Tackling High Construction Cost
Hong Kong is facing the challenge of high construction cost. If the issue of high construction cost is not properly tackled, it will adversely affect the implementation of capital works projects and eventually undermine Hong Kong’s competitiveness. Following the 2016 Policy Address, DEVB has established the Project Cost Management Office to take forward various cost management measures for capital works projects and to promote the same in the private building sector.
We are comprehensively reviewing works polices and requirements on the implementation of capital works projects. Under the overriding principle of not compromising functionality, quality and safety of works, we are consolidating requirements issued at different times and customising existing general requirements into project specific ones. We have been promoting the concept of buildability in capital works projects in recent years for boosting construction productivity and hence lowering cost. A series of works polices has been rolled out, including the guidelines of 3S (standardisation, simplification and single-integrated element), “no-frill” design and repackaging large value contracts to manageable sizes, for cost management purposes. We aim to pilot the use of buildability index in government building projects in 2017.
On project-by-project scrutiny of cost estimates, we have completed the review of about 60 capital works projects in the planning and design stage. A cost reduction of around $13 billion (in money-of-the-day prices) has been achieved through design optimisation.
We will review the cost estimation method for public works projects and establish a benchmarking mechanism for better managing project cost. We will also arrange project management training for more than 1 500 government construction professionals to equip them with contemporary project management skills to tackle the evolving challenges to the implementation of capital works projects. We have already earmarked about $10 million1 to undertake these tasks in 2017 for completion in 2018. Provision for the initiatives will be reflected in the Estimates of the relevant years.
Innovation and Technology Application Centre
The Government continues its efforts to promote innovation and technology which will enhance the competitiveness of various fields and create new momentum for economic and social development. To enhance productivity of the construction industry, the Construction Industry Council (CIC) will establish an innovation and technology application centre. The centre is expected to be in operation in the second half of this year, starting with collecting latest information on local and overseas construction technologies to establish a knowledge hub, enhancing the productivity and safety performance of the construction industry. In the long run, the centre aims at establishing a global research network to promote interdisciplinary research and application on enhancement of productivity.
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, market liberalisation measures have been implemented to facilitate stakeholders of the Hong Kong construction industry to practise and develop their business in the Mainland. Through mutual recognition between Hong Kong and the Mainland, as at 1 December 2016, 1 490 Hong Kong construction and related professionals have already obtained the relevant Mainland professional qualifications. The Agreement on Trade in Services signed on 27 November 2015 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. The implementation methods of the liberalisation measures in Guangxi have been put into effect since September 2016. We will continue to work closely with Fujian on the implementation of the same measures to facilitate the access of enterprises and professionals to the market of the province.
Based on a co-operation agreement signed with the DEVB, Qianhai Authority has compiled a register of Hong Kong’s architectural, building services, quantity surveying and structural engineering professional firms which may provide professional services for projects wholly or principally funded by Hong Kong businesses. We will further pursue with Qianhai for the inclusion of other categories of professional firms in the register. A pilot project for trial implementation of Hong Kong’s project management system is in good progress. We are liaising with the Mainland authorities for extending the scope and number of trial projects in Qianhai as well as Nansha and Hengqin of the Quangdong Free Trade Zone.
Following a tendering exercise by the Ministry of Commerce, two Hong Kong consultancy firms have been awarded the contracts in 2015 for carrying out supervision work of two foreign aid building projects in Nepal and Cambodia. We will continue discussions with the Ministry on providing more foreign aid projects to Hong Kong consultancy firms; engaging the firms in different types of projects including infrastructure projects; and expanding their service scope to include project planning, design, procurement, construction and final acceptance.
Capitalising on the opportunities provided by the Central Government’s Belt and Road Initiative, we will facilitate the relevant professions of the Hong Kong construction industry in their participation in the associated infrastructural projects and market our services.
1 Including $1.5 million for review of cost estimation method, $1.0 million for establishment of a benchmarking mechanism and $7.7 million for project management training.
The spending of the Capital Works Programme in 2016-17 will exceed $80 billion which is higher than the actual expenditure in 2015-16. We will continue infrastructure development to meet the livelihood needs of the public and maintain the long-term competitiveness of Hong Kong. Based on the planned infrastructure programme, we anticipate that the annual capital works expenditure in the next few years will maintain at a level exceeding $80 billion.
Procurement System for Public Works
To achieve economical delivery of quality infrastructures, we are always mindful of the need to build up the overall capability of the construction industry, facilitate its healthy growth and encourage innovation and creativity. To ensure sufficient market participants and bring new technology and ideas into the local construction industry, we have reviewed our list management system to facilitate contractors in participating in public works projects. We will continue to improve management practice and procedures of public works projects to enhance the constructability of works, increase productivity, encourage innovation and creativity and strengthen cost control.
Security of Payment Legislation
We completed the public consultation on the proposed Security of Payment Legislation in September 2015. The public and the industry were in general supportive of the proposed legislation. An Information Paper was submitted to the Panel on Development in June 2016 briefing Members on the results of the public consultation, the legislative framework and the way forward for the proposed legislation. We have started drafting the legislation bill and plan to introduce the bill to the Legislative Council (LegCo) in 2017. 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.