LCQ19: Monitoring of variation orders for public works projects

Following is a question by the Hon Wu Chi-wai and a written reply by the Secretary for Development, Mr Paul Chan, in the Legislative Council today (July 6):


It is learnt that due to circumstances unforeseen in the contracts of public works projects (such as inclement weather and alterations of works designs), works departments (including the Highways Department (HyD), the Civil Engineering and Development Department (CEDD), and the Drainage Services Department) issue from time to time variation orders (VOs) to the works contractors, for which additional project costs will be incurred. It was reported that a corruption case was uncovered in 2009, in which certain staff members of the HyD had allegedly accepted bribes for issuing unnecessary VOs to the works contractors. Regarding the monitoring of VOs for public works projects, will the Government inform this Council:

(1) of the number of complaints concerning corruption in public works projects received by the authorities each year between April 2008 and March 2016; among such complaints, the number of those relating to VOs and the follow-up actions taken on such complaints;

(2) of (i) the number of, and (ii) the total additional project costs incurred by, the VOs issued in each of the past five years (i.e. from 2011-2012 to 2015-2016), broken down by works department and by value band of works contracts (i.e. (a) below $30 million, (b) between $30 million and $100 million, and (c) above $100 million) (set out such information using tables of the same format as the table below);

Year ______

Works            Value band of
department     works contracts     (i)    (ii)
----------         ---------------     ---    ----
HyD                     (a)

CEDD                  (a)

(3) of the details of the existing procedures to be followed by works departments when issuing VOs, including (i) the ranks of the officers designated to make the relevant decisions; (ii) the mechanism for preventing the issuance of unnecessary VOs; and (iii) the procedures for handling those VOs which are found irregular after issuance;

(4) of the number of cases in the past five years, in which works departments were found to have issued unnecessary VOs, and the outcome of the follow-up actions; and

(5) whether the authorities have reviewed the mechanism for issuing VOs since the aforesaid corruption case was uncovered; if they have, of the details?



Infrastructure projects involve works of different disciplines and complexity. In view of the actual site conditions and any changes thereof and the updating of design standards, project managers need to revise the works designs at appropriate times during the construction stage. Therefore, the standard contracts commonly used in the international markets contain provisions that allow project managers to make necessary adjustments and issue variation orders (VOs) to contractors whenever considered necessary. The works departments have also incorporated similar provisions in the public works contracts in Hong Kong.

After consultation with the works departments and the Independent Commission Against Corruption (ICAC), my reply to the Hon Wu Chi-wai's question is as follows:

(1) The numbers of corruption complaints concerning the works departments as received by the ICAC between January 2008 and March 2016 are shown in Annex 1. The ICAC does not keep a separate breakdown for the numbers of corruption complaints about public works projects or VOs. The above figures have already included those complaints about suspected corruption received by the works departments and referred to the ICAC for follow-up.

The Development Bureau and the works departments have maintained close liaison with the ICAC. In the past five years, the ICAC has conducted about 250 corruption prevention talks for about 8 200 stakeholder members, including departmental staff, project consultants, resident site staff, contractors and their employees, to further their understanding of integrity management and corruption prevention measures and to effectively enhance their awareness of corruption prevention.

(2) The numbers of VOs issued and associated additional costs incurred in the public works contracts undertaken by the works departments in the past five years are set out in Annexes 2 to 4.

(3) to (5) The works departments and their consultants are required to follow and comply with the provisions of works contracts, departmental guidelines and relevant procedures stipulated in the Stores and Procurement Regulations during the issuance of VOs. The requisite ranks of authorised officers and requirements for approving the issuance of VOs are set out in Annex 5.

The works departments need to examine and closely monitor the justifications and the estimated additional costs to be incurred for the issuance of VOs in order to ensure their necessity and value-for-money. Following the issuance of VOs, the resident site staff need to monitor the construction works and report to the works departments regularly. The Development Bureau, the works departments and the ICAC also hold meetings from time to time to discuss and review the issues of corruption prevention, public works contract system and management of VOs. The relevant guidelines of the works departments are also updated and enhanced to keep abreast with the times. For instance, in January 2016, the Civil Engineering and Development Department updated the Project Administration Handbook, which is applicable to most public works projects, to require the works departments to exercise the best control of project costs and adopt designs which are fit-for-purpose and cost-effective. These requirements are also applicable to adjustments to project designs and management of VOs during the construction stage.

Regarding policy implementation, the works departments have contract advisory units that are closely monitoring the approval mechanism for issuance of VOs, including conducting sample audits, to ensure the smooth operation of the system. The departmental audits conducted in the past five years have not found any unnecessary VOs issued in the public works contracts.


Ends/Wednesday, July 6, 2016
Issued at HKT 12:26