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CONTENTS
2 Message from the Director
3 Message from the Assistant Director (Quantity Surveying)
4 The Organisation of the Quantity Surveying Branch
7 The Services and Activities undertaken by the Branch
8 Project Cost Estimate
10 Procurement and Tendering
14 Preparation of Bills of Quantities
17 Development in the Measurement of Building Services Installations
19 Post Contract Administration and Final Accounts
22 Term Contracts
24 The Operation of Maintenance Term Contracts
26 General Conditions of Contract
31 Consultancy Management
34 Subvented Projects
37 The School Improvement Programme
39 Dispute Resolution Advisors System
42 Technical Audits
44 Advisory Services
47 Computerization and Information Management
51 Training and Commitment to Continuous Improvement
53 Special Articles
54 Overview of ArchSD Tender Price Index and Contract Value (1986 to 2005)
56 Life Cycle Costing – From Theory to Practice
60 The Development of Construction Mediation in Hong Kong
64 Legal aspects of QS
69 The High Street Project
The Review and Outlook of the Quantity Surveying Branch and the Quantity Surveying Profession
2
Message from the Director
Yue Chi-hangDirector of
Architectural Services
I am delighted to see that the Architectural Services
Department has become a prominent works
department within the Environment, Transport
and Works Bureau since its establishment two
decades ago. The 20th anniversary of the department
witnesses the completion of a number of successful
projects in recently years. To name a few: the Hong
Kong Science Park, the Police Headquarters Phase
III, the New Headquarters for EMSD, the Wetland
Park, the New Territories South Regional Police
Headquarter, the Ma On Shan Sports Centre, the
Margaret Trench Red Cross School and many more.
Other than proudly handing over these completed
projects to our clients, we have also obtained awards
and merits for some of these outstanding works, such
as the Quality Building Award and the HKIA Award.
The Quantity Surveying Branch (QSB) is one of the
six functional branches, which have contributed
tremendously to the success and achievements of
the department. One of the objectives of the
department is to deliver our quality services and
completed products to our clients on time, with good
value for money and within budget. In upholding this
important objective, QSB effectively discharges its
expertise in every facet of its interfaces with the
project teams in areas such as cost estimation,
tender documentation and evaluation, payment, cost
control and finalization of accounts.
Many of our colleagues in QSB have been serving
the department for many years. They very often work
under pressure and always work hard to meet
deadlines. Their loyalty and dedication are deeply
appreciated. Their hard work can be represented by
the many public buildings erected in the past, which
still serve well the people of Hong Kong. Our colleagues
will face with new challenges as the department
develops and meets contemporary demands of the
government and the public. I am confident that our
staff can accomplish their formidable tasks as they
did in the past.
I wish that this booklet will enlighten the readers in
the department and in the industry alike, to march on
with us up the path to build an even better working
and living environment for the people of Hong Kong
in the next 20 years and beyond.
3
Message from theAssistant Director(Quantity Surveying)
Shum Kung-sherAssistant Director
(Quantity Surveying)
This year the Architectural Services Department
(ArchSD) celebrates its 20th Anniversary. The
Quantity Surveying Branch (QSB), as a
constituent branch since the department’s inception,
has progressed from strength to strength over the
past 20 years. With the joint effort and support of all
the staff in QSB, we have capitalized on our
professional expertise and capability in undertaking a
wide spectrum of services and made good
achievements with new and innovative developments
in many aspects of our work. Apart from playing a
significant part in leading and promoting the quantity
surveying profession in Hong Kong, QSB sets new
standards for the local construction industry.
QSB provides quantity surveying services for all
public building works within the purview of ArchSD
including procuring new buildings, renovation or
refurbishment of existing buildings, and all the
subsequent maintenance. QSB also provides
professional advice on behalf of the department to
policy bureaux, government departments, quasi-
government bodies and subvented organizations.
We strive to maintain the highest possible standards
in the delivery of our services, which include traditional
quantity surveying services covering the preparation
of cost estimates, tender documentation, post-
contract administration, interim payment valuations
and finalization of accounts. New operating modes
are introduced to improve our operation and computer
technology is also adopted in our services. Having
been fully computerized in the delivery of our services
for both capital works and maintenance works, our
measurement and valuation services have also been
extended to cover building services works. On contract
administration aspects, QSB pioneered the
introduction of the Dispute Resolution Advisors System
10 years ago and the system has operated
successfully. We have gained valuable experience in
adopting the Design and Build approach in the
procurement of projects not just for capital works but
also for minor works and fitting-out works. Our
expertise has also been employed in developing the
project managing role of the department.
To respond to the needs and expectations of the
local construction industry and the community at
large, QSB has adopted a proactive strategy in
planning and formulating the delivery of its services,
and will continue to seek improvement in this regard.
We will respond to constructive suggestions for
improvement and will take proactive actions to elevate
the standard of our services. In facing new challenges,
we are prepared to explore new services for our
clients such as strengthening our role in advisory
services, to utilize our experience and expertise in
research and development that will benefit the building
industry and Hong Kong as a whole.
Finally, I would like to take this opportunity to thank
all my colleagues for their dedication and contributions
in the past 20 years which will form a solid foundation
for future development.
4
The Quantity Surveying Branch (QSB) is one of the
six functional branches within Architectural
Services Department. Headed by the Assistant
Director (Quantity Surveying), there are four divisions
within QSB, namely Division 1, 2, 3 and Subvented
Projects Division. Division 1, 2 and 3 are each under
the supervision of a Chief Quantity Surveyor and the
Subvented Projects Division is headed by a Chief
Technical Advisor. There are also a number of individual
groups under each division consisting of senior
professionals, professional and technical staff.
Division 1
This Division is responsible for the provision of advisory
services in respect of professional and technical
matters such as consultant procurement and
management, preliminary project estimates, computer
and information technology, quality assurance and
procedures, contract advices and technical audits.
There are seven groups operating under Division 1.
The estimating unit of this division has been providing
advisory services on the construction cost for the
planning of West Kowloon Cultural District project.
Division 2
This Division is responsible for the provision of quantity
surveying services for government capital building
projects and it has five supporting groups. The
type and nature of projects handled by the Division
vary. They may include primary and secondary
schools, special schools, hospitals, correctional
institutions, staff quarters, office buildings, law
courts, libraries, sports complex, swimming pools,
parks, police stations, and fire and ambulance
Quantity Surveying BranchThe Organisation of the
5
stations etc. Examples of some of the recently
completed projects handled by Division 2 are
Science Park, Phase 1 in Shatin, Wetland Park in
Tin Shui Wai, EMSD Headquarters in Kowloon,
Police Headquarters Phase III in Wan Chai, Lok Ma
Chau Boundary Crossing, Castle Peak Hospital Stage
II, Phase 2 in Tuen Mun, and New Infectious Diseases
Centre attached to the Princess Margaret Hospital
in Lai Chi Kok.
Division 3
This Division is responsible for the provision of quantity
surveying services for Minor Works, Maintenance,
Fitting-out and the School Improvement Programme
(SIP). It comprises six groups, two located at the APB
Centre, three at the Kwun Tong office and one at
Queensway Government Offices.
Subvented Projects Division
This Division provides professional, multi disciplinary
advisory service to government departments
responsible for awarding public funds to private
organizations delivering educational, health and social
welfare facilities. In addition, the Division examines
and advises on government projects entrusted to
private developers.
By examining and commenting on construction
cost, best practice, development standards,
consultant and contractor procurement processes
the Division ensures that subvented and entrusted
projects offer quality standards of design at reasonable
cost levels. This is achieved through a dedicated
group comprising independent senior professionals,
professional and technical officers working in concert
to provide coordinated project advice through the
Chief Technical Advisor.
8
Cost estimate
Project estimates are essential information in the
submissions for the upgrading and approval of projects
in the public sector. The Quantity Surveying Branch
(QSB) is responsible for providing and collating all this
information. Based on our past experience on a large
variety of government facilities, QSB has maintained
a library of cost data. With our cost information and
estimating techniques, we provide cost advisory
service on various design options for comparison and
selection at the initial design stage of the project.
During the project development period, our cost
estimates could also be used as a tool to assist clients
in exercising control on future financial commitment
and in making decision on the change in original
design to suit new requirements. Our cost
management and control in this respect have resulted
in a better use of public fund.
Risk analysis
In the preparation of Project Cost Estimate, QSB
adopts the technique of Estimating Using Risk Analysis
(ERA) to identify, assess and make allowance for
uncertainty. The risk analysis technique is now further
enhanced by the application of Systematic Risk
Management (SRM) in public works projects following
Project Cost Estimate
the promulgation of the Risk Management User Manual
by the Environment, Transport and Works Bureau in
June 2005. SRM is to be applied throughout the
project period for public works programme projects
with cost estimates exceeding $200 million. Under
this system, project team members are required to
prepare and implement a Project Risk Management
Plan. The aim of this process is to identify potential
risk and have risk treatment for the sake of proactive
project cost control.
Cost advisory service
Besides servicing on projects of the Architectural
Services Department, QSB also provides building
construction cost advisory service to other bureaux
and government departments. With the rise in public
expectation for quality service, the government has
taken initiative to improve delivery of service by involving
the complementary skills of private sector. In the
construction industry, hybrid development modes
with varying levels of private sector involvement in
terms of risk sharing, financing, ownership and
operation, etc. have evolved rapidly in recent years.
Some examples are Ngong Ping 360 (franchisee
project for design, construction and operation), Hong
Kong Disneyland and AsiaWorld-Expo (joint venture
Hong Kong Disneyland
9
projects), and various outsourcing contracts. QSB
has kept pace with this development and has been
giving construction cost advice to projects in
connection with the private sector involvement
initiative. QSB is currently playing an active role by
providing construction cost advice in the planning of
several mega projects such as the West Kowloon
Cultural District Development, Redevelopment of Kai
Tak Site and the Promenade Development along our
shore line. We envisage that the increasing utilization
of private sector’s skills and experience for better
deliverables will enrich our cost library. We strive for a
continuous improvement in the quality of our cost
information and advisory service.
Knowledge sharing
In collaboration with the Census and Statistics
Department, QSB has shared knowledge of local
construction costs with the government of other
countries by participating in the workshops on
construction survey under the International
Comparison Program. The workshops were organized
by the Asian Development Bank and were held in
Manila, Philippines in 2005 and 2006. Apart from
sending representatives to attend international
conferences, we also exchange cost information and
experience with departments and organizations of
other countries through the internet.
Through the Staff Exchange Programme with the
Mainland, we have shared our knowledge and
experience with officers from the Mainland in the past
years. More officers from the Mainland local
government are scheduled to visit QSB.
QSB would continue to seize all opportunities to
facilitate more exchanges of knowledge and
experience with other countries and the Mainland in
particular.
Ngong Ping 360
Redevelopment of Kai Tak Site
10
Introduction
The procurement policy of the Government of the
Hong Kong Special Administrative Region (HKSAR) is
to obtain goods and services at the best value for
money in support of the government’s programmes
and activities.
The fundamental criteria of the government’s
procurement policy are public accountability, value
for money, transparency, open and fair competition
and equal opportunities are open to all domestic and
foreign suppliers and services providers so long as
they are eligible.
Architectural Services Department (ArchSD) is
specialized in the procurement and maintenance of
all the government buildings. ArchSD always looks for
innovative procurement initiatives to further safeguard
government’s procurement policy and interest.
Procurement strategies
The common procurement strategies employed by
ArchSD for its capital and maintenance works are
lump sum contract with or without quantities, re-
measurement contract and design and build (D&B)
contract. Re-measurement contract is mainly used in
maintenance works because a lot of the requirements
are so uncertain at tender stage whereas the other
two strategies are normally used in capital works.
Most of the capital works are procured by lump
sum contract. D&B contract was first introduced for
ArchSD in early 1990s. The first D&B contract was the
Design and Construction of RHKA Air Force Helicopter
Hangar at Sek Kong, New Territories. With the D&B
approach, contractor’s expertise in buildability and
creative solution to technical problem can be brought
in as early as the concept stage of a project has been
completed. D&B is a fast-track procurement method
and its application is on the rise since its first launch
more than a decade ago.
Another major change in procurement strategy is
on the building services installation. It has gradually
evolved from a direct contract to nominated sub-
contract of the building contract to now a domestic
sub-contract within the building contract domains.
Obviously such merger makes building contract
administration more effective.
Tendering process
Tender invitation by open and selective tender through
government gazette has a long history. Prequalification
of contractors was not widely used until the design
and build contract has gained more recognition. Not
only l imited to design and bui ld projects,
prequalification exercise is also used for some
complex or large-scale developments.
The HKSAR Government acceded to the
Agreement on Government Procurement of the World
Procurement and Tendering
11
Trade Organization (WTO GPA) in 1997. Contracts
for goods and services with a value over five million
Special Drawing Rights (SDR), an equivalent of
approximately HK$57.6 million in 2006, are governed
by the requirements of WTO GPA. The objective is to
provide an open and fair competition
amongst eligible domestic and foreign goods
and services providers. To fulfil WTO GPA
requirements, tender invitation also needs
to be advertised in local newspapers and
selected overseas trade journals. Foreign consulates
and trade commissions are also notified where
appropriate. Consequently the construction industry
of HKSAR is brought to the international stage.
Advancement of information technology
revolutionizes the tendering process in two aspects:
the first one is the publication of tender invitation
notice through the Internet and the second one is
electronic tendering. The Electronic Tendering System
(ETS) has gradually evolved. At present, electronic
copy of tender documents stored in a compact disc
together with hard copy of tender documents are
dispatched to tenderers who can opt to return their
tenders in hard copy or electronic format.
Two-envelope tendering process was introduced
in design and build projects in 1990s. Tenderers are
required to submit tenders in two envelopes; one
envelope contains all the required technical
submissions and the other envelope contains the
prices. Tenderer’s proposal on design, methodology
of construction, resources and resources planning,
safety and environmental measures, construction
waste management, etc. are the main elements in
technical submission whereas their
tender price either in the form of bills of
quantities or schedule of rates forms the
price submission.
Tender assessment and award
The tender assessment process has undergone
dramatic changes in the past two decades. Tender
assessment was used to focus on analysis of tender
prices. A more comprehensive evaluation, not just on
prices, but also on the performance and capability of
the tenderers is now carried out. Tenderer’s past
performance records, conviction records on
environmental protection, site safety and employment
of illegal immigrants together with their current
workload in hand are all taken into account in
an overall tender evaluation before making
recommendation to the Tender Board for acceptance.
Since 2004, these elements are adequately
considered and covered in the ‘formula approach’
tender assessment method.
In the two-envelope tendering arrangement
mentioned above, the tender assessment panel will
Tai Po Complex
12
study all tenderers’ technical submissions before
opening their price envelopes. The assessment
panel will carefully scrutinize each tenderer’s
technical submissions against a set of pre-
determined criteria. If tenders are technically
acceptable, their price envelopes will be opened.
The result of technical assessment and pricing
assessment are then combined at predetermined
weightings to work out which tender scores the
highest mark. The tender with the highest scores
will then be recommended to the Tender Board for
acceptance. Having taken the quality and price
into account, this balanced tender assessment
process is to ensure that the most appropriate
tenderer is awarded the contract.
