Promotion of Lego-like construction method in Singapore

• In Hong Kong, there is increased adoption of an emerging and innovative building technology, namely modular integrated construction ("MiC") involving on-site assembly and installation of building blocks (e.g. entire housing units) pre-completed elsewhere off-site. As modules production can begin as soon as the start of foundation works, coupled with the fact that assembly of a floor usually takes just a few days, MiC can compress construction time up to 50% or by years, on top of other social benefits.^{1Development Bureau et al. (2021).} By end-2021, at least 60 building and civil engineering projects are reportedly going to apply this sort of "Lego-type" technology.^{2GovHK (2021b).}
• With a view to upgrading productivity in construction activities, the Government has introduced a host of measures since 2017 such as (a) granting 6% additional floor area to MiC projects; (b) offering subsidy to MiC contractors; and (c) streamlining regulatory oversight of MiC projects. However, some private developers are still hesitant to apply MiC, due in part to practical issues such as longer lead time in project planning, inadequate space at construction sites and tedious logistic arrangements. All these give rise to calls for additional policy measures.^{3Hong Kong Institute of Surveyors (香港測量師學會) (2021), Hong Kong Institute of Construction Managers (香港營造師學會) (2020), Zhang et al. (2018) and Pan (2017).} During 2020-2021, MiC was discussed in the Legislative Council on at least three occasions.^{4Over the past two years, three Council Questions on MiC were raised at the Council meetings on 6 May 2020, 8 September 2021 and 29 September 2021 respectively. See GovHK (2020, 2021a, 2021b).}
• MiC has also gained popularity in many advanced places globally, with the Singaporean government appears to be amongst the most enthusiastic in reaping its potential gains in construction productivity.^{5Xu et al. (2020).} Coupled with its compact city landscape which may be considered broadly similar to Hong Kong, this issue of Essentials looks into the MiC facilitative measures taken in Singapore, after a quick review of recent developments and major concerns in Hong Kong.

