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LCQ12 : Re-entry of public works contracts

Following is a question by the Hon Abraham Shek and a written reply by the Secretary for Works, Mr Lee Shing-see, in the Legislative Council meeting today (February 6) :

Question:

Severe competition in the construction industry in recent years has resulted in the award of some public works contracts at unrealistically low price. As some of these projects were poorly executed and did not conform to the contracts, the Government had to re-tender them. In this connection, will the Government inform this Council:

(a) of the number of projects re-tendered by the Government in the last 24 months;

(b) of the additional costs and time involved; and

(c) whether it has assessed how the community has suffered due to the delayed completion of these projects; if so, of the details of the assessment?

Reply:

Madam President,

(a) In 2000 and 2001, there are eleven public works contracts re-entered by the Government.

(b) The estimated additional cost for these eleven re-entered contracts ranges from $4M to $183M. The total estimated additional cost amounts to $306M. The additional time involved is different from contract to contract but the average statistics is in the region of 9 to 12 months.

(c) For each contract, Government specifies the completion date before which the contractor shall complete the works. We will also assess the likely loss to Government if the contractor fails to complete the works before the completion date. Such loss, if not recovered, will eventually be shouldered by the community at large. We have long established a mechanism to assess the amount of such loss which is stipulated in the contracts in the form of liquidated damages (LD's).

LD's is enforceable if the amount fixed is a genuine pre-estimate of the loss likely to arise from the anticipated delay in completion of the works. According to legal principles, the amount cannot be extravagant or unconscionable in comparison with the greatest loss which could conceivably be proved to have followed from the breach of contract. Otherwise, it will be regarded as a penalty, which is not enforceable under the public works contract.

End/Wednesday, February 6, 2002

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