In order to speed up the delivery time of capital
works projects, in late 2001, the Finance Bureau
introduced the Simplified Tendering directive, which
streamlined tendering procedures for works
contract valued below HK$50 million. For tenders
meeting certain specified criteria, the director of
the department is authorized to approve the
tender recommendat ion. The use o f th is
Simplified Tendering arrangement has reduced
the overall tendering time of many small value
works contracts.
A refinement of the tender assessment process
was initiated in 2004 when ETWB promulgated a
“marking scheme” tender assessment method for
contracts other than design and build and also
replaced the pre-qualification exercise for non design
and build contracts. A marking scheme with scores
marked against predetermined criteria is submitted
to the Central Tender Board for approval before it
would be used in tender assessment. The “marking
scheme” tender assessment concept is quite similar
to the two-envelope system.
Outlook
The government and the general public are becoming
more concern on issues such as, environmental
protection, site safety, workmanship and sustainability
on building projects. However conflicting interests
among various stakeholders in the construction
industry need to be addressed. Advices from
Independent Commission Against Corruption are
taken in refining a fair and corruption free procurement
process. To achieve our objective of striking a balance
between quality and price, the procurement and
tender assessment system of public works are under
constant review, reform and refinement.
Reviews have been carried out by ETWB to
consolidate the changes within the construction
industry and ArchSD is in full support in implementing
these policies. Some of the initiatives are outlined
below.
Public Private Partnership
Public Private Partnership (PPP) has been introduced
to the territory on some infrastructure projects.
Diversified models for project financing and contracting
are adopted as pilot schemes to allow more private
enterprises to take part in the construction and
operation of public works projects. ArchSD, an expert
in construction procurement and management, will
take a proactive role in assisting ETWB and other
client departments to look for projects that are suitable
to be procured under the PPP arrangement and to
formulate the most appropriate project delivery
strategy.
Partnering
Non-contractual partnering arrangement has been
implemented in recent years. The prime purpose is to
bring out the full co-operation among all members of
the project team consisting of the employer’s
representatives, the contractors and the consultants.
It is hoped that through their harmonious interactions
in the project, positive outcome for the best quality,
value for money and completion on time of the project
can be achieved.
Although the application of partnering system in
construction contract is a new attempt, it is under
constant review and further improvement.
13
Alternative sub-contacting strategy
Sub-contracting is a common practice in the local
construction industry. Poor management and
coordination of sub-contractors always cause delay
in project completion. One of the alternative sub-
contracting strategies under consideration is the
introduction of Principal Building Services Sub-
contractor in a building contract. The main contractor
is required to appoint one building services sub-
contractor from a pre-qualified list given in the tender
document as a principal building services sub-
contractor who will take up a leading role to co-
ordinate all the building services installations in the
contract. The idea is to transform the multi-point
contact situation into a single point contact
arrangement for all the building services works. As a
result a more efficient project management system is
emerged to cope with present building services
installations, which are getting more and more
sophisticated.
Value management and risk management
The annual turnover of ArchSD on capital building
works is over HK$7 billion and a large portion of the
money is spent on projects with a value exceeding
HK$200 million. The government is always mindful of
the resultant benefits of spending taxpayer’s money.
The value management mechanism is an ideal tool in
making sure any perceived benefits can be abstracted
from construction projects without sacrificing
functionality, quality and performance. In 2002, the
value management technique was adopted in some
selected projects. The stakeholders in a building
project i.e. the client department (the end user), the
project team and the contractor shall meet in a
workshop session to look at specific issues such as
design options, construction method etc. in order to
achieve value for money for the project.
The System Risk Management is now a mandatory
requirement for capital building projects with value
over HK$200 million. A risk treatment plan is
incorporated into the tender document for the
tenderer’s reference. The plan will be used throughout
the construction period for monitoring purpose. Should
any potential risk arise it will be dealt with immediately.
Life cycle costing
The initial cost of an asset could be well below half of
its whole life cost. Public buildings are becoming
more and more complex, and the operation and
maintenance costs have caused concern to the public
as well as the government. It is envisaged that the use
of more durable materials with low maintenance cost
for public buildings is an effective means to reduce
public expenditure in the long run. Starting from the
second half of 2006, design and life cycle cost of
materials proposed by tenderers is a factor of
consideration in tenders for D & B contracts. Currently,
ArchSD is actively involved in a series of life cycle
costing research activities. The long-term goal is to
set up a life cycle cost data bank to rationalize
decisions on building designs such as building shape,
component systems, materials, equipment etc. and
their effect on maintenance programme.
Electronic tendering
At present electronic tendering is only applied to the
dispatch and return of tender documents. Some
studies are being carried out to validate a complete
paperless tendering system and full utilization of
contemporary information technology. Considerations
will be given to its technical viability, ease of use for
tenderers and cost-benefit in implementing the system.
Tai Po Complex
14
Procurement of building projects
Most capital building projects are procured by way of
lump sum contracts with quantities for tender invitation
and subsequent post-contract cost control. Contracts
for minor building projects are mainly let on the basis
of lump sum contracts without quantities whereby
drawings and specifications would form the essential
parts of the contracts.
Since the successful launch of the first design and
build contract in early 1990s, ArchSD has had other
alternatives in procuring capital building projects. The
introduction of term contracts for minor building
works and design and build term contracts enabled
building works of low values to be undertaken by term
contractors obviating the needs for documentation,
tender invitation and evaluations which could be quite
time-consuming.
Bills of quantities (BQ)
BQ is a document quantifying the works with
detailed descriptions transferred by the QS from
drawings/information provided by the architects,
structural engineers or building services engineers.
The units of measurement, the amount of
information given and the items which are deemed
to have been included are governed by some
mutually accepted standard rulings stipulated in
the contract. Each schedule or bill has money
columns ready for pricing out. It serves as a vehicle
for inviting tenders and an indispensable tool for
controlling cost during and after construction.
Cut and shuffle method
Before the introduction of computer for preparing
BQ, QS in ArchSD usually adopted the cut and shuffle
method. It was considered to be the most effective
means to ensure the quantities so arrived at are an
indication of what should be done by the contractor.
For the cut and shuffle method, the QS would take
off the dimensions from the drawings; entered the
descriptions and dimensions onto the specially-ruled
carbon back cut-and-shuffle papers. These papers
resembled normal measurement sheets but they
were perforated and could be ripped apart transversely
into 3 equal slips. The carbon copies were kept for
future reference purpose and they would be kept
intact. To save times and efforts, full description of the
items would be written on the slips which were
supposed to be the “master” and all other or “slave”
slips would contain the abbreviations only.
During the working-up stage, the taker-off’s
calculations would be checked, the volume and the
area, etc. of the works items worked out or squared
and totals cast up.
The cut-and-shuffle papers would then be cut
into slips. Slips having same description would be
grouped together with the master slip placed on
the top. The quantities of associated slave slips
would be further summed up and brought forward
to the master slip to arrive at a total quantity. Finally
the QS would sort the slips into desired order ready
for the typing of the bill.
The method was very labour-intensive. All
Preparation ofBills of Quantities
15
dimensions booking, mathematical calculation and
checking, typing out bill pages and proof-reading
were carried out manually. There was a supportive
pool comprising both typists and machine operators
to assist the QS. In the old days when staff resources
were relatively scarce, QS would unavoidably compete
for priority of services and preferential assistance
from the pool if several projects were to meet deadlines
around the same time.
Computerization
The computer system, RIPAC, was installed in 1989
which took full advantage of automation for the
production of BQ. Inputting, squaring and almost all
working-up processes are now carried out
electronically. Editing and amendments can be easily
performed by the QS with the help of a keyboard.
Other appeals of the system are its multiple sorting
capacities, easy storage and retrieval of data for post-
contract cost administration.
A standard phraseology for BQ description library
was developed. Taker-off could select from the
manual-driven computerized library and build up the
works items normally encountered. Only a few rogue
items would require further details to be input. The
standard phraseology comprising a structured set of
4-level divisions of descriptions was complied with
the 3rd Edition of the Hong Kong Standard Method of
Measurement for Building Works and ArchSD General
Specification for Building. It was published in 1995 to
raise the awareness of the industry to the ways of
describing works items in the ArchSD-prepared BQ.
The Hong Kong Standard Method of
Measurement (HKSMM)
At the time when no standard rules of measurement
were in place, English Standard Method of
Measurement had been followed in a general sense
in government and private practice and adapted
mainly by merging most labour items into their relative
parent items. The adaptation, however, had been
totally arbitrary depending on the discretion or
inclination of the individual QS and consequently
caused confusions. Prompted by the BQ-conscious
sent iment and to ensure consistency of
measurements, the Standing Joint Committee for the
Hong Kong Standard Method of Measurement was
established in 1960 to produce a uniform and local
set of rulings for use by the industry. The committee
comprised representatives from surveyors and
contractors. It also had the duties of answering
queries from the industry in relation to the interpretation
Stanley Municipal Services Building
16
first edition. Being the major user of the document,
QSB has been active in developing the new standard
phraseology for BQ descriptions with a view to adopt
the new edition as soon as practicable.
Outlook
There have been many discussions recently over the
procurement of capital public works by way of public
private partnership approach. Currently, more public
building projects are constructed under the design
and build contractual arrangement instead of the
traditional one based on BQ. As the procurement
strategy changes, so must the contract documents;
BQ may not be as fashionable as it was. However,
transplanted from the British construction industry
and modified progressively to suit local conditions,
BQ is still working as the welcomed tool on account
of its fairness between the contracting parties. Its
importance and usefulness have been widely
comprehended ever since it is introduced.
Being a building works agent for the government,
ArchSD will continue to assist formulating new or
modifying old standards to suit the changing economy
and government policy. ArchSD shall take the lead by
setting out bench marks for the industry to follow. At
the same time, we shall apportion equitably the risk in
respect of quantities/measurements between the
government and the contractors.
of these rulings and considering revisions that might
be advisable. The Government Quantity Surveyors at
various times (now the post of Assistant Director/
Quantity Surveying of ArchSD) had been actively
involved in this committee since its inception by
reason of their expert knowledge and long experience
in dealing with local contractors in respect of
measurement and contractual matters. They have
been contributing their times and valuable expertise
ever since to bring the document to its present stage.
Through the committee’s determined effort, the
third edition of HKSMM released in 1979 had eventually
found its way into the public and private version of
conditions of contract for building works. The effect of
its incorporation into the contract conditions was of
significance. The works which should have been
measured in the BQ according to the rules in the
HKSMM but were found missing or where insufficient
quantities were stated, the shortfalls should be treated
as deemed variations adjustable under the contract.
Since the accuracy of quantities in BQ was somewhat
guaranteed, contractor’s risk in respect of measurement
errors would be thrown back to the client.
The new fourth edition of HKSMM developed by
the committee under the auspice of the Hong Kong
Institute of Surveyors was released in 2005. It contains
sections for building services works which were
previously published as a separated document in its
Primary school in Yau Tong
17
The use of bills of quantities can help improve cost
control. It also promotes risk management in
construction contract as it enables fair sharing and
allocation of risks between the employer of the contract
and the contractor.
The use of bills of quantities for building services
(BS/BQ) work was a new initiative of ArchSD. ArchSD
had done a lot in promoting the development and
implementation of bills of quantities for building services
work in the department and also the construction industry.
The contribution of ArchSD in promoting BS/BQ
dated back as early as 1984 when ArchSD encouraged
the Royal Institution of Chartered Surveyors (HK
Branch) to set up a sub-committee to draft a Building
Services Standard Method of Measurement
(HKSMMBS) for the local construction industry. After
years of discussions, consultations and refinement,
the HKSMMBS was finally launched in May 1993.
In August 1993, ArchSD Management had
committed to the implementation of this new contract
procurement initiative. A dedicated staff team was
formed to be responsible for the development and
implementation of BS/BQ in ArchSD.
As a start, 3 projects had been selected as a pilot
scheme on the use of BS/BQ. These pilot projects
had been successfully completed and the pilot study
proved that it was worthwhile to promote the use of
BS/BQ in ArchSD. The feedback and experience
gained from the pilot study had provided a strong
base for ArchSD to develop a standard BS/BQ Model
Bills. In early 1995, ArchSD had successfully
established a standard model of BS/BQ in the
computerised QUEST system.
The success in the development of a standard BS/
BQ Model Bills was an important milestone in ArchSD’s
implementation of BS/BQ as since then ArchSD
Management had firmed up its policy on the use of
BS/BQ as a norm in the procurement of BS work of
projects.
The development work on BS/BQ in ArchSD has
never ended with the success in the implementation
of BS/BQ Model Bills. In 1999, a BS Standard
Phraseology Library was successfully developed,
which made the BS/BQ work more easy and efficient.
In early 2000, based on the BS/BQ Model Bills, a
computerised BS cost information system was
established in the QUEST system. The computerised
BS cost information system enabled ArchSD to build
up a cost library on BS works, which should be very
useful for project staff in the preparation of BS cost
estimate and cost plan.
In 2001, ArchSD had also actively participated in a
review of the HKSMMBS organised by the Hong
Kong Institute of Surveyors (HKIS). ArchSD had
provided a lot of feedback/suggestions to the Review
Committee on the practical applications of the
HKSMMBS. After extensive consultations and
discussions among the various professional bodies
Development in the Measurementof Building Services Installations
18
and construction associations in the local construction
industry, HKSMM4 (combined Building Works &
Building Services) was finally launched by HKIS in
November 2005. This new Standard Method of
Measurement would be adopted for use by ArchSD
in due course.
Personnel competent on BS/BQ work are scarce
in the local construction industry. As a result, training
forms an important part of ArchSD’s strategy in
promoting the use of BS/BQ. A lot of training in the
form of briefing sessions, hands-on workshops and
seminars had been organised to develop staff in
taking up BS/BQ work. Besides, ArchSD had also
helped the local industry in developing personnel in
BS/BQ work by organising external seminars and
courses in collaboration with professional institutions
and local universities. Through these training activities
and years of application of BS/BQ, ArchSD had built
up a valuable asset of staff and expertise competent
on BS/BQ work.
With the increasing demand for sustainability,
energy conservation and intelligence/automation in
the design of modern buildings, the need for good
cost control on building services work should become
increasingly apparent and the trend on the use of BS/
BQ in ArchSD would continue. However, it is expected
that the work on BS/BQ will be very challenging as
building services installations of modern buildings are
going to be increasingly complex and involving
advanced technology/specialist type applications.
The technique and skill of the staff responsible for BS/
BQ work should be enhanced in parallel with the
development of new technology applied in building
services installations.
Hong Kong Science Park
19
As part of the concerted cost control effort, the
cost implication of any variation prior to its issuance
will be made known to the initiator, who will seek
approval in accordance with the relevant procedures
and apply for supplementary funding should the
contract sum be exceeded.
In this regard, the QS always work closely with the
other project team members and tender timely advice
to them to arrive at value for money design solutions.
Cost reporting
Government’s procedures forbid an officer, without
justifications, from committing expenditure of
government funds before approval. To give project
team members a clear picture of the financial status
of the project, the QS will regularly issue financial
statements, usually on a monthly basis, to show the
overall project financial status with cost implications
of the issued and proposed variations, adjustment of
provisional quantities and provisional sums to date as
well as anticipated prolongation/disruption claims to
facilitate the project team to deliver the project within
the cost limit.
When it is apparent that variations and/or other
events would lead to exhaustion of the contract
contingency and the contract sum being exceeded,
the QS will alert the project team to determine whether
it is necessary to apply for supplementary funding
and/or to adopt cost saving measures.