• Recent global trend: Enabled by rapid technological advancement, MiC is an emerging construction method involving pre-fabrication of volumetric modules (with finishes, fixtures and fittings) at off-site factories before moving them to construction sites for assembly.^{6Construction Industry Council (2020).} MiC has been increasingly applied in advanced places in recent years, partly to speed up housing construction.
  For instance, the proportion of flats using MiC technology in new housing projects in 2020 has already exceeded 10% in Canada, the United Kingdom and Sweden.^{7Luk et al. (2020).} In the Mainland, the adoption rate of MiC in terms of floor area under construction has even quadrupled from 5% in 2016 to 21% in 2020, on the back of a number of incentives (e.g. direct subsidies, tax benefits and floor area concessions) offered by local governments.^{8Ministry of Housing and Urban-Rural Development (住房和城鄉建設部) (2021) and Minsheng Securities (民生證券) (2020).} It is making good progress to reach the national target of 30% by 2025 as put forward by the State Council.^{9General Office of the State Council (國務院辦公廳) (2016).}
• Necessary conditions of MiC: For smooth execution of MiC, developers need to finalize the building layout very early in project planning, with less flexibility to change design upon changing market situation once the modules have entered production. It requires tedious coordination and logistic planning throughout the supply chain.^{10Kamali and Hewage (2016) and Sun et al. (2020).} As developers need to make pre-payment to module manufacturers early, it will have implications on liquidity and project financing. Technically and more importantly, MiC application is highly site-specific. If the construction site is too small for module assembly or when the nearby roads are too narrow for moving big modules, MiC may not be a feasible option.
• Benefits of MiC: Conceivably, MiC have multiple benefits for developers and contractors, primarily because of compression of construction time and reduced activity on construction sites. Based on a number of global studies, MiC can remove on-site activities by 90%, reduce construction accidents by 80% and achieve time savings by 20%-50%.^{11Abdelmageed and Zayed (2020) and McKinsey and Company (2019).} On top of better quality control arising from standardized module production, MiC can bring a wide range of environmental benefits, like reducing material waste by 85%, saving energy by 5% and cutting greenhouse gas emission by 3%.^{12Xu et al. (2020).}
  Nonetheless, there are mixed reports on whether MiC can bring down overall construction cost because additional costs may be incurred in project planning, logistics procurement and storage of modules before assembly. Studies suggest that MiC may lead to 20% cost savings at its best, but 10% additional cost at its worst.^{13For example, Singaporean contractors reported 10%-20% additional cost in concrete modules and 15%-25% in steel modules, compared to conventional building method. See McKinsey and Company (2019) and Ho et al. (2019).}
• Local policy objectives: Since 2017, the Government has been promoting MiC partly because of the urgency to speed up flat production amidst severe housing shortage locally. There is also a concern over rapid ageing of local construction workforce, with its average age standing at a high level of 46.5 years in November 2021. Worst still, 19% of them aged at least 60 (i.e. approaching retirement age within five years or having already reached that threshold).^{14Construction Industry Council (2021b).} MiC appears to be a less labour- and time-intensive building method that can meet the various needs of Hong Kong.
• Local promotion measures: An array of different measures has been adopted, including –
  • (a)
    streamlining of regulatory vetting of MiC systems, upon establishment of a pre-approval mechanism on common designs in December 2017 (approved MiC systems can be used in future projects over the following five years at maximum without seeking approval again);^{15By now, in-principle approval was granted to 49 MiC systems. See Buildings Department (2019a, 2021).}
  • (b)
    offering direct subsidy to contractors and consultants of MiC project under a dedicated fund set up in October 2018, subject to a maximum of 70% of cost involved or HK$7.5 million, whichever is lower;^{16A total of HK$115 million was granted to 51 MiC projects. See Construction Innovation and Technology Fund (2021a, 2021b).}
  • (c)
    providing 6% additional gross floor area to developers using MiC technology as from May 2019;^{17As at August 2021, 11 applications for MiC concession were approved. See Buildings Department (2019b) and GovHK (2021b).} and
  • (d)
    mandating six types of government building projects (e.g. schools and office buildings) to adopt MiC as from April 2020.^{18Development Bureau (2020).}
• Prominent local projects: InnoCell in Tai Po completed in October 2020 and Married Quarters for the Fire Services Department in Tseung Kwan O completed in February 2021 are amongst the first batch of MiC projects seen in Hong Kong. According to a dedicated study on these two projects, MiC helps lift onsite productivity by 100%-400%, cut short construction time by 30%-50% (i.e. 9-14 months) and achieve cost savings by 6%-7% (Figure 1). In addition to some 60 projects in the pipeline that will apply MiC, over 10 000 transitional housing units will do the same in the near future. Turning to the private sector, the first project using concrete MiC is expected to be seen in 2023, upon completion of a residential redevelopment project in Tai Kok Tsui.^{19Urban Renewal Authority (2021).}
  Figure 1 – Selected MiC housing projects in Hong Kong

  		InnoCell	Married Quarters for the Fire Services Department
  1.	Location	Pak Shek Kok, Tai Po	Pak Shing Kok, Tseung Kwan O
  2.	Project completion	October 2020	February 2021
  3.	Number of storeys	17	16-17
  4.	Number of units	393	648
  5.	Type of MiC system	Steel	Concrete
  6.	Construction cycle (days/floor)	2-3	5
  7.	Time savings (months)	14	9
  8.	Time savings (%)	50%	30%
  9.	Cost savings (%)	7%	6%
  10.	Enhancement in labour productivity (%)	>400%	100%

