Construction demand drives shift to collaborative contracts

Target cost sharing spreads savings or pain across project parties in real time.

Singapore’s construction demand is projected to hit S$47–53 billion this year, driven by a wave of major infrastructure, housing and industrial transformation projects. With budgets under pressure from cost escalation and complexity, industry players are increasingly turning to collaborative contracting frameworks such as NEC4 to curb overruns and reduce disputes.

Renee Paik, Head of Asia Pacific at NEC Contracts, said the surge reflects both expansion and long-term asset optimisation in a mature city environment.

“The country is continuing to invest heavily in long term infrastructure, housing and industrial transformation,” she said. “There's also an equal mandate to optimise the existing high quality assets that we have in this quite mature urban landscape.”

Projects fueling demand include Changi Airport Terminal 5, the Marina Bay Sands IR2 expansion, MRT network extensions and ongoing public housing developments. Singapore is also pushing ahead with sustainability-linked investments such as low-carbon data centers, hydrogen-ready power plants and sustainable aviation fuel facilities.

“Collaborative models such as the NEC become a real anchor, because these contracts are precisely designed to deliver these types of complex projects,” Paik said.

Cost overruns remain a persistent challenge across major construction works, often originating in the earliest planning stages. Paik pointed to underestimated complexity, scope changes, design errors, unforeseen site conditions, regulatory shifts and volatile material prices.

For collaborative contracting to succeed, Paik stressed the importance of transparency, leadership support and proper localisation. NEC’s target cost approach encourages parties to share both savings and overruns as they occur, rather than relying on rigid lump-sum structures.

Singapore has already taken steps to align NEC frameworks with domestic regulations. Paik noted that “the groundwork back in 2024 developed tailored, localised clauses to align NEC with Singapore laws as well as industry practices.”