Recently, ArchSD has adopted a web based
Contract Variation Management System to monitor
the issuance of variations from initiation to approval
Introduction
The post contract stage of a building contract starts
immediately after the contract is awarded. As a
member of the project team, a quantity surveyor (QS)
works closely with other team members to ensure the
project will be delivered in accordance with the terms
and conditions of the contact and within the cost limit.
The post contract quantity surveying services are:
cost control and monitoring, certification of payments
to the contractor and valuation of variations and
settlement of the final accounts.
Cost control and monitoring
There are two objectives for cost control and
monitoring. The first one is to estimate the implications
of the proposed variations and the second one is to
report the accumulated implications of variations and
events, which have bearings on the final contract
sum. A good cost control and monitoring system will
enable the client to have a full picture of his expenditures
and at the same time alert him to any overrun of the
budget.
Contract variation estimate
Increased project complexity, tight programme in
pre-contract stage, high expectation from the end
users and the need to accommodate the last minute
requirement render changes during the construction
stage unavoidable. These changes should be reported
as they arise and their effects monitored such that the
project can be delivered without exceeding the
approved budget.
Post Contract Administrationand Final Accounts
20
by electronic means. This system will enable the
project team to access updated project financial
information.
Certification of payments
A contractor will submit its payment application by the
end of each period of interim certificate stated in the
Appendix to the Form of Tender. Within 21 days of
receipt of the contractor’s application, the QS shall
value and certify payment in respect of the estimated
value of the permanent works executed, temporary
works or preliminary items, materials for inclusion
in the permanent works not prematurely delivered
to the site, sums payable to the nominated
subcontractors, variations completed to date,
adjustment of fluctuation in materials prices and
labour wage rates, after taking into account of any
works found unacceptable by the architect.
In response to government’s initiative of helping
local business, QSB now adopts an administrative
target of certifying payments within 15 calendar
days from the date of receipt of contractor’s
applications.
If there are specialist subcontractors in
the contract, the QS issues separate
payment notifications to advise these specialist
subcontractors the certified percentage of their work
done included in the payment certificates.
Milestone approach of payment is sometimes
adopted in contracts which links interim payments to
prescribed milestones for the completion of significant
stages of the works. This approach has been adopted
in standard schools projects and design and build
contracts. Unlike traditional valuation method, the QS
certifies payment based on milestones/payment
schedule included in the contract and achievement of
these milestones by the contractor. This milestone
payment method provides incentives for contractors
to complete the works earlier in order to get paid.
While less time is spent on the interim valuation
process, cash flow prediction is also enhanced by the
use of this payment method.
Contractual advice
The QS will provide contractual advice to project
team members to achieve a smooth running contract.
Usually team members seek QS’s view on issues like
whether an item has been included in the rate or not,
whether certain provisions in the General Conditions
of Contracts and/or Special Conditions of Contract
Tai Po Waterfront Park
21
the contractor are facts of life and in most cases
inevitable. The majority of these disparities are due to
differences in valuation concepts rather than difference
in measurement of quantities. To reconcile disparities,
the QS would proactively establish dialogue with the
contractor as early as practicable to promote
understanding and, if possible, seek consensus in the
disagreements before escalating into disputes.
Good negotiation skills, ability to maintain
professionalism, objectivity, integrity and tactfulness
working under pressure are essential elements in
gaining cooperation from the contractor.
Final accounts
ArchSD makes every effort to achieve settlement of
the final accounts within the measurement period. To
this end, the QSB final account-monitoring framework
stipulates final accounts settlement shall be completed
in three dist inct stages start ing from the
commencement of the measurement period. Progress
of achieving each stage is closely monitored and
recorded.
The final accounts process actually starts at the
commencement of the post contract stage. QS liaises
with the project team and the contractors to collect
and collate information required for valuation of
variations and, where practicable, to agree the
valuation as soon as these variations are issued.
Outlook
QSB endeavours to take the lead in the field of
developing new framework to improve its post contract
service. Drawing from experience and feedback from
front line staff, means to improve the contractual
framework are explored and operating procedures
are under constant review. At present, the branch is
exploring means to expedite final accounts and claims
settlement, investigation into possible enhancement
to the cost library to facilitate post contract cost
control and cash flow forecast/monitoring, as well as
reviewing best practices to minimize/mitigate
contractual claims.
are relevant to a given situation, whether contractor’s
claim on extension of time (EOT) is admissible. However
for more complicated contractual/legal issues, advice
from the Contract Advisory Unit and/or Legal Advisory
Division (LAD) of ETWB will be sought.
Building services installations
QSB has since 1994 extended the post contract
quantity surveying services to building services
installations the value of which, in complex projects,
could account for up to 50% of the contract sum.
Most of the QSB staffs are well conversant with
building services technology and, in the course of
providing cost control service, integrate the quantity
surveying skills with knowledge of various building
services systems.
Implementation of various government initiatives
With increase of public concern on issues like site
safety, environmental protection, management of
subcontractors, ETWB has promulgated a number of
measures to provide incentive for contractors to
improve their performance in these areas.
Provisions for payment to comply with these
initiatives are included in the contracts and the QS will
verify whether the contractor has complied with these
obligations before certifying payments. QSB, in a
way, actively contributes to the implementation of
these initiatives.
Valuation of variations
Conditions of contract stipulates “Surveyor shall
determine the sum which in his opinion shall be added
to or deducted from the contract sum as a result of an
order given by the architect...” in accordance with the
prescribed rules and to fix rates when the contractor
and surveyor fail to reach agreement.
In plain words, it is the QS’s role to translate the
variations into monetary terms in accordance with the
terms and conditions of the contracts and to seek
agreement with the contractor.
Disparities between the assessment of the QS and
22
Term contracts are contracts with fixed contract
period during which works or services are ordered
through the issue of Works Orders (for works contracts)
or Letters of Appointment (for consultancy
agreements). There are different types of term contract
handled and processed through the Quantity
Surveying Branch to meet different project
requirements.
Maintenance term contracts
The works to be executed under this type of term
contract include alterations, additions, maintenance,
convers ion, rep lacement , re furb ishment ,
reinstatement, improvement and minor fitting out
works. Works are re-measured on completion based
on schedule of rates. In 2006, ten maintenance term
contracts with duration of three years each have been
awarded. Number of works orders issued in the
financial year 05/06 is about 333,800 amounting to
approximately HK$1.5 billion.
Design and build minor works term contracts
The works to be executed under this type of term
contract include site investigation, feasibility study,
design, supply, manufacture, delivery, site installation,
demolition, construction, testing, commissioning,
operation and maintenance of minor works. Works
are re-measured on completion based on schedule
of rates and the contractor is responsible for the
design of the works. In 2006, there is one design and
build minor works term contract covering the whole
territory of the HKSAR. About 400 works orders were
issued in the financial year 05/06 amounting to
approximately HK$410 million.
Design and build fitting-out term contracts
Currently, there are 3 term contractors undertaking
the design and build fitting-out works. These
contractors are in the List of Approved Public Works
Contractors under the category of Turn-key Interior
Design and Fitting-out Works. These contracts have
their own schedule of rates which comprise composite
works items. In the financial year 05/06 about 190
works orders were issued amounting to approximately
HK$185 million.
Minor works term contracts
This type of term contract covers both building and
building services works carried out through the issue
of works orders. Each term contract has a 3-year
contract duration with total value around $300 million.
It covers a wide range of projects like parks, public
toilets, improvement works etc.
Soft landscape term contracts
This type of term contract covers soft landscape
works with total estimated value for each term of a
3-year contract of around HK$20 million. The size of
individual works order varies, ranging from a few
plotted plants to extensive soft landscape works of
Term Contracts
23
estimated value over HK$2 million. Examples of these
works include the Hong Kong Flower Show at Victoria
Park, soft landscape works at various parks/local
open spaces, recreation grounds, etc.
Term contracts for ground investigation
and laboratory testing
This type of term contract covers ground investigation
and laboratory testing works within a 2-year contract
duration. The data so collected provide important
information for the design teams of the ArchSD in
planning for the new projects. Quantity Surveying
Branch provides pre-contract services of the term
contract. Post-contract works are handled by the
Structural Engineering Branch.
Term consultancies
Other than procurement of construction works through
term contracts, the ArchSD also procures consultant
services through term consultancies.
Term consultancy operates in a way very similar to
a term contract. A QS consultant appointed under a
term consultancy is required to provide QS services
on a pre-estimated number of projects or value of
projects during the term of the consultancy agreement,
which normally covers a period of 2 to 3 years.
The types of project in a term consultancy are
minor building construction works covering, new
buildings, demolition, piling and/or foundation,
geotechnical engineering works including slope
upgrading and improvement, building services
installation, drainage, external works, landscaping,
and alteration. The value of each minor works project
normally will not exceed HK$15 million. A letter of
appointment is issued for each project.
Recently awarded term consultancy also covers
capital works projects which are uncertain in scope
but urgent in nature. The value of each capital works
contract normally exceeds HK$15 million, but not
HK$100 million. Similarly, a letter of appointment is
issued for each project. The appointment of consultant
through term consultancy is likely to continue in view
of the anticipated increase in volume of minor works
projects in the coming years.
Outlook
It is anticipated that the proportion of services
outsourced to consultants will increase in the future.
To ensure the quality of service is up to the expected
standard, QSB will strengthen its quality control
checking mechanism. QSB will also streamline the
procurement strategies. For the design and build
fitting out term contract, tender assessment by the
formula approach and the common Schedule of
Rates for Building Works would be adopted. For the
ground investigation and laboratory testing term
contract, consideration is being given for increasing
the contract duration to 3 years. QSB will also explore
other procurement strategies such as PPP type of
term contract for slope maintenance.
Po Kong Village Road school village
24
Maintenance term contracts are re-measurement
contracts. Under the terms of the contract,
contractors are responsible for the measurement of
the works. These measurements are submitted in the
form of dimension books for our checking. Due to the
large number of works orders, a provision known as
“batching and sampling” has been adopted to speed
up the finalization process. Works orders are grouped
into different “batches”; from which random “samples”
are selected for subsequent detail checking. The
aggregate percentage error found in the sampled
works orders will be applied to all other works orders
in the same batch. This provision has been successfully
operated for more than 30 years and has become a
significant feature of our maintenance term contracts.
With the launch of the ACTION II system in May
2006, the accounts finalization processes for ArchSD
Property Services Branch term contracts are now
fully computerized. Dimension books are submitted
by contractors through the Internet, adjustments are
keyed in directly onto personal digital assistants during
site check, and payment certificates are signed
electronically with smart cards. Works orders checking
are now automatically assigned to individual staff by
the system. With these new tools, we can manage our
term contracts more effectively and efficiently.
Apart from having a separate form of General
Conditions of Contract, term contracts in many ways,
The Operation ofMaintenance Term Contracts
Kowloon CityMagistracyBuilding
25
differ from a ‘normal’ building contract and require a
different focus on contract administration from a QS
perspective.
The total number of works orders issued under all
ten maintenance term contracts over the entire three
years term may well exceed 1,000,000. Although
over 90% of these works orders are valued under
HK$1500, each of them has to be finalized individually.
A large portion of the remaining works orders would
involve other post contract processes such as interim
payments, variations, extension of time, liquidated
damages etc. similar to a ‘normal’ building contract.
In addition, there are also provisions such as “claw
back” of interim payment for non-submission of
dimension books, and “batching and sampling”
checking of dimension books that are unique to
maintenance term contracts. When problems occur,
they need to be addressed immediately since a large
number of works orders are issued every day. Whilst
dimension books checking and assessment of star
rates are daily routines, we are committed to meeting
expenditure targets and early finalization of accounts.
Unlike other one-off construction procurement,
term contracts are catered for continuous
requirements. Prior to inviting tenders for new term
contract, a complete review of the current procurement
strategies and contract administration would be held
internally. These strategies may include tender
evaluation criteria, grouping and pairing of term
contracts, restrictions on tender award, and staggering
of commencement of different types of term contracts.
It is also the time for revising the Employer’s
Requirements, based on experience gained from the
previous term contracts.
On the resources side, given the large volume of
works orders involved, a large pool of technical
officers is required for dimension books checking and
“quality control checking”. Motivating a large pool of
staff is a constant challenge.
Recently, consultants have been engaged to take
up some of the accounts checking. With outsourcing
of the services, we expect the time for dimension
book finalization will be shortened. Additional human
resources will be re-deployed to conduct more “quality
control checking” on work by in-house staff and
consultants to ensure that the quality of services is up
to standard.
Hammer Hill Road Leisure Pool
26
for term contracts. There is also a GCC for Design and
Build contracts, which is used in procuring work
services adopting the contractor’s design and build
approach regardless of the types of works. A set of
GCC was also prepared in the past for the Airport
Core Program projects and is no longer used after the
completion of the projects. Some special features of
this GCC, however, have been transformed into
Special Conditions of Contract (SCC) for use in Mega
Project Contracts (ETWB TC No. 26/2002 refers).
The current GCC are the updated versions of the
1985 editions, which were based on and evolved
from the ICE Conditions of Contract prevailing at that
time. SCC for any newly introduced or changes in
policy requirements are issued from time to time by
ETWB to supplement the GCC. At the start of a new
year, a TC on Library of Standard SCC is generally
compiled and issued by ETWB to summarize and
update all the SCC previously issued.
Overall review of the GCC
There were problems encountered in the use of the
GCC since the promulgation of the 1985 editions.
Only when several controversial disputes on risk
The origin
The Stores and Procurement Regulations (SPR)
regulate matters relating to the management and
procurement of government stores and services.
They are applicable to all public officers. SPR345 is on
Tender Documents. It requires that departments
should use the standard forms of Articles of Agreement
and General Conditions of Contract (GCC) for inviting
tenders for various types of works contracts. Any
deviation from this regulation should be consulted
with the Department of Justice and approved by the
relevant policy bureau and Financial Services and the
Treasury Bureau.
The GCC are prepared by the Environment,
Transport and Works Bureau (ETWB). They aim at
achieving the following objectives:
(A) promoting the public interest in receiving the
best value for money in the procurement of
public works;
(B) an optimal risk allocation to minimize the cost
if risk materializes;
(C) minimizing the total cost to the community, not
to either of the contracting parties; and
(D) the best international practice.
The GCC are promulgated by ETWB in the form of
Technical Circulars (TC). There are three sets of GCC
available for use in building works, civil engineering
works, and electrical and mechanical engineering
works respectively. Each set has two versions: one
for the one-off capital works contracts and the other
General Conditions of Contract
27
responsibility had surfaced in some major public
works projects in 1996 and after, it was decided to
engage an internationally renowned expert to review
the identification and management of risks in the
GCC. In March 1998, Jesse Grove, an attorney from
New York, was appointed to carry out a fundamental
review of the GCC and in particular the allocation and
management of risks and to make recommendations
on any modifications necessary in the interests of
public finance based on international best practice.
Jesse Grove submitted his report in September
1998. He advised that the risk allocation in the GCC
was basically fair and congruent with the risk allocation
practice in other international forms. Having said that,
however, he recommended the government to take
back the risk allocated to the contractor in the GCC
on some controversial issues and suggested
government making provisions in the GCC to simplify
and tighten the variation and claim assessment and
dispute resolution process.