  Sources: Development Bureau et al. (2021) and Construction Industry Council (2020).
• Local issues of concern: In spite of aforementioned policy incentives, some developers remain lukewarm about MiC application due to the following concerns, amongst other things –
  • (a)
    Technically, while the hilly terrain and generally small site area in Hong Kong render modules storage and installation difficult, there are lingering doubts about how to build skyscrapers with MiC;
  • (b)
    On transportation, it is challenging to move bulky modules on road lanes with typical width of merely 3.3 metres or even less.^{20Sing Tao (星島網) (2020) and Construction Industry Council (2021a).} Also, developers need to apply for Wide Load Permit ("WLP") for modules wider than 2.5 metres; and they are required to submit a traffic impact assessment in cases modules are wider than 3.0 metres;^{21Transport Department (2021).}
  • (c)
    Financially, a local study suggests that prefabrication of modules could increase unit construction cost by 17%.^{22Lu and Yuan (2013).} Some stakeholders opines that the 6% concession in floor area can barely offset the 5.3% loss of usable area due to more structural walls required under MiC;^{23P∓T Group (2019).} and
  • (d)
    On manpower implications, there are concerns over the adverse career implications for local construction workers in the longer term, given that modules are almost exclusively produced in the Mainland and Malaysia.^{24Hong Kong Institute of Surveyors (香港測量師學會) (2021) and 葉思進(2019).}

• In Singapore, public housing production averages at a high level of 19 000 units per year over the past decade, on top of many concurrent infrastructural projects.^{25Department of Statistics Singapore (2021).} However, as Singaporean are generally reluctant to work in the construction sector, imported workers take up over three-fifths of the sector's employment.^{26Ministry of Manpower (2021).} Coupled with the challenges of ageing workforce and in anticipation of imminent labour shortage, the Singaporean government is keen to explore a less labour-intensive and more efficient construction method.
• MiC as default construction method: In 2014, the Building and Construction Authority ("BCA") launched the Second Construction Productivity Roadmap, highlighting prefabrication as one of the directions to enhance construction productivity by 2%-3% annually during 2010-2020.^{27National Archives of Singapore (2015).} In 2017, BCA reiterated that MiC is a game-changing technology, aiming to make it the default construction method.^{28Ministry of Trade and Industry (2017).} After release of a technical guidebook on MiC, over 50 projects have adopted MiC by January 2020.^{29Building and Construction Authority (2017) and Ministry of National Development (2020).}
• Key policy measures: The multi-pronged measures launched to facilitate MiC adoption in Singapore are briefly summarized below:
  • (a)
    Mandatory requirement of MiC in selected private developments: In November 2014, Building Control (Buildability and Productivity) Regulations was revised to mandate MiC adoption in selected sites in government land sale ("GLS") programmes, mostly in residential and hotel construction.^{30Only applicable to "non-landed sites" which homeowners have no ownership to the land under development, like condominiums and apartments. See Singapore Statutes Online (2021).} Private developers wining the bids need to adopt MiC in at least 65% of the total constructed floor area;
  • (b)
    Accreditation of module manufacturers for quality assurance: For manufacturers of modules produced by either local or overseas plants, they must meet accredited professional standards beforehand for application in aforementioned GLS sites as from March 2016. The accreditation scheme is jointly managed by two industry associations. Manufacturers are assessed by six major criteria in the accreditation audit, and reviewed annually to ascertain the quality of the modules produced.^{31The accreditation criteria include (a) quality management system; (b) plant and design capabilities; (c) human resource requirements; (d) quality control in production; (e) storage and delivery; and (f) installation and maintenance. See Building and Construction Authority (2020b).} Taking concrete systems as an example, there are 12 accredited manufacturers in Singapore by now;^{32Singapore Concrete Institute (2021).}
  • (c)
    Relaxing transportation constraint: Oversized vehicle movement ("OVM") of modules used to be subject to stringent traffic regulation in Singapore. However, OVM regime was relaxed in October 2016, allowing OVM within width limit of 3.0 metres for unrestricted travel without the need of permit.^{33Land Transport Authority (2016).} But drivers of modules wider than 3.0 metres still need to apply for OVM permits three days in advance, and such transportation work must be done in off-peak hours. For extra-width modules (3.4 metres and above), escort from police force is required in the transportation process;
  • (d)
    Granting subsidy to MiC projects: Similar to Hong Kong, BCA subsidizes registered construction companies up to 80% of qualifying costs in MiC application under an incentive scheme (i.e. Productivity Innovation Project) launched in 2015. By January 2020, a total of S$15 million (HK$85.8 million) was disbursed to nine firms on MiC-related projects.^{34Ministry of National Development (2020).}

