What if the NSE becomes $13b like the MCE?

January 04

By Leong Sze Hian

2 Parliamentary reports on MCE?

Terry Xu, the Executive Editor of theonlinecitizen sent me 2 Parliamentary replies in connection with the Marina Coastal Expressway (MCE).

Something rather strange caught my eye in the latest Parliamentary reply on 22 January, 2009, as per the transcript in Hansard –

The heading was “MARINA COASTAL EXPRESSWAY (Clarification on exceeded budget)”, followed by – “13.  Mdm Ho Geok Choo asked the Minister for Transport whether he will clarify on the exceeded budget of the Marina Coastal Expressway which is currently under construction”.

Parliamentary debate on “exceeded budget” – but no figure given?

However the entire proceedings makes no mention as to what is the expected “exceeded budget” amount?

It is akin to asking why does it cause more than originally planned? – but the answer leaves us kind of like “hanging in the air” – because the reply also makes no mention of “how much” is the new projected cost?

It would also appear if I may use the word “weird” that all the Parliamentarians apparently just left it as it is – i.e. with no one being none the wiser to the sum involved?

As it turns out, we now know after about 4 years from the above Parliamentary reply – that the final cost is $4.3 billion, which is a whopping $1.8 billion or 72 per cent more than the original budgeted amount of $2.5 billion.

What happens next may be even more strange? – after about 3 months from the Parliamentary reply – the LTA issues a press release on 28 April, 2009, that the projected cost had increased to a whopping $4.1 billion. But the press release – “To date, LTA has awarded contracts worth about $4.1 billion for the construction of the MCE, including all 6 major civil contracts and 4 major system-wide contracts” – makes no mention about the original budget of $2.5 billion or that it had increased?

So, this very significant piece of information was left out of the press release?

What may perhaps be even more strange is that we do not recall this being reported in the media? And even if it had been reported and we missed it – it may have been of little newsworthiness to anyone, as the crucial material information on the increase from $2.5 to $4.1 billion was left out?

Who approved? What process?

So, who approved the jump from $2.5 to $4.1 md now $4.3 billion? What process and documentation was done? Can these be made public, given the large amount involved?

To put the amount in perspective, the $1.8 billion difference is about 18 times what ComCare gives to the needy in a year, about 80 per cent more than the HDB’s annual deficit, etc.

Where on earth, was the Parliamentary oversight?

Not the first time?

Moreover, this is not the first time that we have had huge budget overruns – such as the Youth Olympic Games’ (YOG) 272 per cent budget overrun, from $104 to $387 million.

How many more whopping budget overruns do we need to have, and how many more years – before we put in place a formalised process for more scrutiny and accountability, especially by Parliament?

3 reasons, but no breakdown, details, amounts?

With regard to “In 2007, the Government gave the approval to construct MCE at a budget of $2.5 billion. The budget was based on preliminary engineering design and construction prices estimated in 2006. There has since been a substantial increase in the project cost, primarily for three reasons.

“First, construction costs in general have gone up. The construction industry has seen steep increases in the prices of materials and resources due to shortages locally and internationally. To mitigate this, LTA has put in place measures such as full price fluctuation clauses for concrete and steel reinforcement. This reduces the risk that contractors face and consequently, helps lower their tender bids. It will also allow LTA to take advantage of any subsequent fall in construction prices without compromising project timelines”

– Are we saying that the inflation on construction costs, despite the original cost projection which was surely projected taking into account expected inflation – had shot up by 72 per cent to the tune of an extra $1.8 billion?

So, can we have the amount and breakdown of the contribution of this “Reason number 1″ to the $1.8 billion?

For the purpose of comparison, has any other construction project, MRT projects, HDB projects, private development projects, etc , experienced such a whopping difference?

“Second, LTA’s further investigation of soil conditions have revealed that certain stretches of the MCE have weaker soil conditions than originally thought. This will require the contractor to put in more robust and deeper temporary structures during construction and carry out additional works to improve the soil. These measures are necessary to ensure safety during construction”

– Who is responsible for this slip-up in the original soil investigation? Similarly, can we have the amount and breakdown of the contribution of this “Reason number 2″ to the $1.8 billion?

“Third, there have been additional safety requirements put in by the relevant authorities. The Building and Construction Authority (BCA) has required tighter specifications for temporary works such as earth retaining systems during excavation. The Singapore Civil Defence Force (SCDF) has also required LTA to comply with the latest international fire safety standards”

– Can we have the details of the “tighter specifications” and  ”the latest international fire safety standards”, as well as the amount and breakdown of the contribution of this “Reason number 3″ to the $1.8 billion?

If I may use an analogy – I tell you there are 3 reasons why you have to pay $1.8 billion more. Don’t you think you should be given a detailed breakdown of the increased costs due to each reason?

More transparency and accountability?

In respect of “Yes, we did consider other possibilities: One, of course, is at grade, it should be cheaper because it is on the surface. But, in terms of the benefits foregone, it will be much higher because you forego the developments on the surface. So, I would like to assure the House, that when it comes to infrastructure projects such as the MCE, the Government takes a stringent financial approach. The transport agencies would evaluate the cost and match that against the benefits from that particular infrastructure project. And only when the benefits outweigh the costs, in this case, including the cost increases, would the transport agencies proceed. But that is not the end of the matter. After that, it goes up to the finance ministry, which is another layer, they will look into it, they will conduct their own detailed studies to ensure that the benefits outweigh the costs, before giving the go-ahead to the transport agencies to proceed with the project. So, I would like to assure Members that the Government exercises prudence and discipline when managing scarce physical resources”

– Can all these cost-benefits analysis, detailed studies, etc, be made public?

After all, spending $4.3 or $7 to $8 billion on an expressway is not “peanuts”, and should be subject to more public scrutiny, accountability and transparency, given the magnitude of the sums involved.

What if the North-South Expressway (NSE) becomes $13b?

In this connection, as to the future expressway that is to be built,

“The third major expressway is the North-South Expressway, which will cost about $7 billion to $8 billion. It is 21 kilometres long, from the north, down to the south.  We expect this to be completed by about 2020″ (Parliamentary reply, 15 February, 2008) “

Unless Singaporeans and Parliamentarians start “kicking up a fuss” now (pardon my language) – can you imagine being told when the North-South Expressway opens that it’s original budget of $7 to $8 billion may become another whopping budget overrun to say about $13 billion, like the MCE?

$13 billion is about 165 per cent more than what the Government spends in a year on healthcare (public healthcare spending as a percentage of GDP of 1.4 per cent now)!

Are our expressways by any chance the most expensive on a per kilometer basis in the world?

And to top it off, MCE opened with much fanfare, jams, kaos and confusion on its first day!

About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.