Jesse Grove’s report
Jesse Grove made the following recommendations:
(A) General issues
a. Employer to take back some powers of the
Architect;
b. lump sum contracts instead of Re-
measurement contracts;
c. breach of contract by Employer is subject to
valuation in accordance with contract terms;
d. right for Employer to terminate for convenience;
e. right for Employer to accelerate the works; and
f. avoid “catch-all” clauses as grounds for
extension of time.
(B) Specific issues
a. Employer should accept the r isk of
unforeseeable physical conditions;
b. Employer should retain the “impossibility” clause;
c. Employer should require mandatory all risk
insurance;
d. Employer should accept the risk of third party
interference;
e. Employer should accept the risk of changes in
law;
f. Employer should let market forces operate
regarding sub-contractor payment;
g. failure of notice should give rise to damages,
not forfeiture; and
h. Employer should use dispute resolution
advisers widely.
(C) Variations should be simplified and tightened by:
a. lump sum forward pricing of variation works;
b. Contractor’s alternative design during the
course of the works;
c. Contractor’s entitlement to profit in claim
settlement;
Lai King Hospital
28
d. Employer to fix the rate of head office overhead
recovery;
e. Employer to fix the rate for profit mark up;
f. Contractor to escrow his estimating file as
reference for dispute;
g. global claim should be contractually prohibited;
and
h. l iquidated damages for performance
deficiencies.
The changes recommended and suggested were
so radical that they had attracted critical examination
and heated debate both within Government and
among stakeholders in the industry.
Wind of changes
While the debate on “whose risks and who pays” was
in full swing in the construction industry in Hong
Kong, the construction industry in the UK, Australia
and other countries over the world had also gone
through a considerable change in the procurement
and contractual arrangement over the years. This
wind of changes came to Hong Kong just in good
time when Government was pushing ahead its
public sector reform programme in which it was
promoting its financial and management philosophy
of gett ing pr ivate sector involvement, i .e.
outsourcing and public private partnership, in
delivering services to the public.
In April 2000, the Chief Executive appointed the
Construction Industry Review Committee (CIRC) to:
(A) examine the current state of the construction
industry in respect of quality, quantity,
environmental friendliness, manpower, safety
and supervision;
(B) identify specific actions and good practices to
improve the efficiency and cost-effectiveness
of local construction in terms of quality,
customer satisfaction, timeliness and delivery
and value for money; and
(C) advise on an order of priority for implementation.
The CIRC submitted a report “Construct for
Excellence” to the Chief Executive on January 18,
2001 ( the CIRC Report ) conta in ing 109
recommendations.
The CIRC Report
The CIRC Report’s recommendations had covered
changes to every aspect of the construction industry,
which included:
(A) Fostering a quality culture, such as:
a. knowledgeable and involved client;
b. importance of the planning and design
stages;
c. realistic project programming;
d. clear accountability industry and project
participants;
e. regulating subcontracting practice and
improving subcontractor’s performance;
Tseung Kwan O Swimming Pool Complex, Library, Indoor Recreation Centre and District Open Space
29
f. quality site supervision requirements and quality
assurance; and
g. raising the quality standard of renovation
contractors and decorators.
(B) Achieving value in construction procurement,
such as:
a. promoting and developing guidance notes on
systematic risk management;
b. reconsidering recommendations in Jesse
Grove’s Report to achieve a more equitable
allocation of risks between the contracting
parties;
c. contractual provisions for proactive and
collaborative dispute resolution methods;
d. wider adoption of a partnering approach;
e. considering integration of a partnering
approach into a new form of contract;
f. wider adoption of the milestone payments
approach;
g. considering the merits and need of enacting
security of payment legislation; and
h. considering wider adoption of alternative
procurement approaches such as target cost
contracting.
(C) Nurturing a professional workforce, such as:
a. mandatory participation in continuing
professional development activities;
b. mandatory supervisors registration scheme;
c. implement construction worker registration
scheme;
d. foster an ethical culture; and
e. wider use of direct labour through contractual
arrangements.
(D) An efficient, innovative and productive industry,
such as:
a. process re-engineering to achieve better
integration;
b. wider use of standardization in component
design and processes;
c. wider use of prefabrication;
d. wider application of information technology in
project implementation;
e. investment in construction-related research
and development;
f. facilitating regulators;
g. more reliable records of underground utilities;
h. lowering the cost of ready-mixed concrete; and
i. export potential of the construction industry.
(E) A safer workplace and an environmentally
responsible industry, such as:
a. incorporating safety planning and management
system in public works projects;
b. strengthen safety training, promotion and
performance;
c. practising the concept of sustainable
development and sustainable construction;
30
d. encouraging green designs, environmentally
friendly designs, energy efficient designs;
e. practising the concept of life-cycle costing;
f. abating environmental nuisance during
construction; and
g. wider use of recycled materials and minimize
the generation of demolition materials.
On September 28, 2001, the Provisional
Construction Industry Co-ordination Board (PCICB)
was set up and one of its Terms of Reference was to
consider and take forward the recommendations in
the CIRC Report. Unlike Jesse Grove Report, there
was no time allowed for further debate on the CIRC
recommendations. A tight time frame, ranging from
“at once” to “5 years”, was set for implementation of
the recommendations.
The implementation
Five years have passed since the release of the CIRC
Report. What have been done by ETWB, particularly
what changes have been made on the GCC due to
the impact of the CIRC recommendations?
The most obvious phenomenon is the greater
numbers of TC issued introducing contract
requirements on site safety and environmental
management, construction and demolition material
disposal, and site cleanliness and tidiness matters.
Carrots and sticks are provided in contracts to
encourage contractors to improve their performance
on these aspects. There are also a considerable
number of TC issued covering additional contract
requirements on sub-contracting arrangement and
management, employment of qualified supervisors,
tradesmen and workers, etc. aiming at improving the
traditional loose and non-value added industrial practice.
On the contractual side, particularly on GCC, it
appears that the following recommendations in Jesse
Grove’s Report have been implemented:
(A) ETWB TC No. 17/2004 – Impossibility/
Unforeseen Ground Condit ions/Uti l i ty
Interference;
(B) ETWB TC No. 23/2004 – Right of the Employer
to Terminate for Convenience and Risk
Allocation with respect to Changes in Law;
(C) ETWB TC No. 25/2004 – Contractor’s Designs
and Alternative Designs.
Changes have also been introduced on a wider
perspective, e.g.
(A) ETWB TC No. 35/2002 – Implementation of
Value Management in Public Works Projects;
(B) ETWB TC No. 32/2004 – Reference Guide on
Selection of Procurement Approach and Project
Delivery Techniques;
(C) ETWB TC No. 6/2005 – Implementation of
Risk Management in Public Works Projects;
(D) ETWB TC No. 7/2005 – Procurement of
Construction Related Insurance;
(E) Documents on Dispute Resolution Adviser
System (1999 Edition);
(F) Guidelines for Milestone Payment for Public
Works Building Projects (August 2002);
(G) Manual for Alternative Dispute Resolution
Techniques (August 2004);
(H) Documents on Voluntary Adjudication System
(2004 Edition);
(I) Administrat ive Handbook on Dispute
Avoidance and Resolution Mechanism
(November 2004); and
(J) Practice Note on Adoption of Non-contractual
Partnering in Public Works Contracts (March 2006).
Looking forward
Apart from some controversial issues, most of the
recommendations made in the CIRC Report have
been implemented. The outstanding issues may drag
on for some time before compromise can be reached
among stakeholders in the industry. The wind of
changes, however, is still blowing though it is now
blowing toward a new direction : a change in delivery
approach, e.g. contractual partnering and private
public partnership. How far it will go is still a question
mark. As quantity surveyors and public officers, we
always face changes and we shall get prepared for
the changes to come!
31
Consultancy Management
Outsourcing policy
It is the ArchSD’s practice to employ consultants to
assist in the design and management of projects. This
happens when certain expertise is not available in-
house, or when there is a shortfall in resources. The
latter has often been the prime reason. For many
years, to cope with the uncertain and fluctuating input
of projects under the Public Works Programme,
outsourcing has proven to be a very effective means
to ensure optimum deployment of resources in the
ArchSD.
With gradual development of the local construction
industry and in line with the HKSAR policy of a leaner
government, the ArchSD has since 2002 embarked
on a re-engineering programme to outsource more
projects to the private sector, while allowing the
department to be more focused on planning and
management related issues.
Selection and appointment of consultants
The considerations involved in the selection of a
consultant are different from those for the selection of
a contractor. In the latter case, the “finished product”
is clearly defined in the tender documents. Once it is
ascertained that the tender specifications are met,
tender prices and the tenderers’ ability to deliver the
product are the only considerations. However, in the
case of consultancy services, the “finished product”
is described in less absolute terms. Consultants are
given the latitude to devise their own methodologies
and solutions to satisfy the “parameters” and
“deliverables” specified in the invitation documents.
A tender should be conducted in a manner, which
fosters open, fair and equitable competition. In the
assessment of submissions for a consultancy, the
following questions should be answered:
(a) Is it the client’s intention to accept a scheme
which is better in terms of quality but costs
more in terms of fees?
(b) By how much should the scheme be considered
better before the client is prepared to pay the
extra incremental cost? Are the consultants
bidding for the consultancy made aware of this
margin?
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(c) Is it possible to quantify the extent to which the
quality of a particular proposal is considered
better than the others? Are the consultants
made aware of the methodology or criteria for
quality assessment?
To balance quality and price in the selection of
consultants, a two-envelope system is adopted. The
technical proposals are first assessed before the fee
envelopes are opened. Based on a formula with pre-
established weightings between technical and fees,
the consultancy submission with the highest combined
score will be selected.
In order that a level playing field is available to all
consultants, the following information will be provided
in the invitation documents:
(a) the client’s requirements in terms of project
objective, scope, programme, services and
deliverables
(b) criteria for assessing the technical aspects of a
consultant’s proposals
(c) weighting of technical : fee (usually 70% : 30%)
Generally, the technical : fee weighting is 70:30.
For complex projects where more emphasis is placed
on the consultants’ technical competence and
experience, a higher weighting, e.g. 80:20, may be
adopted. For more straightforward assignments, the
weighting may be lower, e.g. 60:40.
Relative to the tender stipulations, the consultants
are required to submit their technical and fee proposals
in separate envelopes. The technical proposals are
first assessed by an assessment team prior to the
opening of fee envelopes. Being unaffected by any
prior knowledge about the fee proposals, the
assessment team is allowed to conduct the technical
assessment in an objective manner. Once the technical
assessment is approved by an independent board or
a designated officer (depending on value of the
consultancy), the fee envelopes are then opened. The
overall winner will be determined by applying the pre-
determined technical to fee weighting. The operation
of the two-envelope system is illustrated in the following
flow chart:
Hong Kong Film Archive
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Consultants management
Except in some special circumstances where the
scope of work cannot be pre-determined with
certainty, such as in the case of a term contract, bids
for consultancies are usually invited on a lump sum
basis. As such, it is essential for the consultants to be
clearly advised of the services that they are expected
to provide. Any ambiguity in the consultancy brief may
invite misleading or inadequate proposals from
consultants. It may also result in unnecessary
arguments and claims during execution of the
consultancy.
It is also essential to maintain good communication
with the consultants on the project requirements and
the government’s operational procedures. The
consultants should be properly alerted to any deviation
from quality targets or procedures so that corrective
action can be taken promptly. A performance
management system is in place to monitor and report
on the performance of all consultants. Special attention
is given to those consultancies which unsatisfactory
performance is reported. From a long term perspective,
the consultants are induced to provide good services,
as their respective performance scores are linked to
the marking schemes in the evaluation of bids for
future consultancies.
Conclusion and outlook
Consultants are an extended arm of the ArchSD in the
delivery of services and projects. To be accountable
for the expenditure of public money, selection of
consultants must be based on open, fair and equitable
competition. On the other hand, to achieve value for
money, selection must not be based on cost alone.
Balancing quality and cost requires enormous skills
and experience. The two-envelope system has proven
to be effective in:
(a) providing a platform for open, fair and equitable
competition
(b) providing a systematic and objective
mechanism for balancing quality and cost in
the selection of consultants
(c) facilitating the selection of the most cost-
effective proposals
Through dialogues with the consultants, a
partnering approach is being adopted to ensure value
for money in the selection process and continual
improvement in the consultants’ performance.
34
History
The Grant-in-aid Schools Division was commissioned
during the 1960’s in response to a social need for
more educational facilities. It was apparent that the
government did not have adequate resources to
handle the projects and it was agreed that a limited
policy of funding private schools with public money
could be developed.
The phenomenon of private schooling was not
new to Hong Kong. Religious groups, Kai Fong
societies and vested self-interest groups had for a
long time building schools funded by private donation.
These private schools were also in full control of their
students admission process.
The government’s plan is to provide funding to
private school operating bodies to expand and
upgrade their facilities in order to accommodate the
growing numbers of students.
Initially, the mechanism was simple. The subvented
body would sign a service agreement with Education
Department (ED) and a team of consultants would be
hired to submit a development plan to ED and ArchSD.
The latter would check the design standards and cost
against similar schools built by the government. If
everything was in order, 80% of the capital cost would
be granted to the subvented body.
Upon the acceptance of the funding proposal, the
school operator would be required to fund the other
Subvented Projects
Tseung Kwan O Hospital
35
20% of the building cost. The apportionment of the
80:20 capital cost funding would be based on the
cost of the awarded tenders for the building contracts
and other ancillary contracts. Variations to the building
contract without prior approval would not be allowed
for funding.
The system had become so successful that more
school operating bodies were formed to exploit this
new source of capital funding.
In 1986, the headquarters of ArchSD was relocated
from Murray Building to Queensway Government
Offices. In order to rationalize all subvented projects,
a new division named Subvented Projects Division
(SPD) was formed. A new post, Chief Technical
Advisor/Subvented Project Division (CTA/SP), was
created.
The new division, in addition to subvented schools,
also took on other subvented projects including social
welfare projects, subvented hospitals, clinic and health
facilities, universities, projects under Head 708
entrusted to non-government organizations (NGO)
and the maintenance responsibility for subvented
schools.
In 1991, the Property Services Branch took over
the responsibility for the maintenance of subvented
schools.
The Hospital Authority (HA) was established in
1992 and all subvented and subsidized hospital
projects were gradually passed to HA, but SPD still
retains the maintenance and vote control
responsibility.
Function
SPD aims to maintain fiscal responsibility of the
government using a model of audit control while at the
same time allows flexibilities to the NGO, such as
allowing the employment of their own design team,
the fusion of public funding with private donation to
enhance the scope of the project, etc.
The function of SPD can be divided into the following
two categories:
I. SPD provides advisory function given to
Subventing Departments and Policy Bureaux
on the following:
a) preliminary project proposals and preliminary
estimates.
b) approval of the Technical Feasibility Statement.
c) procurement of consultants fol lowing
government’s best practice.
d) submission to Public Works Sub-Committee
(PWSC) of the Finance Committee to secure
project funding.
e) draft tender documents, lists of tenderers and
pre-tender estimate based on government’s
best practice.
f) approval of tender recommendation based on
government’s best practice.
g) approval of final account and final statement of
actual expenditure.
h) budget reconciliation should the approved
project estimate be exceeded.
II. SPD is also responsible for the procedural
management and financial accountability of
Hong Kong University of Science and Technology
36
Programme, Hospital Redevelopments, Landslip
Prevention Programme and various Entrustment
Projects. The latest record shows that, currently, SPD
is handling approximately 1,090 projects with a total
value of about HK$42 billion. Each year, SPD offers
an average of 12,000 advices generated from
approximately 4,600 requests.