    BCA also sets aside S$120 million (HK$686 million) to support government agencies under Public Sector Construction Productivity Fund in case there is additional cost in adopting MiC. A total of 35 public and private projects has prescribed MiC during 2021-2022;^{35Building and Construction Authority (2021d).}
  • (e)
    Streamlining approval procedures: Similar to Hong Kong, BCA also set up a pre-acceptance mechanism in evaluating the design and materials used in MiC systems. As at November 2021, the cross-agency Building Innovation Panel has assessed and granted In Principle Acceptance ("IPA") certificates to suppliers of 51 approved systems (including 34 concrete systems and 17 steel systems), representing a 16-fold increase compared with just 3 systems in 2014.^{36Building and Construction Authority (2021c).} The approved systems will then be accorded fast track status for subsequent submissions for evaluation; and
  • (f)
    Promoting local manufacturing of modules: The Singaporean government is keen to boost local production of MiC modules as well, with a view to providing job opportunities to local construction workers displaced by MiC. Since February 2013, BCA has issued 30-year leases covering a total area of 12 hectares in five sites for erecting Integrated Construction and Prefabrication Hubs ("ICPHs").^{37Building and Construction Authority (2021a).} Companies engaged in ICPH are entitled to Land Intensification Allowance ("LIA") on their qualifying capital expenditure as from March 2017, with an initial allowance of 25% and annual allowance of 5% lasting for 15 years.^{38Building and Construction Authority (2021b).}

    To widen the pool of MiC specialists in Singapore, BCA launched Professional Conversion Programme ("PCP") on MiC in mid-2020, equipping construction workers to switch to prefabrication jobs in the mid-career. Alongside other PCPs, the Singapore government targets to train a total of 80 000 personnel by 2025 with knowledge of latest building technologies.
• Policy effectiveness: The Singaporean government is hailed as having an "effective policy system" to promote MiC adoption.^{39Xu et al. (2020).} During 2017-2020, the adoption rate of MiC in Singapore has doubled from 19% to 39%, concurrent with 7% enhancement in on-site productivity.^{40Ministry of National Development (2021).} In the public housing programme, the adoption rate of MiC quintupled from 6% in 2016 to 30% in 2020, resulting accelerated housing completion by over 20 000 units.^{41The reported adoption rate also included the usage of other prefabrication technologies, such as structural steel and mass engineered timber. See Housing and Development Board (2021).} In private development, the mandatory MiC requirement were applied in 36 GLS sites (34 residential and 2 hotel developments) during 2014-2019.^{42Building and Construction Authority (2020a).}
  Prominent completion of MiC projects include Crown Plaza Changi Airport Hotel Extension and North Hill Residential Halls of Nanyang Technological University. Two blocks of 56-storey residential buildings in Bukit Merah scheduled for completion by 2023 will become the tallest concrete MiC project across the world.^{43BCI Asia Construction Information (2020).}
• Observations: MiC appears to be an innovative building technology offering multiple social benefits, but its application is contingent on a host of site-specific factors. Apart from some common measures (e.g. streamlined regulatory vetting and granting subsidy) also seen in Hong Kong, there are additional measures to promote MiC application in Singapore, including (a) mandatory application in certain private sector projects; (b) accreditation of module manufacturers; and (c) relaxing transportation requirements in moving modules.