.7 per cent in 2020, thanks to abrupt work stoppages, delays and disruptions during the Circuit Breaker period, which continued to varying extents thereafter as dormitory infections and incoming labour restrictions persisted. It faces an even more uncertain future, with escalating costs due to migrant labour shortages, pricier raw materials, disrupted supply chains and safe workplace measures.
Is the writing on the wall for others to follow Greatearth’s footsteps? Or should pandemic-fuelled disruption be an impetus for the battered built environment to go back to the drawing board and reinvent itself for the future?
Ripe for disruption
As the saying goes: “Give a poor man a fish and feed him for a day; teach him to fish and feed him for a lifetime”. It is hard to argue that the construction industry is not the poor man here – it lags in productivity and profitability, and time and cost overruns abound. The numbers do not lie. According to a McKinsey report, despite the sector accounting for 13 per cent of the global economy, the last two decades saw annual productivity growth of a paltry one per cent, which is only a third of total economy averages. And profitability is only averaging at five per cent despite the high risks.
The reasons for such inefficiencies and costs include the sector’s high dependency on manual labour, relatively low adoption of technology as compared to say, the manufacturing sector, and fragmented processes and multiple parties within the value chain with diffused responsibilities resulting in added risk, cost, coordination and supervision.
Needless to say, Covid-19 has further exposed and amplified such inherent and structural inefficiencies and shortcomings, with a scarcer manual workforce due to border restrictions and infections, that is now more inefficient with safe workplace and testing requirements, supply chain disruptions, and suspension of work at construction sites.
There is just that much fish that should be fed to an underperforming industry with unlocked potential – it would serve the sector far better in the long run to learn to fish. What the sector needs is more robust immunity not just to survive pandemics, but also cyclical and other unforeseen storms, hopefully with boosters from the Government and other stakeholders.
Technology: the way forward
The industry should seize this disruption by its horns not just to recover, but emerge stronger. One way to do so is to digitalise products and processes to enable better collaboration, greater control of the value chain, and a shift towards more data-driven decision making, as McKinsey suggests.
For example, “digital twin” technology can be used to create a virtual depiction of an actual product. It combines real world data with artificial intelligence to analyse, simulate and predict products, outputs and outcomes, and can add layers of sequencing and costing. This makes it easier to predict and mitigate unforeseen risks and flaws right from the outset. It also integrates the design and construction phases, and simulates performance with real world input. Furthermore, project management, which can account for up to 15 per cent of total costs, will naturally be made more efficient with the benefit of such integrated and predictive technology.
Another potential area of innovation is automating works and processes and using technology to reduce physical labour dependence, which typically makes up a hefty 30 per cent of total costs. Robots are becoming increasingly capable of performing complex physical tasks such as bricklaying, welding and concrete pouring, according to an Ernst & Young report.
Supervising and monitoring work, and controlling physical access, security and safety could also be augmented. The use of facial recognition, biometrics technology and geo-enabled technologies such as drones, which can capture still and moving records of work progress and workmanship, will improve efficiency, and turn these tasks into something that can be done remotely. Increased and frequent collection of accurate and complete data could also reduce the incidence of disputes and potentially streamline claims and certification processes.
A more industrialised, modularised and off-site approach to construction would be an additional bulwark against inefficiencies and pandemics. Such an approach shifts many construction activities from the construction site to individual factories and then back to the site for assembly, resulting in enhanced delivery times, efficiency and quality.
This is not a particularly new or obscure approach as the manufacturing sector has been doing it a long time now. Not only would the reduced site activity from such remote pre-fabrication of building components and modules potentially improve and ease sequencing and coordination of multiple work trades, it would enhance the implementation of safe workplace measures and ameliorate the impact of site closures and worker infections.
Fairer for all
While Cotma is a welcome relief for contractors, it has always been intended to temporarily cushion and mitigate Covid-19’s unprecedented assault on the sector.
One potential problem with extending such reliefs over a protracted period is that the proverbial can gets kicked down the road. It will not be surprising to see a spike in legal actions, bond calls and insolvencies when Cotma is finally discontinued.
Moreover, who ultimately bears the costs of the Cotma reliefs? Such costs would probably trickle down the food chain and ultimately to end buyers, consumers and small business owners who are in lower positions of power and leverage. While the deep pockets of developers, employers and landlords will bear the initial brunt of the reliefs enjoyed by downstream contractors, it is only natural for them to mitigate these costs with increased land and rent prices. In other words, vulnerable private individuals and brick-and-mortar-businesses, such as the F&B and retail sectors whose earnings have reportedly plunged by up to 80 per cent since the pandemic, will likely be at the ultimate, receiving end of the cost stick.
It is perhaps high time for a notoriously change-resistant and tech-averse industry to reinvent and adapt by adopting more innovative and novel approaches, methods and processes to construction with the benefit of digitalisation, integration, industrialisation and decentralisation, automation and other technologies, to render itself more pandemic and future proof. It is hoped that the built environment will rally from the pandemic gloom and turn Covid-19’s disruption to its advantage for the long term.