The trends in projects undertaken by SPD are
moving towards larger scale with sophisticated
construction techniques, materials and elaborate
mechanical and electrical service requirements. SPD
has the opportunity to experience unique design and
construction technique, comment on unusual
procurement processes and oversee complex project
disputes. ETWB recent policies supporting energy
efficiency have been studied by NGO with a view to
implement such initiatives in their projects. As a result,
funded institutions constantly test the boundaries of
subventibility with cost in use and sustainability
submissions. Inevitably, SPD will be required to
consider such submissions as relevant in the
establishment of the supporting subvention level.
As a result of the 3+3+4 education reform soon to
be implemented by the government, it is anticipated
that there will be massive developments and changes
in university and school premises to cope with the
new policy. With the wealth of experience and expertise
possessed by the staff of SPD, the department will
strive to provide the best services in facing the
challenges lying ahead.
Special and Entrustment Projects for
Government Accommodation (GA) undertaken
by private development under land sale/grant.
SPD provides advice on the following:-
a) compliance with lease/sale/grant conditions
and technical schedules.
b) rough indication of cost and liquidated damages
amounts for proposed GA.
c) development control and landscape advice to
Lands Department and Planning Department.
d) PWSC Submission.
Staff in SPD comes from a multi-disciplinary
background comprising architects, quantity surveyors,
building services engineers, structural engineers,
geotechnical engineers and landscape architects. It
is quite common that a piece of advice given to a
subventing department or a bureau needs to go
through a lengthy process and requires the
collaborative effort of officers from different
disciplines within SPD. However, as it is the general
policy of the government to speed up the delivery
process of projects undertaken by subvented
organizations, the department is committed to
providing all advice within the number of days as
pledged in the Government Printed Estimates.
Outlook
SPD has good experience in providing advice to
various departments and bureaux in the Social Welfare
Reform Programme, School Improvement
Hong Kong Polytechnic University
37
School Improvement Programme (SIP), involving
a budget expenditure of more than HK$20
billion, was promulgated under the Education
Commission Report No. 5 on ‘Improving the Physical
Environment of Schools’. ArchSD is honoured to take
up this meaningful task of bringing the existing primary,
secondary and special schools to the latest standard.
The Quantity Surveying Branch (QSB) has dedicated
a team of professional and technical staff to this
programme. The programme commenced in the
1990s and is now almost completed.
The improvement works, all carried out in the
existing school premises, are in many ways
constrained by the existing site conditions, which vary
from one school to another. There
are many improvement options,
ranging from addition of new or
annexed blocks, extension on the
roof, to alteration of existing
accommodation. The management
boards of the schools can choose to
implement the programme on their
own or to invite ArchSD to build on
their behalf. Over 90% of the schools
in this programme are built by
ArchSD.
The SIP is targeted for phase
completion. Each phase comprises
a number of packages and each
package embodies groups of
schools. Basically, the design and
supervision duties are outsourced. Consultancy
agreements are awarded in packages and
construction contracts in groups. Totally, there are 5
phases, 34 packages, 157 groups, and 667 feasible
schools. The construction agents comprise 17 design
consultants, 11 quantity surveying consultants and
54 building contractors. Two project management
consultants have also been engaged for the last two
phases.
A concurrent construction programme of a large
number of schools, from feasibility study through
tender procurement to completion, is a feature specific
to the SIP. The huge volume of work has not lowered
our commitments to time, cost and standard.
The School Improvement Programme
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38
Standardization is an effective tool to ensure integrity
and consistency. There are over a hundred
construction contracts in the SIP. An index system
using the “phase-package-group” combination has
been developed to identify each contract. For example,
“343” means “Phase 3 Package 4 Group 3”. The
procurement procedures, as described in the
Integrated Management Manual, are consolidated
into standard checklists to facilitate planning,
monitoring and checking.
Inviting a large number of tenders at the same time
would have strong impact on the construction resource
and competitiveness of the tenders. Tender invitations
have been regulated to two per week and the financial
limits of tenderers are also relaxed to ensure sufficient
competition among them.
SIP tendering programme is extremely tight that
there is almost no float time. The time for each activity
is pre-fixed. Each party is expected to adhere strictly
to the programme. The project team would meet
regularly to exchange views, to review assessment
progress and to resolve problems encountered, all for
the purposes of avoiding time or budget overrun and
ensuring consistency.
SIP tender documents are issued in batches.
Feedbacks from preceding tender exercises are valuable
experience for improvement. This “experience-learning”
is achieved through the process of knowledge
management where the feedbacks are collected,
discussed, assimilated, disseminated and stored. In
addition, regular meetings are held to encourage
collective experience sharing and problem solving.
QSB SIP team is honoured to participate in the SIP
which has provided a better learning environment for
the next generation.
SKH Good Shepherd Primary School
Holy CarpenterSecondary School
39
Dispute Resolution Advisors(DRAd) System
Introduction
In Hong Kong, construction is a tough business since
competition has become so intense that most
contractors are now operating at very low profit
margins. With the increasing demand for better
performance by clients and the demand for non-
technical issues such as socio-economic requirements
and public interest group pressures, construction
projects have become much more complex.
It is believed that many contractors with tight
margins are required to pursue all available means to
protect their bottom line by filing claims whenever
possible and backed up by lawyers and consultants.
It is not uncommon that some projects are eventually
led by claim consultants, lawyers rather than
professional project managers. As this phenomenon
has become more evident, the construction industry
has expressed strong demands for curtailment of
proliferation of avoidable claims and disputes and a
closer involvement and integration of different parties.
Evolution of the dispute resolution
Over the years, the construction industry has dealt
with the resolution of claims and disputes through a
variety of solutions. Arbitration is the most popular
option, as it is less expensive and faster than litigation.
However, it has become increasingly more costly and
time consuming, less satisfactory and adversarial.
Other alternative dispute resolution methods like
mediation have been adopted for public works
contracts in settling disputes. However, the inherent
drawback of mediation is that it could not avoid the
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40
claims and review the status report of outstanding
issues. The parties are therefore led to focus on early
identification and resolution of problems and, in the
event of an impasse, use the DRAd for prompt
assistance.
Less claims and disputes
There has been concern that the active participation
by the DRAd during the construction stage would
encourage contractor’s claims and disputes. This is
not the case. In fact, the presence of the DRAd could
deter the contractor from filing unjustifiable claims
and promote partnering.
One of the major causes of claims and disputes for
a construction project is that problems could not be
identified promptly or have been left unresolved or
unattended for a long period of time so that simple
issues would develop into more difficult and complex
as time progresses. With the active involvement of all
parties and the DRAd, the construction process is so
transparent that neither party could pretend the non-
existence of any potential problems or unresolved
issues.
For the designers, they could not ask the contractor
to proceed with the works without providing him with
sufficient construction details. On the other hand, the
contractor could hardly claim for any discrepancy or
deficiency in the contract documents if he has ample
time and opportunities to disclose the issue. In these
cases, if either party commits any foul playing, the
cooperative working environment would inevitably be
damaged.
Quick settlement is better than no settlement
Win or lose, parties find it more productive to resolve
issues as they arise, so they can progress the
construction without carrying the baggage of
unresolved claims and disputes. The uniqueness of
the DRAd system is the tight time frame that each
party has to observe in the case of a dispute not being
resolved at site level.
The owner of a Group C contractor once said, “The
occurrence of construction claims and disputes.
The development of the Dispute Resolution Advisors
(DRAd) system by the Architectural Services
Department in early 90’s has proved to be very effective
in avoiding claims at their roots and resolving disputes
before they escalate to formal disputes. Experience
has demonstrated that the presence of a mutually
selected, technically knowledgeable and experienced
neutral party tends to promote agreement on problems
that would otherwise proceed to arbitration or litigation.
Prevention is better than cure
The primary benefit of the DRAd system is claim
avoidance. At the beginning of the project, the DRAd
would study the project and the contract documents
thoroughly and identify potential problems so that all
parties would pay particular attention to them. Besides,
the DRAd would establish procedures and
communication channels in order to foster positive
relations, trust and cooperation that are necessary for
the parties to resolve problems efficiently and amicably.
During the regular project meetings, the DRAd
would try to trace any sign of potential problems and
Quarry Bay Park
41
essential thing is that if I know at the very beginning
that I’m losing money in a particular incident, there are
various options for me to recover it during the course
of construction. Once the construction has been
completed, I could do nothing other than claim my
money back from the client.”
Resolve differences in the field
The DRAd is a catalyst which helps the client and the
contractor to more objectively assess their respective
positions. Once an overall picture is shown, both
parties are more than willing to settle any differences
instead of bearing the risk of long delays and substantial
costs in arbitration and litigation.
Basically, if a dispute arises, the DRAd allows both
parties the opportunity to argue or defend their case
in a private and professional manner in the light of the
relevant contract documents, correspondence,
drawings and the facts of the dispute. If it still could
not be resolved at site level, it would quickly be
escalated to the senior management of both parties
who would take a broader view in evaluating their
position.
The concept of right or wrong
The attitude of the parties often plays a critical part in
determining whether a dispute could be resolved
successfully and promptly. For construction
professionals, they are trained to observe well-defined
principles like rules, standards, regulations, guidelines
and procedures. When they are faced with the task of
settling disputes, they have difficulties in accepting
the word “pragmatism” because it seems to be the
opposite of “principled” and that is “unprincipled”.
In fact, pragmatism does not necessarily mean the
absence of principles but can mean the flexible
application of principles. It can also mean a refusal to
be driven into impractical action by rigid principles.
The DRAd, who is a neutral and experienced
professional, could facilitate the parties to look into
the problem from different perspectives and explore
options where both parties could accept.
Way forward
Since the DRAd is a neutral person and acquainted
with the actual construction of the project, we may
consider extending the role of the DRAd to other
administrative functions such as giving opinion on the
report of contractors’ performance.
Further, in order to allow project officers to
appreciate the extent of the use of the DRAd in
resolving claims and disputes for various types of
projects, a database on case studies would be
established for internal reference. Alternatively,
workshop on the use of DRAd would be organised.
Obviously, for confidentiality reasons, only limited
amount of details could be presented.
Pamela Youde NethersoleEastern Hospital
42
One of the duties of the Contract Adviser, as
stipulated in Works Bureau Technical Circular
No. 15/2002, is to conduct technical audits on works
contracts including term contracts and those contracts
handled by consultants. These technical audits are to
be carried out in accordance with the guidelines in the
Technical Audit Manual on Works Contracts (“the
manual”) promulgated under Environment, Transport
and Works Bureau Technical Circular (Works) No. 53/
2002. The history of technical audit can be traced
back to 1974 (PWDTC No. 9/74) when the post of
Contract Adviser was first established.
According to the manual, the objectives of Technical
Audits are as follows:
(a) to check whether laid down procedures/
requirements are strictly complied with by
project staff, and if not, the reasons for non-
compliance;
(b) where appropriate, to check objectively whether
reasonable skill and care have been exercised
by project staff in carrying out their technical
duties; and
(c) where laid down procedures/requirements are
not being followed by project staff, to
recommend measures which may be applied
to prevent future repetition.
The Contract Adviser shall submit quarterly Activity
Reports to the head or deputy head of the department
with copies to ETWB. These reports show the technical
audits carried out during the previous quarter and the
programme for the next quarter. Individual technical
audit reports are to be submitted to the head or
deputy head of the department and copied to the
relevant division heads and ETWB.
Technical audits cover the various stages of a
contract. The pre-contract stage includes the
preparation of the tender documents, the contract
provisions, tendering procedure and tender
assessment. The post-contract stage includes
construction activities, site checking, contract
administration, settlement of final accounts and claims.
At present, there are two Contract Advisers in
Architectural Services Department leading two teams
of auditors each comprises Quantity Surveyors,
Principal Survey Officers and Survey Officers. The
Contract Advisers shall determine which work stage
or stages shall be audited. The audit officers shall
audit the items in accordance with the Checklist in the
Manual and list out the findings in the technical audit
report. The audited items are usually the normal
activities and requirements of a contract such as
tendering procedures, payment certificates, extension
of time, variation orders, completion certificate and
maintenance certificate, etc.
ArchSD has a high regard for technical audits. A
Contract Practice Review Committee (CPRC) is in
place to review the technical reports received and to
oversee the implementation of any follow-up actions
arising from the technical audits. The CPRC is chaired
by the Deputy Director and its duties are as follows:
• fact finding of the non-conformities observed
in the audit reports
• directing the project officers concerned to take
appropriate remedial action
Technical Audits
43
• reporting to AACSB on non-performance of
consultants
• bringing to the attention of all project staff as
general issues of any specific procedural non-
conformities
• recommending issues of technical instructions
to cover anomalies
• clarification of ambiguities and laying down or
revising procedures for proper contract
administration
The Secretary of CPRC shall issue Technical Audit
Corrective Action and Preventive Measures Request
to the appropriate Head of Grade or Project Director
who will propose any required corrective action and
preventive measures and specify a date for its
completion. The whole process of a technical audit
will be completed when CPRC is satisfied with the
proposed corrective action and preventative
measures.
As a project would be audited for different stages
including the final account, it is inevitable that in-
house staff and consultants have to keep the
documents in store for a certain period of time after
completion of works and made ready for audit purpose.
Technical audits have a direct positive effect on the
performance of the contractors, consultants and in-
house staff as well. Other than increasing their
awareness of all laid down procedures and requirements,
feedback from the audit reports would help prevent
recurrence of non-compliances and ultimately improve
the performance standard of all parties.
Audits conducted in the past years have identified
quite a number of ambiguous clauses in our contract
documents, grey areas in our contract requirements,
inconsistent or conflicting procedural requirements in
the Office Quality Manuals, etc. This has assisted the
department in bringing tremendous improvement to
our documents in contract administration.
The technical audit process will also facilitate
government in the implementation of new policies
such as site safety, environmental management,
construction and demolition waste disposal, site
cleanliness, sub-contractor management, energy
efficiency and risk management, etc. Once these
policies have been promulgated, auditors will include
the relevant items in their audit agenda.
The department is fully aware of the positive results
that technical audits bring and is highly supportive of
the system. As the department under the re-
engineering programme has increased the proportion
of the works being outsourced to consultants, it is
anticipated that the technical auditing function will be
strengthened with majority of the audits to be
conducted on projects handled by consultants.
Besides technical audits, procedures and works of
ArchSD are also subject to other audits or checking
by the Commissioner of Audit and ICAC. Quality
audits are also conducted regularly under the
Integrated Management System of the department.
Audits are also conducted on consultancy
agreements. All these audit and checking activities
serve to maintain and enhance the quality standard of
the services rendered by ArchSD. Elevating quality
standard is always a major objective of the department.
Shatin Ma On Shan Swimming Pool
44
(a) Quantity surveying advice
This primarily covers the provision of professional
advice and support on all matters relating to quantity
surveying, including procurement and contract
administration. QSB offers advices to policy bureaux
and government departments on policy and
technical matters relating to building construction
costs and project information. This encompasses
aspects such as costs, cost indices, tender price
indices, estimating, cost planning, cost modeling,
cash flow, budget control and financial reporting of
works contracts.
