OKP Holdings

MOF Wrote:The Government procurement regime is premised on the principles of open and fair competition, transparency and Value-for-Money (VFM). When government agencies call for tender to procure goods and services, they would stipulate their evaluation criteria upfront. These would include not only price alone, but also other criteria that would enable the agencies to assess the vendors’ ability to deliver, such as their track records for comparable contracts and their financial health, as well as criteria relating to the quality of goods and services required.

Branding in construction project doesn't really command a premium in SG govt projects... there are plenty of contractors who can give the level of quality that OKP is producing. Generally when a contractor puts in a tender, they already have a track record in delivering. Quality doesn't really vary much. Financial health of local companies cannot even compare to the other MNCs in the industry.

Just take a look at the recent awards to DTL3 projects, most of them are given to the lowest bidder. OKP's branding "premium" is just being the cheapest...

Hi Piggo,
are you from the construction industry or somehow related to road construction?
To better understand on your comment, would you like to share with us why you say "OKP's branding premium" is just being the cheapest...."?

To share a bit based on my knowledge,
In government sector, track records for vendors/contractors is very important as it is an indication whether the contractor can deliver the product on time, on target and of quality.
A successful project will enable the officer overseeing the project a better career advancement.

My 2 cents.

Safety, quality, timeliness, budget & public relations. There are many international contractors with better and more impressive track records than OKP. Given that, why would OKP be able to command a premium? Of course for the officer overseeing the project, the work will be smooth sailing, but it doesn't mean that the govt is willing to pay more.

Other than having a good track record, u also need to be cheap... That in itself should mean that high margins aren't sustainable.

Take VINCI as an example ( www.vinci-construction-projects.com/projets.nsf/en/press-releases.htm?OpenAgent&20110830-1746) despite being way bigger, their net profit margin is <5%.

(21-11-2011, 07:55 AM)piggo Wrote: Safety, quality, timeliness, budget & public relations. There are many international contractors with better and more impressive track records than OKP. Given that, why would OKP be able to command a premium? Of course for the officer overseeing the project, the work will be smooth sailing, but it doesn't mean that the govt is willing to pay more.

Other than having a good track record, u also need to be cheap... That in itself should mean that high margins aren't sustainable.

Take VINCI as an example ( www.vinci-construction-projects.com/projets.nsf/en/press-releases.htm?OpenAgent&20110830-1746) despite being way bigger, their net profit margin is <5%.

Roadwork constructions are quite troublesome as compared with building a depot, building or factory. Typically, for a successful construction of road or expressway may require the company to liaise with LTA, URA, PUB, HDB, NPARKs, NEA and possibly many other private companies(SBS, SMRT, ..) to accommodate for short term disruptions.

I have noted that typically, widening and road constructions are normally undertaken by local companies while skyscrapers, mrt stations and railway tunnels are built by foreign construction companies.

It may have to do with the local companies having a better working relationship with the local authorities and companies or the amount of contract is too small to arouse the interest of foreign MNCs.

A quick look at the tender list does show that road constructions are typically dominated by local companies.
http://www.lta.gov.sg/tender_info/index_tender_info.htm

No doubt we can all agree that construction contract tend to be margin narrowing - that's why most construction company moved towards property development.

However, one thing to point out is, OKP doesn't and will never specialise in MRT construction. That itself can be a double-edged sword where OKP will never benefit from the contract boom of the upcoming MRT expansion but they will also not be pressured from the low bid competition from such contract.

Maybe what yeokiwi mentioned is right, there might be something different between roadworks and other kind of construction. I am very tempted to ask them more questions.

Project companies in Singapore usually have certain expertise and no 2 companies will provide exactly the same services when the pie is big enough for everyone to share. In the case of OKP, they are smart enough to identify their niche, it's engineering strength (which project management usually earns the highest margins) and availabity of equipment like pavers allow them to deal with relatively big scopes of work with fairly little competition. However in the case of much bigger and complicated projects, it's a total different ball game and the vendor selection process naturally goes to those who has done it before.

The LTA masterplan says, "With 12% of our land space already allocated to roads (compared with 15% for housing) and other competing demands to develop available land for other purposes, the scope to expand the road network would become more limited.” and As Singapore becomes increasingly built up, the constraints we
face in road building have become more acute. Our limited land resources have to be shared with other competing uses such as housing, industry and recreation. Hence, road expansion will inevitably slow down in the future.”

How will this affect OKP?

There's still road maintenance to consider?

But road maintenance constitutes a much lesser percentage of revenue. Around 20% or lesser if I'm nt wrong.

Are most of the road and expressways done up by OKP? If it is, i think they did a very lousy job. There has been increasingly a lot of pot holes in quite a number of roads i travelled. Alot of the roads are also rather bumpy.