Measures to Keep Cost of Food at Coffee Shops Affordable

Er Dr Lee Bee Wah asked the Minister for National Development (a) what measures are being taken to keep the cost of food sold at coffee shops affordable; (b) whether the Ministry will consider removing minimum rent in coffee shop tender exercises; and (c) whether e-bidding in coffee shop tender exercises drives up the rent and subsequently the cost of food sold at coffee shops and, if so, whether there are measures taken to mitigate this.

To provide residents with access to affordable food options, the Housing and Development Board (HDB) ensures that there is a good supply of coffee shops in HDB estates to maintain healthy price competition. There are presently close to 750 HDB-built coffee shops, of which 70 were completed in the last five years. A further 31 are in the pipeline and will be completed in the next five years.

To find suitable operators for new coffee shops, HDB has used an online tendering system since 2004. This system makes bidding more transparent as it allows prospective bidders to see all bids in real time and adjust their bids accordingly ahead of the close of tender. We are continuously reviewing the tendering mechanism to see how it can be made more effective in ensuring affordable food for residents.

For example, instead of simply awarding to the highest price bids, HDB has been piloting the use of the Price-Quality Method (PQM) to tender out several coffee shops. Under the PQM, quality score accounts for 50% of the evaluation and operators with affordable food options will score higher. That is why HDB recently awarded a coffee shop in Choa Chu Kang to a food operator with affordable food options and with initiatives to improve productivity, even though their rental bid was 40% lower than the highest bid.

We have seen good outcomes from this tendering approach. So, I am happy to share that HDB will be replacing the existing e-bidding system with the PQM tender for all coffee shops later this year.

Thank you, Sir. The reason I ask this is that, there are a few coffee shops in Nee Soon South, the new one, not even, I think barely around for one year and it closed down, cannot survive. And now, a tender is called again. I met up with the coffee shop operator. They told me that because of e-bidding, some of them are not experienced, just because they want to come into business, they put up a higher price and then when they come in, they cannot survive, they close down. It affected the residents because they serve the surrounding residents, residents have nowhere to go. And then HDB calls another tender. It takes quite a few months before it awards.

So, I am happy to hear about the PQM and I hope that, in future, we will have to be very mindful. You do the sums. A small coffee shop, $30,000, $40,000; how much would they have to charge per stall? I think we can easily calculate whether they can survive or not.