(b) Contract advice
The spectrum of advisory services under this category
is wide and varied. It generally covers all contractual
matters concerning works contracts and consultancy
agreements. More specifically, these may be related
to contractual disputes, mediation, arbitration, re-
In retrospect
Monitoring and advisory service is one of the key
programme areas undertaken by ArcSD. In unison
with the direction and pace of the department’s
policies and strategies, QSB has strengthened its
resources for this programme area through re-
deployment of staff to cope with the expanded scope
of advisory services it delivers. A dedicated advisory
services division of the branch, headed by Chief
Quantity Surveyor/1, has thus been established for
the purpose. The Subvented Projects Division, led by
Chief Technical Advisor / Subvented Projects (CTA/SP)
and used to be a dedicated division directly accountable
to Deputy Director of Architectural Services on matters
related to subvented projects, has been integrated
with QSB as one of its constituent divisions.
At a glance
Assistant Director (Quantity Surveying) (AD(QS)), as
head of QSB, is vested with authority to give advices
to policy bureaux, other government departments,
quasi-government bodies and subvented
organizations. AD(QS) further delegates the authority
to designated officers who monitor the process and
appoints advising officers to formulate advice. The
advising officers will attend meetings, co-ordinate the
collection of information and prepare documents as
necessary.
Today QSB undertakes to provide a diversified
scope of advisory services, which may be broadly
categorized into the following aspects:
Advisory Services
45
entry in works contracts and consultancy agreements,
liquidation, public complaints and litigation. Technical
audits on works contracts and QS consultancies also
fall within this category.
(c) Management of consultants and Dispute Resolution
Advisors (DRAds)
The branch coordinates, manages and advises on
matters relating to quantity surveying consultancies
procured by the Department. It assists AACSB in the
list management of consultants and selection of
consultants under the categories of Architectural,
Building Services, Structural Engineering, Quantity
Surveying, Landscaping and Building Surveying.
Moreover, it administers the list of Dispute Resolution
Advisors jointly with the Hong Kong Construction
Association and provides advice and support to the
reporting and review system on the performance of
DRAds.
(d) Research and development
QSB takes up a prominent role in providing comments
on, or undertaking the drafting of, revised or new
contract provisions prepared for works contracts and
Hong Kong Wetland Park Phase 2
consultancy agreements to ensure compliance with
any policy changes, enforcement of new statutory
requirements or amendments to existing legislation.
To better serve the needs of QSB in the delivery of its
services, the branch develops and maintains a
database of costs, building cost indices, tender price
indices for building works, standard phraseology for
bills of quantities, model bills of quantities, standard
method of measurement for the building elements,
and a very comprehensive library of standard contract
documents.
(e) Subvented projects advice
The scope of advisory services under this category
covers matters relating to the procedural management
and financial accountability of subvented funding
awarded under capital grant, lottery funding or
donations for building projects authorized through
policy bureaux or government departments, and
other special and entrustment projects for government,
institution or community facilities undertaken by private
development under land sale/grant. Monitoring of
subvented projects and provision of advices are
normally undertaken by advising officers assigned by
46
increasing number of technical audits.
So long as “value for money”, “compliance with
requirements and procedures” and “financial
accountability” continue to be the catchphrases in the
management and administration of works projects
procured by government or other organizations in
receipt of subvented funding, the advisory role of the
department, and hence the complementary roles of
its constituent branches, will look certain to evolve
and grow in all aspects. The prospect of expanding
and further strengthening the provision of advisory
services by QSB appears as bright as ever. The
branch will gauge its available resources to cope with
the prospective demand for its advisory services
when formulating strategies and planning resources.
What is more, it will seize every opportunity to explore
new frontiers of services beneficial to the fulfillment of
purpose for the key programme area of Monitoring
and Advisory Services.
CTA/SP in the Subvented Projects Division which
features multi-disciplinary groups comprising senior
professionals, professionals and technical grade staff.
Looking ahead
There has been a steady increase in the demand for
advisory services undertaken by the department over
the years, which in turn reflects the growing need for
advices provided by QSB spanning all categories
briefly described above. Technical audit on works
contracts, for instance, has been identified as an area
warranting increased allocation of staff resources to
augment the branch’s capacity in dealing with an
Victoria Park
47
Computerization andInformation Management
The good old days
In stark contrast with the contemporary look of our
office at Quantity Surveying Branch (QSB) today, the
picture in mind of a typical scene of our workplace in
the good old days may probably arouse a strong
sense of nostalgia, be it carried with affection or
dislike, among officers who first joined QSB in 1987
or earlier.
It was a fact of life in those days that our officers
were inundated with piles of paperwork ranging from
bills of quantities, specification documents, drawings,
right to technical circulars and instructions of all
descriptions. Documents of various kinds were
presented in hard copy almost without exception.
Exchange of electronic copies of documents was
virtually unheard of. By and large, information
management remained to be an inevitably manual
task for officers generally.
Whether bulky or not, paper documents gradually
mounted up over time and took up considerable desk
and shelf space in officers’ workstations. Rows and
stacks of lever arch files, box files and case files of
paper documents proliferated in the office. Except
those documents filed under QSB core services files
which were kept centrally by QSB General Registry,
filing of all other documents relating to works projects
became the responsibility of the officers. It can be
easily imaged that those who did not have a habit of
filing their documents in good time could find it a
nightmare when attempting to locate and retrieve a
particular document.
Use of information technology in our workplace
– From 1987 to 1999
The rapid advance of information technology (IT) in
the 80’s provided the opportunity of introducing IT to
our QS practice, thereby revolutionizing the then
heavily manual process of preparing and producing
the bills of quantities (BQ). The benefits of improved
Hong Kong Wetland Park Phase 2
48
In 1995, the system was further expanded with a
super-micro UNIX server for running UNIX applications
and a Novell server for running MS-DOS and MS
Windows based applications. The number of terminals
was increased from 92 to 151, with the additional
terminals all being PC-based personal computers.
The use of IT in our workplace brought significant
changes to the ways we used to work. It also made
available various electronic channels of communication
and information exchange, which went far beyond
the telephones, the fax machines or the medium of
people coming face to face with one another. Most
notably, we dispensed with the traditional cut-and-
shuffle method of preparing BQ and made use of the
application software RIPAC to assist us in building up
item descriptions, sequencing bill items in the billing-
up process, and generating BQ in hard copy or to
electronic files in text format. With a substantial
proportion of the manual chores done away with, the
billing-up process became largely automated. This
availed the branch management of the opportunity to
re-focus staff effort on other crucial aspects of our
operational efficiency and cost-effectiveness through
the utilization of IT in our workplace were readily
evident to the branch management.
In December 1987, the initial phase of a
comprehensive computerized Quantity Surveying
system “QUEST” was installed in QSB as a pilot
system. The system comprised a mini-computer
using PICK operating system. The application software
was a quantity surveying package commonly referred
to as RIPAC. It comprised a contract document
production module (RIPAC I), a post contract module
(RIPAC II) and an estimate/cost planning module
(EVEREST).
In 1990, following a successful trial, the pilot system
was expanded with a replacement microcomputer
using the UNIX operating system and networked with
92 text (dumb) terminals and other peripherals. The
application software deployed included RIPAC
together with an additional module, PCMS (Project
Cost Management System). An integrated office
system called UNIPLEX was also implemented for
use in QSB.
North Point Government Offices
49
work in producing the BQ and compiling other parts
of the tender documents, thus enhancing the overall
efficiency and productivity of our staff.
Using UNIPLEX, QSB developed and released its
first online “QS Manual” which included a project
procedures guide known as QSB Quality Manual and
a library of standard contract documents, forms and
letters, instructions, circulars and QS practice notes.
Information on indices, prices and other references
was also made available on this online facility.
Besides having access to the QS Manual, users
could make use of the word processor and
spreadsheet modules of UNIPLEX to prepare
documents in text format. Text documents prepared
or received could be organized and saved in the
server electronically and the file manager module of
UNIPLEX was deployed to assist users in managing
their information. Moreover, users were able to prepare
their schedule measurement of quantities for BQ
using the spreadsheet module of UNIPLEX which
was linked to RIPAC for final BQ production.
Communication and exchange of information
among users within QSB were markedly facilitated
with the use of the electronic mail module of UNIPLEX
and the availability of broadcast messages over the
QUEST system. Above all, the implementation in the
late 90’s of an email system called “Lotus cc:Mail” in
the Department further enhanced the ease of
communication and information exchange among
parties within or outside QSB.
From 2000 till the present
Progressive acquisition of better servers, PCs and
application software to add to the existing inventory
or to replace obsolete ones was made in the ensuing
years to cope with increased workload, growing
demand from users, and logistic improvement to the
system. Just before the year 2000, the QUEST system
underwent a thorough physical checkup by way of a
Y2K compliance exercise and enhancement was
introduced to the system to ensure that it was Y2K
compliant. This was then followed by a major QUEST
Upgrade exercise in 2002 to bring forth a significant
enhancement to the system covering servers, PCs,
and application software comprehensively. To ensure
compliance with government’s policy in electronic
tendering, a separate exercise was also carried out in
2002 to procure an application entitled ArchSD E-
Tendering System, which has become a major
complement to RIPAC.
Sai Kung Waterfront Park
50
Today the QUEST system has on board over 200
PCs networked to several high-performance servers.
The UNIPLEX application software has served its
honour gloriously and has been replaced with
contemporary and popular software products like
Microsoft Word, Microsoft Excel, Adobe Acrobat,
etc. With improved bandwidth in the cabling network,
an Intranet for QSB was developed and launched in
March 2002. The QSB Intranet, built upon the success
of the online “QS Manual”, is a central repository of
information on QS practice and procedures which is
accessible to users in QSB as well as those in other
Branches of the Department. It has succeeded the
online “QS Manual” and now contains a much wider
spectrum of information, ranging from a very
comprehensive l ibrary of standard contract
documents, forms and letters, to a rich database of
project cost data and tender information. The classic
“Message of the Day” corner on QSB Intranet, a web
version based on the mode of broadcast messages
via the UNIX platform, is arguably a must for all QSB
users to visit as they logon to the QUEST system.
Equipped with powerful servers, PCs and a robust
network, users have been able to manage their
information with considerable ease and can have
different options at their disposal. Electronic
documents in various file formats, for instance, may
be filed locally in users’ PCs, archived under designated
folders in the ArchSD Network Folder System, or even
stored in removable media such as CD, DVD or
memory cards. Hard copies of the same documents,
if rendered superfluous, can be disposed of in an
environmentally friendly manner.
Popular e-mail applications like web mail, Notes
Mail, Outlook Express, etc., have been adopted for
use in the Department and the old e-mail applications
UNIPLEX Mail and Lotus cc:Mail have become
obsolete. What is more, users now have ready access
to both the Intranets and the Internet, which implies
an immeasurable amount of useful information virtually
at their fingertips.
Above all, the implementation of the Branch
Integrated Management System procedures on
document and data control has laid down a sound
framework for managing information in QSB.
Accessibility of e-mail and availability of various services
over the computer network have meant a tremendous
impetus to our endeavour in aiding and promoting
communication and information exchange.
Information management has been made much more
convenient and user-friendly. This would not have
been possible without a sound IT infrastructure of
modern and efficient computer hardware and network
firmly in place in both QSB and the department.
Looking ahead
The use of IT in our workplace at QSB will continue to
be conducted in accordance with the policies and
strategies set by the Policy Management Committee
(PAC) of the department and follow the procedural
directions given by the Departmental Information
System Management Committee (DISMC), the
executive arm of PAC on IT matters.
Information management will certainly be further
facilitated with the forthcoming launch of the electronic
Document Management System which wil l
encompass all branches in the department. When it
comes to considering prospective deployment of
resources in IT within QSB, the Branch management
will continue to attach priority to serving its operational
needs and enhancing the quality and standard of
services it delivers.
51
Training is an effective means of uplifting the
quality of human resources for the delivery of
services in line with the business goals of an
organization. To supplement the training provided or
organized by ArchSD and CSTDI on computer
technology, safety, national studies, general
management, language and communication, quality
and environmental management (Q&EM), QSB has
long developed training plans to enable its staff to
acquire and update job-specific and profession-related
knowledge and skills to meet operational needs and
fast evolving circumstances. Another objective of the
plans is to enable professional staff to achieve
continued professional development (CPD) as required
by professional institutions.
Over the past 20 years, QSB has gone through
many drastic changes. Labour-intensive operation
such as typing, squaring up dimensions in the
documentation preparation stage has now been
performed by electronic gears. On the other hand,
measurement and cost control of BS works which
were not kept under QSB’s roof in the past have been
transferred to QSB. More outsourcing of QS services
under the re-engineering process in return increases
the need of in-house resources for advisory and
managerial roles. QSs are also required to take up
vibrant and demanding duties associated with project
management under the re-engineering concept. All
these transitions would not have been successful
without proper training.
For professional training in relation to contract
administration, dispute resolutions and contractual
claims, apart from nominating QS officers to attend
seminars organized by external organizers, lecturers
from various companies and local universities will be
engaged for in-house lectures. Courses on the use of
the BQ production software and comprehension of
building services technology and measurements have
also been arranged. CPD events in the form of talks
by guest speakers or by way of experience sharing
sessions presented by in-house veterans have also
been organized. Some of the topics convened in the
past are risk management, project management,
Training and Commitment toContinuous Improvement
Cheung Sha Wan Wholesale Food MarketMarket Office
52
consultant management and accounts finalization, all
aiming to increase staff awareness and effectiveness
in performing their existing and future duties.
To keep abreast of the latest development world-
wide in respect of quantity surveying and cost
engineering, some officers have been sent abroad to
attend international conferences focusing on these
topics. These officers share with their colleagues
what they had gathered during the trip upon their
return. Some had been attached to overseas QS
firms for a short period of time to gain at a close range
of how their counterparts were practicing in the vastly
different economical and political climates. This type
of exposure is not only mind-broadening but helpful in
the future career development of the staff by
establishing precious links with QSs in other countries.
QSB officers are encouraged to attend those
courses and seminars offered by ArchSD, CSTDI and
CSB to boost their skills in IT application and
Putonghua proficiency. These are helpful for their
personal development. QSB also supports the bureau
and departmental initiatives in quality, environment
and health by nominating staff to attend related
courses and seminars. Q&EM awareness training,
seminars and courses on environmental protection
issues, internal auditor courses and Q&EM
documentation course are some of the examples.
In the light of limited funding and resources, the
Branch would allocate the training opportunities fairly
among all officers to meet operational and career
development needs. We are not complacent with our
past and current achievements in training. We always
strive for continuous improvement as advocated in
the ISO 9001:2000, strengthening the delivery and
the overall performance of our services. In the years
to come, we shall read the signals within and outside
the department and look for more training
opportunities. We hope that appropriate expertise
can be tapped to better equip our staff for the
impending changes that lie ahead.
The training of QS graduates
To support ETWB’s initiatives of nurturing young
prospective QSs, each year QSB will take in a handful
of fresh university graduates and provide them with
the training, guidance and exposures necessary for
them to obtain professional qualification in 3 years’
time (revised to 2 years from 2007 intake to match
new HKIS requirement). They are mainly attached to
the capital works division assisting in mainstream
work. Arrangements will be made to post them to the
various sections of QSB and the Project Management
Branch to enable them to acquire the necessary
experiences that may assist in their professional
qualification examinations. Recently, two QS
graduates have been attached to the Shenzhen
Construction Bureau and the Shenzhen Public Works
Bureau for short term training. Furthermore, all our QS
graduates are encouraged to attend experience
sharing sessions and CPD events organized by QSB
to enrich their professional knowledge and experience.
