The cost of construction in Hong Kong is higher than our neighbouring regions and the rate of increase in recent years has impacted on the cost estimates of some major infrastructure projects. To address the issue of high construction cost in public works, DEVB will establish a dedicated office to draw up cost control measures and cost reduction initiatives, and steer and monitor the related work of the works departments. The measures include enhancing project management and cost estimation performance, trimming project requirements that are not fully justified without compromising technical and safety standards, and improving procurement methods to reduce tender risk premium and the overall project costs. In the past year, we adopted New Engineering Contract as a new contract form in some pilot public works projects, which promotes the spirit of contract partnership and reduces contractual risk. We will continue the pilot trial and assess its effectiveness in reducing construction cost.
We will make reference to the successful experience of some overseas countries and introduce the concept of “Design for Construction” giving more consideration to the buildability aspects of project designs. Apart from enhancing construction safety, buildable designs can lower the cost of construction through comprehensive appraisal of the construction methods and ensuring their practicality and effectiveness well in advance in the project design stage. We also continue to promote the concept of 3S, standardisation, simplification and single-integrated element, to improve construction efficiency. For example, we anticipate that a prefabrication yard for cutting and bending steel reinforcement bars in Tsing Yi, let out by the Government, will be commissioned in the coming weeks.
Benchmarking the unit cost of projects is a significant step towards appraising the construction cost objectively. We will roll out a cost benchmarking system for public works projects. Under the system, new government building projects, initially for schools, government offices and staff quarters, are required to meet the newly established cost benchmarks, except on fully justified grounds, such as onerous site conditions.
Supporting Construction and Related Professionals to Extend Business to the Mainland and New Market
Since signing of the “Mainland and Hong Kong Closer Economic Partnership Arrangement” in 2003, 51 market liberalisation measures have been implemented to facilitate stakeholders of the Hong Kong construction industry to practise and develop their business in the Mainland, particularly in Guangdong under the pilot scheme arrangement. Through mutual recognition between Hong Kong and the Mainland, as at 1 December 2015, 1 490 Hong Kong construction and related professionals have already obtained the relevant Mainland professional qualifications. Amongst them, 559 professionals of the three disciplines, namely architect, structural engineer and building surveyor, may now use their registered practitioner qualification in Guangdong as an enterprise qualification to set up companies to conduct business under the Guangdong pilot scheme. In 2015, the Agreement on Trade in Services signed on 27 November extended the liberalisation measures under the negative list (commercial presence) from Guangdong to the whole Mainland. For the positive list (cross-border services), the Agreement extended most of the liberalisation measures in Guangdong to Guangxi and Fujian.
Following the Cooperation Agreement with the Authority of Qianhai Shenzhen -- Hong Kong Modern Service Industry Cooperation Zone of Shenzhen (Qianhai Authority) signed in 2013, we have established a framework for Hong Kong professionals and enterprises in the construction and related sectors to participate in Qianhai development and provide a full range of services throughout the project delivery cycle, including design, project management and works supervision services. The Qianhai Authority has identified a pilot construction project, and is liaising with the developer for implementation of the framework. The next step is to support the Qianhai Authority to establish an approved list of professional services companies to facilitate their participation in Qianhai development projects involving Hong Kong investment.
In 2015, the Ministry of Commerce (MOC) awarded supervision contracts for two medium-sized foreign aid projects in Nepal and Cambodia to two Hong Kong firms. The construction works of the two projects have commenced and are progressing smoothly. In the coming year, we will further liaise with MOC to explore similar future opportunities. The Belt and Road Initiative of the Mainland will potentially open up an even larger market for our professional services. In that connection, we are studying how we may create an effective platform to facilitate Hong Kong companies’ participation in those projects.
The spending of the Capital Works Programme in 2015-16 will exceed $70 billion which is slightly higher than the actual expenditure in 2014-15. We will continue infrastructure development to meet the livelihood needs of the public and maintain the long-term competitiveness of Hong Kong.
Of the about $370 billion on Capital Works Programme projects approved by the Legislative Council (LegCo) Finance Committee in the past five years, about 60% is related to the Ten Major Infrastructure Projects and the remaining 40% to other projects. We anticipate that based on the planned infrastructure programme, the annual capital works expenditure in the next few years will maintain at a level exceeding $70 billion.
Procurement System for Public Works
To achieve economical delivery of quality infrastructures, we will enhance the capability of the construction industry and facilitate its healthy growth. To ensure sufficient market participants and bring new technology and ideas into the local construction industry, we will facilitate the entry of new contractors and consultants into the relevant approved lists for undertaking public works projects without compromising quality. We will also split large public works projects into smaller ones to facilitate participation by more contractors.
Security of Payment Legislation
We conducted a 3-month public consultation on the proposed Security of Payment legislation from 1 June 2015 to 31 August 2015 and received the industry’s majority support. We are now conducting a business impact assessment on the proposal and we plan to start drafting the legislation bill this year. The legislation will help contractors, sub-contractors, consultants and suppliers in the supply chain to receive payment on time for work done and services provided. The legislation will also introduce an adjudication system to speed up the resolution of disputes, thereby enhancing the cash flow of the supply chain in the construction industry.