Caritas Medical Centre
54
announced in October 1989, Hong Kong experienced
a construction boom during 1990s and reached
historical height in 1997. Infrastructures such as
Western Harbour Crossing, West Kowloon
Expressway, Tsing Ma Bridge, etc. were developed
to open up remote area in Lantau and a new
international airport was built at Chep Lap Kok. The
TPI generally indicated a continuous rising trend in
tender prices at that time as vast construction works
were competing for limited resources.
However, the cheers faded when the Asian financial
crisis started in Thailand in July 1997, dot.com bubble
burst in 2000 and global economy went into recession
in 2001. The economy of Hong Kong faced the
downturn and the construction industry shrank after
1997. A combination of recent shocks like the terrorist
Tender price index for building works
The Tender Price Index (TPI) of ArchSD for building
works has been published quarterly since 1970. It
acts as an aid to index link building cost data for
estimating purposes. With the base of 100 at the first
quarter of 1970, the TPI indicates the general cost
trend of government building projects based on
contractors’ pricing in bills of quantities for accepted
building tenders through competitive tendering on
new works contracts let by ArchSD.
TPI trend
Over the past twenty years, the TPI witnessed the
fluctuation in local and global economy. The TPI trend
from 1986 to 2005 was shown in Fig.1. With the
overall port and airport development strategy
Overview of ArchSD Tender Price Index andContract Value (1986 to 2005)by Jessica Chow and Katherine Leung
55
attack of September 11, the outbreak of SARS, and
the US-led wars in Afghanistan and Iraq induced even
worse situation with negative economic growth, high
unemployment rate, deflation, etc. in Hong Kong.
Shrinkage of construction works was inevitable as
more properties turned into negative asset. The TPI
generally indicated a continuous drop in tender prices
since early 1998.
Recently, there has been an economic rebound in
Hong Kong after the signing of CEPA and introduction
of Individual Visit Scheme in June and July 2003
respectively. The TPI picks up gently.
More building projects in the public sector have
started or planned to start in the near future. It is
expected that the future TPI movement will reflect the
increasingly active construction industry.
Contract value
Broadly speaking, the value of a building contract is
determined by the design and quality standard of its
works, the site conditions and development
constraints, and the prevailing price level in the market
at tender stage. In order to compare different contracts
on common basis, gross building cost approach is
normally adopted for estimating purposes. That is the
construction cost of superstructure including building
Kei Wai Primary School(Ma Wan)
services for a building contract, which eliminates
most of the unique factors of the site like development
constraints.
Recently, a cost study of gross building cost for
primary schools built during 1986 to 2005 has been
carried out. The simplistic and uniform design
requirements of school buildings together with a large
number of school contracts available each year provide
a good study basis. Fig. 2 is a scattered diagram of
the gross building costs of primary schools plotted
against the TPI. It is revealed that the trend of gross
building costs of primary schools follows that of the
TPI. In other words, the gross building costs of
primary schools were on the rising trend during
1990s, peaked in 1997, generally decreasing from
1998 to 2000, and gently picked up again after 2000.
56
to visualize the challenges facing ArchSD, where
numerous decisions are made daily on planning and
procurement of building projects, selection of materials
and equipment, and operation and maintenance of
facilities. On top of all these, there is the need to keep
track of relevant actual costs which should be the only
source of justification for future investment decisions.
These challenges are universal. In countries where
sustainable construction and LCC are more advanced,
e.g. the UK, there is as yet no industry consensus on
LCC procedures and practices and there is a lack of
robust historical data on running costs1 . From a
positive side, Hong Kong may not be too late in
catching up on LCC R&D and application. With more
emphasis being placed on sustainable construction
in recent years, the HKSAR Government has been
actively promoting LCA2 and LCC. In the Construction
Industry Review Committee (CIRC) Report published
by the Hon. Henry Tang, the fo l lowing
recommendations were made:
• a coherent policy framework that anchors the
concept of sustainable construction firmly in
the context of sustainable development; and a
broad base of public support, ensuring the
need for sustainability is understood in the
community;
• relevant model and data that support due
recognition of life cycle costs and life cycle
performance of materials and components in
assessing tenders; and
Of itself, life cycle costing (LCC) is not a new idea.
The concept is not particularly complex either.
Initial investment does not represent the true total
cost, until future costs of operation, maintenance and
ultimate disposal are considered and for comparison
purposes discounted to present value. It does not
take an expert (like quantity surveyors) to make good
sense of the application. Yet, many researches and
developments on LCC over the years, local and
international, have been limited to academic analysis.
Considering also that there has been very few reliable
or quotable data on LCC, the gap between LCC in
theory and LCC in practice becomes evident.
Few people will challenge the notion that whilst
costing a bit more initially, an energy-saving light bulb
is a better bargain than a traditional tungsten one
when the electricity bill is taken into account, not to
mention the fact that it is also more environmental
friendly. Why then is the tungsten light bulb still
popular on supermarket shelves? An average
consumer may be excused for not doing the arithmetic,
but what about an organization as big as the ArchSD,
having an annual turnover of over HK$7 billion on
capital works projects and HK$2 bil l ion on
maintenance activities?
Money may not be the only concern. The equation
gets complicated when one starts to consider other
factors such as product functionality, aesthetics,
consumer behaviour, brand loyalty, etc. If the choice
of one light bulb raises enough questions, it is not hard
Life Cycle Costing – From Theory to Practiceby Francis Leung and Alvin Ng
57
• guidelines on use of alternative materials and
systems that can help improve the environment,
energy and economic performance of buildings.
Through a consultancy study recently completed
by the Electrical and Mechanical Services Department
(EMSD), a comprehensive understanding of the
international efforts on LCA/LCC is achieved. Some
international coefficients and data concerning
environmental performance of materials/M&E systems
are also converted for local use.
Being an agent responsible for a large number and
a wide diversity of construction projects, the ArchSD
has accumulated over the years a wealth of knowledge
and experience in new works and maintenance
activities. A massive amount of costing data is available.
Based on robust historical data, further research
work may provide conclusive information for the
purposes of supporting reasoned investment
decisions involving alternative building layout and
choice of materials/systems.
However, before the data can be usefully applied
for LCC purposes, a structured approach will need to
be adopted for data capture, archive and presentation.
A database management system will need to be
devised. Under the directive of our Assistant Director
(Quantity Surveying), a working group has been set
up to pursue LCC in ArchSD. The working group pulls
together efforts of various branches to
• review current practices and data availability
• identify practical issues and problems
• identify LCC development potentials
• assess applicability of LCC to ArchSD projects
• make recommendations on LCC to the ArchSD
Senior Staff Forum
• oversee development of LCC in ArchSD.
In developing LCC, regard will be paid to the
following:
• practical issues at technical and management
levels
• compliance with international standards
• f lexibi l i ty of data structure to al low
communication with databases of others
• data accuracy and reliability
• quantification of LCC benefits.
Bridging the gap between theory and practice
appears to be the greatest challenge. Soon after
commencement of the research, the following have
been identified for more focused study:
• Owner/cost-bearer relation
• Owner/designer/user communication
• Matching funding with LCC
• Project team communication
• Mater ia l /component propert ies, l i fe
expectancies, replacement/deplet ion
assumption
EMSDHeadquarters
58
strengths and weaknesses, and to explore LCC
potentials.
(b) LCC comparators
A database will be set up to keep track of LCC of
facilities/projects. The data will be held in a format,
which complies with international standards and will
facilitate interfacing and data exchange with LCC
systems of other organizations. Materials/components
where LCC has a high impact on ultimate cost will be
identified. Relative to internationally recognized
standards, further research will be conducted with a
view to designing a robust database structure.
Medium-term
(c) Management system
Building on the database structure and
benchmarks, a management system will be developed
to facilitate the collection, archiving and analysis of
data. Technical and organizational issues affecting
LCC implementation will be addressed.
(d) Alternative design/investment decisions
With gradual build-up of a database, LCC
techniques may then be applied to the evaluation of
alternative design/investment options. A framework
will be developed for assessment of alternative design/
investment decisions.
Long-term
(e) Economically Most Advantageous Tender
(EMAT)
A framework wi l l be developed for the
implementation of EMAT3 .
(f) LCC trend analysis/indices
Based on combination of materials and design
alternatives, cost data or indices may be published to
assess the variability of LCC according to different
geographical and/or socio-economic conditions.
A consultancy study has recently been
commissioned to embark on a preliminary review of
ArchSD activities and compile cost comparators which
have a high impact on ultimate cost. Some examples
of these comparators are: external wall system, HVAC
• Cost data in different format (bills of quantities
for new works vs. term contracts for
maintenance)
• Data collection and archiving
• Data accuracy and reliability
• Database management
• Implications on organization and operation.
If, in the earlier scenario, the need for justifying an
energy-saving light bulb has not yet received the
attention it deserves, the practical issues identified
above certainly underscore the challenges in our
attempt to make sense of the massive but loosely
scattered data in an organization as large as the
ArchSD. In dealing with such a complex subject, a
step-by-step approach is adopted. The overall
strategy, broken down into phases, is as follows:
Short-term
(a) Activities review
A comprehensive study of ArchSD’s current
activities grouped into capital investment, financing,
operation, and maintenance. Relative to the collected
data, further studies will be conducted to identify
59
1 UK National Audit Report on Improving Public Services throughBetter Construction, March 2005
2 Life Cycle Assessment (LCA) is defined by the Society ofEnvironmental Toxicology and Chemistry as “an objectiveprocess to evaluate the environmental burdens associatedwith a product, process or activity by identifying and quantifyingenergy and material uses and releases to the environment, andto evaluate and implement opportunities to affect environmentalimprovements.”
3 Task Group 4 Final Report on Life Cycle Costs in Construction,European Commission, Oct 2003
Diagram 1 – Consultancy for R&D of Life Cycle Costing in ArchSD (Phase I)
system, electrical system and roofing system. Based
on the findings of the preliminary consultancy study,
the ArchSD LCC strategies will then be subject to
review and fine-tuning. The relations between policies,
strategies, stakeholders and data are illustrated in
Diagram 1.
With increasing emphasis by the industry on
sustainability and renewable energy, there is a pressing
need to bridge the gap between LCC theory and
practice. Being a big organization responsible for a
major share of capital formation in the building sector,
the ArchSD is best placed to take a lead in these
important R&D areas.
Returning to the debate over the choice between
energy-saving and tungsten light bulbs, it may still
take some time and effort before sufficient data
comes in for one to claim victory and drive the other
off the supermarket shelves. It is reassuring, though,
that some new light has been shed on the subject.
60
The Development of Construction Mediationin Hong Kongby Leung Hing-fung 1
In my early days with the Architectural Services
Department in the mid eighties, mediation was a
term almost unheard of for most practitioners in the
construction industry. As a schoolboy freshly
graduated from the university and then a young
professional, I was always curious in what mediation
was all about. At professional grade within the
government structure, even if there was going to be
a genuine mediation case, it was unlikely that one
would have the opportunity to participate in the actual
mediation meeting.
Well, those were the days. Mediation has proven to
be an effective means to resolve disputes. Nowadays,
the use of mediation has infused into many sectors
and is popularly accepted in general commercial,
insurance, housing, community, work place conflicts
and personal injuries compensation disputes. It has
been developed into what is now commonly
recognized as a skill essential for leadership2 .
The promotion in the use of mediation through the
use of Standard Forms of Building Contract
In the years after I have left the civil service, that is
1990, a mediation clause was, through some intelligent
mind in the government and for the first time in the
history of Hong Kong, introduced into the Government
General Conditions of Contract3 (GCC). Clause 86(1)
of the GCC 1990 says:
“If any dispute or difference of any kind whatsoever
shall arise between the Employer and the Contractor...
it shall be referred to and settled by the Architect... the
Contractor shall... give effect forthwith to every such
decision of the Architect unless and until the same
shall be revised in mediation or arbitration as
hereinafter provided.” (author’s emphasis)
The mechanism of mediation in government
contracts has largely retained its shape and there has
not been much change since its introduction into the
GCC. Over the years thereafter, rules of mediation
have been developed to facilitate the use of mediation
in the resolution of disputes. The most commonly
used Rules of Mediation are The Government of Hong
Kong Special Administrative Region Construction
Mediation Rules (1999 Edition)4 and the Hong Kong
International Arbitration Centre (HKIAC) Mediation
Rules (1999 Edition) (respectively for the pubic sector
and the private sector). Appointment of mediators
(where the parties fail to agree) in the former rules in
fact relies much on the HKIAC.
Within the government, the use of mediation has
also been adopted subsequently in the airport
contracts5 and other government building and civil
engineering contracts6 .
On the other hand, the private sector of the
construction industry pales when compared to the
government in the use of mediation for resolving
disputes. For many years in the past, the standard
form of building contract used in the private sector
has largely been modeled on the English JCT 63
standard form. There is no mediation mechanism
provided in that somewhat dated form or its
counterpart in Hong Kong.
61
Bringing the parties to the mediation table is one
thing and whether the parties have a genuine intention
to settle the dispute by mediation is another. Mediation
clauses in standard forms can at best serve the
former purpose. How the parties may have the intention
to settle their disputes through mediation is actually
the crux of the question. To this end there is no
solution other than through long-term education of
the prospective users and long-term practice to
improve mediation process. Moreover, no system
can work without the support of competent
practitioners and competence of mediators is
therefore an essential key.
The promotion in the use of mediation
through the court mechanism
Unlike in many civil law countries, where often the
judge could act as the mediator 9 for the parties’
disputes after the case has been filed in court, most
courts in common law countries have adopted a
relatively hands-off approach towards mediation10 .
Moreover, in many of these countries mediation is
usually imposed through a specific mediation statute
or provisions in the general civil procedure legislation11.
In Hong Kong, there has been no statute-imposed
mediation system. However, the court has made its
debut in introducing mediation through a pilot scheme
The wider use of mediation by the government to
resolve disputes was nicely echoed in the Report of
the Construction Industry Review Committee 7
published in January 2001.
In March 2005, with the joint effort of Hong Kong
Institute of Surveyors, Hong Kong Institute of Architects
and Hong Kong Institute of Construction Managers,
a new standard form of building contract was
published8 . The dispute resolution clause of this new
standard form introduced a mediation procedure for
the private sector of the construction industry. Clause
41.3(1) of the new standard form of building contract
provides:
“If the dispute is not resolved by the Designated
Representatives within 28 days of the dispute being
referred to them by the Architect under clause 41.2,
either party may give a notice to the other party, by
special delivery, to refer the dispute to mediation and
the person to act as the mediator shall be agreed
between the parties.” (author’s emphasis)
Although mediation is by itself a kind of dispute
resolution method relying on the voluntariness of the
parties, the reliance on a clause in standard forms of
contract to bring the parties to mediation has constantly
been included in the repertoire of those who are
promoting the use of mediation in many parts of the
world.
Public Health Laboratory Centreat Nam Cheong Street
62
in the family court in 2002. Cases in the Construction
and Arbitration List of the Court of First Instance have
been targeted to be the 2nd kind of cases for which the
court would promote the use of mediation. Therefore,
on 1st September 2006, a Practice Direction12 started
to take effect such that lawyers representing parties
in cases in the Construction and Arbitration List of the
Court of First Instance are imposed a duty to advise
their clients to enter into an agreement to mediate,
failing which without acceptable reason may result in
cost sanction. The Practice Direction in effect has
started a pilot scheme of voluntary mediation, which
operates from 1st September 2006 to 31st August 2008.
There are obvious reasons that mediation can be
a preferable method for the resolution of certain kinds
of disputes over litigation. It is expected that the court
will encourage more types of cases to be referred to
mediation. Cases in building management, land
compensation and personal injuries cases are on the
wish list of the general mediation practitioners.
Mediation practice in Hong Kong
Nowadays, the use of mediation for resolution of
various kinds of disputes has developed in both the
private sector and the government. The application
covers contractual and non-contractual disputes. At
present, there are different bodies maintaining their
own panels of mediators, such as the HKIAC, Hong
Kong Institute of Surveyors and Hong Kong Institute
of Architects (Joint Panel), Hong Kong Bar Association
and Law Society of Hong Kong. Some of these
bodies have their own accreditation system for
mediators.
The current list of mediators under the HKIAC
panel contains more than 200 names and the number
of mediators under the Joint Panel of Hong Kong
Institute of Surveyors and Hong Kong Institute of
Architects is about 20. It can be anticipated that more
practitioners in different professions will be interested
in developing into that area of practice.
Other than disputes in the construction industry
and family court mentioned above, mediation has
been used to resolve general community and
commercial disputes in the private sector on the one
hand and relied on by the government for land,
housing and building management disputes on the
other. Naturally construction is one of the major
arenas for mediation.
Future development of mediation in Hong Kong
In most developed countries, mediation was
incorporated into the legal system either through a
specific mediation statute or the general civil procedure
legislation. This is at least the case for the United
States13 , United Kingdom, Australia and the
Continental Europe. In this respect Hong Kong looks
somewhat under-developed and should work hard to
pick up.
Most importantly, any system involving a 3rd party’s
act to influence the disputing parties’ settlement
Veterinary Laboratoryat Tai Lung Farm
63
terms would entail the question of justice. This remains
the case despite the fact that in mediation the mediator
does not impose onto the parties any settlement
terms. Even if the disputing parties are not looking
forward to a fair and just outcome, the procedure
must be fair and just so that those administering the
system and the mediator would be answerable to the
disputing parties who rely on them based on trust.
Unlike judges, which are bound by the strictest
standard in moral sense, the conduct of mediators is
governed generally by the code of conduct issued by
the organization administering the panel to which the
mediator belongs. The upholding of mediator’s
conduct and competence is essential for the
development of mediation in the construction industry
and indeed in any other sector in Hong Kong.
Moreover, despite the fact that there are many
mediation cases in which lawyers represent one or
more of the parties, the conduct of lawyers in mediation
cases remains an area yet to be improved in their
code.
Conclusion
Gone are the days when mediation was treated
almost like heresy in the construction industry. If one
now clicks on any search engine in the computer for
the word “mediation” or “mediator”, one would end
up with tens of millions of results. Most of these
1 LEUNG Hing Fung worked in the Architectural ServicesDepartment from 1984 to 1990
2 See for example the work of Gerzon, M., Leading ThroughConflict: How Successful Leaders Transform Differences intoOpportunities, Harvard Business School Press, 2006
3 Government of Hong Kong General Conditions of Contract forBuilding Works (1990 Edition)
4 Issued by the Works Bureau in 19995 See the General Conditions of Contract for the Airport Core
Programme Civil Engineering Works, 1992 Edition6 See for example clause 86 of the Government of Hong Kong
General Conditions of Contract for Civil Engineering Works7 See paragraph 5.63 in the Report Construct for Excellence
published in January 2001 under the chairmanship of Sir HenryTang
8 The Agreement & Schedule of Conditions of Building Contractfor use in the Hong Kong Special Administrative Region,Standard Form of Building Contract, Private Edition, withquantities 2005 Edition
9 See for example Article 178 of the Italian Code of Civil Procedure10 See for example the U.K. Civil Procedure Act 200511 Ditto12 Practice Direction 6.3 – Construction and Arbitration List Pilot
Scheme for Voluntary Mediation13 See for example the Uniform Mediation Act, which has been
adopted by e.g. Illinois, Nebraska and New Jersey
websites are related to mediation appointing bodies,
mediation administration bodies and mediation
practices. Moreover, one could observe that there
are relatively few such bodies in Hong Kong. Clearly
in respect of the popularity in the use of mediation to
resolve disputes, Hong Kong should quicken its pace
when compared with many other developed countries.
Despite the fact that mediation is a voluntary
process and relies entirely on the parties’ agreement,
some sort of external impulse is needed to set it in
motion. There are many examples to show that the
assistance through the use of standard forms of
construction contracts, the court, and the law, are
amongst the most widely used means. It is through
more use of mediation more situations favourable for
its use will be unfolded. Most importantly, competence
and conduct of mediators are the essential elements
in forming the linchpin for the successful development
of construction mediation in Hong Kong.
Editor’s note
Mr. Leung Hing Fung had been a QS graduate and
QS of the ArchSD. He is now the Associate Professor
of the University of Hong Kong and also practicing
as a barrister.)
References:a. Boulle, L. & Nesic, M., Mediation Principles, Process and
Practice, Butterworths, 2001b. Caller, R., ADR and Commercial Disputes, Sweet & Maxwell,
2002c. Gerzon, M., Leading Through Conflict: How Successful
Leaders Transform Differences into Opportunities, HarvardBusiness School Press, 2006
d. Goldrein, I.S., Structured Settlements: A Practical Guide,Butterworths, 1997
e. Mackie, K., Miles, D., Marsh W. & Allen, T., The ADRPractice Guide – Commercial Dispute Resolution,Butterworths, 2000
f. Newmark, C. & Monaghan, A., Butterworths Mediators onMediation, Leading Mediator Perspectives on the Practiceof Commercial Mediation, Tottel Publishing, 2005
g. Roe, S. & Jenkins, J. Partnering and Alliancing inConstruction Projects, Sweet & Maxwell, 2003
h. Stitt, A.J., Mediation: A Practical Guide, CavendishPublishing, 2004
64
Legal Aspects of QSby Gilbert Kwok
Introduction
I am honoured to contribute an article for the publication
to mark the 20th anniversary of the Architectural
Services Department. This event is also a special
occasion to me as I had received quantity surveying
training in ArchSD for a few years before embarking
on my legal career.
In this article, I hope to provide some insight into
the legal aspects of quantity surveying which would
be of interest to you.
While the nature of the work of quantity surveyors
and lawyers is different, a common feature of both
professionals is that they may face negligence claims
from clients.
With the assistance of one of my associates Fanny
Leung who is also a quantity surveyor, I wish to cover
the following topics:
1. the professional liability of quantity surveyors in
general;
2. the traditional role of quantity surveyors and
the corresponding liability; and
3. the additional role of quantity surveyors and
the corresponding liability.
In preparing this article, we have tried to identify
relevant Hong Kong cases. There appears to be no
Hong Kong cases involving professional negligence
claims against quantity surveyors.
We have therefore checked whether there are
relevant UK cases. Again, surprisingly, whereas there
are many cases involving other professions such as
lawyers, architects and engineers, there are relatively
few professional negligence actions involving quantity
surveyors.
While this lack of court cases may be due to the fact
that quantity surveyors are luckier than other
professionals, I do not believe they should rely too
heavily on this factor.
This is especially true now that quantity surveyors
have broadened their scope of services, such as
providing project management services and hence
exposing themselves to greater risks of being sued.
Professional liability of quantity surveyors
in general
In this article, I would like to focus on quantity surveyors’
liability in the tort of negligence.
Professional negligence is a subset of the general
rules on negligence to cover situations where a
professional who undertakes a specific task and
professes some special skill in carrying out that task
is in breach of the duty of care owed to his client.
Similar to other professions, such as doctors and
lawyers, a quantity surveyor owes a duty of care to his
client. It is the breach of such duty, which may give
rise to professional negligence claims.
It is therefore important to quantity surveyors to
know the standard which is required of a professional
as this will be fundamental in establishing a breach of
duty, thereby giving rise to a professional negligence
claim.
By relying on the well-known case of Bolam v Friern
Hospital Management Committee1 that sets out the
test of negligence for persons who hold some special
skill, one would expect a quantity surveyor to exercise
the standard of skill and care of an ordinary competent
surveyor.
65
The case of Eckersly v Binnie & Partners2 provides
further guidance on the skills and knowledge expected
of a competent professional man.
Those quantity surveyors who have freshly joined
the profession must bear in mind that the above
cases suggest that the standard expected is that of
an ordinary competent member of the profession in
question. Hence, whether a quantity surveyor is
experienced or not he or she will be judged by the
same standard.
The traditional role of quantity surveyorsand the corresponding liabilityCosts estimates
Quantity surveyors are usually required to provide a
cost estimate based on the architect’s or engineer’s
design before the employer decides whether to
proceed with the project concerned.
If the quantity surveyors overestimate the price, the
employer may abandon the project, which they indeed
are able to afford. On the other hand, if the quantity
surveyors underestimate the price, the employer may
experience cash flow problem or fail to meet the
payment to contractors.
However, an incorrect estimate does not necessarily
lead to professional negligence. To some extent,
estimation is an art, which involves professional
judgment. If actual construction cost turns out to be
higher or lower than the estimate, this is not in itself
evidence of negligence if the quantity surveyors
concerned are able to prove that reasonable care has
been employed during the exercise of estimation.
The question of a consultant’s liability in respect of
an allegedly negligent estimate cropped up in the
case of Copthorne Hotel (Newcastle) Ltd v Arup
Associates 3 . Copthorne claimed that Arup was
negligent because the actual piling cost turned out to
be £975,000, which was more than double its original
estimate of £425,000. Copthorne sued Arup for the
difference between actual piling costs and the original
estimate. The court rejected Copthorne’s claim
because mere discrepancy between the estimate
and actual piling costs was not enough to establish
negligence; the piling costs may have increased for
other reasons such as a change in market conditions.
As a result, if the quantity surveyors exercise all
reasonable skill and care in preparing the estimate, an
incorrect estimate in itself may not necessarily be
negligent.
Procurement strategy
Quantity surveyors play an important role during the
tendering stage not only in preparing cost estimates,
but also advising on the procurement strategy suitable
for the project. To ascertain the most appropriate
procurement strategy to carry out the project, it is
essential to plan and assess various options and
adequately advise the client on the pros and cons of
Education Resources Centrecum Public Transport Interchange
at Kowloon Tong
66
available options. In the recent case of Plymouth &
South West Co-operative Society Limited v
Architecture, Structure & Management Limited4 , the
court had to decide whether a firm called Architect
Structure Management Ltd (ASM), the architect for
the project, who also performed quantity surveying
services for the project, was negligent when advising
on a procurement strategy.
Plymouth South West Co-operative Society Ltd
(Plymco), a retailer, decided to redevelop its flagship
store at Derry’s Cross. Plymco appointed ASM to
perform architectural, structural engineering, design,
procurement, quantity surveying, costing and valuation
services for the project. Plymco provided ASM with a
budget figure of £5.5 million. ASM prepared an initial
estimate of the proposed redevelopment in the sum
of £5.65 million and confirmed that they could tailor
the redevelopment to meet Plymco’s budget.
At that time, Plymco had already secured a tenant,
Argos, for the new development and Plymco required
ASM to ensure the works to be completed by certain
date to meet Argo’s occupation requirements. Given
the tight budget and time constraint, ASM recommended
a two-stage tendering process. By the end of the
second stage, almost 90% of the works included in
the tender document was described as provisional or
prime cost sums. The only detailed design capable of
being priced was related to the Argos store. Plymco
expressed its concern to ASM about the amount of
provisional sums within the tender documents but
ASM assured that those provisional sums would be
monitored against actual expenditure.
Considering this assurance by ASM, Plymco
proceeded to enter a formal contract with the
contractor. As the work progressed, more that 7,500
variation instructions were issued and £2 million of
cost overruns occurred. Plymco claimed against ASM
and argued that the cost overruns could have been
avoided if ASM exercised reasonable care and skill
when performing the services. Plymco argued that
ASM should have advised them not to enter into one
construction contract but rather divide the works into
two separate contracts, one for the construction of
Argos store, for which the design had been developed
and the other for the remaining works which would be
procured later after the design was adequately
advanced.
The judge held that ASM had breached its duty of
care to Plymco because ASM did not give Plymco
proper advice on the two-stage tendering process.
The court further considered that had ASM given
correct advice on the procurement method, Plymco
would have accepted the alternative process of
awarding two separate contracts and achieved the
completion of the project at a reasonable cost.
Bills of Quantities
Quantity surveyors have used bills of quantities for
more than a century as a cost control document that
enables tender evaluation, valuation of interim payment
and variations as well as project final account
preparation.
Although quantity surveyors are expected to be
familiar with standard methods of measurement when
preparing bills of quantities, errors in the preparation
of bills of quantities are common; most of them are
processing or arithmetical errors, such as double-
counted items and clerical errors in calculation.
It seems that an occasional slip or error may be
insufficient to sustain a claim of professional
negligence. In the case of London School Board v
Northcroft, Son & Nicholson5 , it was held that a few
errors in the measurement of quantities or in the
computation of an interim valuation might not
necessarily be negligent.
Hong Kong HeritageDiscovery Centre
67
That case concerned the question whether the
quantity surveyor concerned was negligent in making
two clerical errors, one in the sum of £118 and the
other in the sum of £15, in preparing an interim
valuation for the buildings of a value of £12,000.
On the other hand, in Tyrer v District Auditor of
Monmouthshire 6 , it was held that the defence of
claiming the mistake being a simple mathematical
error was not sufficient to rebut an allegation of
negligence. The case concerned a mathematical
error made by a quantity surveyor in preparing an
interim certificate, which led to the approval of
excessive quantities and rates and irrecoverable
overpayments to the contractor. The court held that
the quantity surveyor was negligent for his failure to
fulfill the obligation to ensure adequate checks were
made and his failure to appreciate that the quantities
and rates were excessive.
Valuation and preparation of final account
Most construction contracts require valuation of interim
payment to be made for the amount of work executed
and the value of unfixed goods and material stored on
site.
The consequence of overvaluation is potentially
significant as it can lead to difficulties for the employer
if for instance the contractor becomes insolvent. In
the case of a lack of fairness in valuation, it may
damage the employer’s legal position in the
subsequent arbitration or litigation with the contractor.
Accordingly, despite the fact that interim valuation
can be corrected and the employer may in the end
suffer no loss, quantity surveyors should at all times
exercise reasonable skill and care.
Variation work is an inevitable part of a construction
project. Quantity Surveyors are usually required to
evaluate variation work in the preparation of final
accounts. Unlike valuation of interim payment,
valuation of variation work and the preparation of final
accounts require precision as final accounts may not
be corrected once they have been agreed by the
contractor concerned.
Additional role of quantity surveyorsand corresponding liabilityQuantity surveyor as project manager
Quantity surveyors are increasingly being called upon
to perform non-traditional roles such as project
management. If you have to provide such services,
you should review carefully your contract with the
employer, which should clearly set out the scope of
such project management services. This need for
special caution is illustrated in the case of Pride Valley
Foods v Hall & Partners7 .
In Pride Valley, the court had to decide whether a
quantity surveyor acting as project manager was
negligent and in particular whether his duty included
warning clients of potential fire hazards in the design
Kwai ChungPublic Mortuary
68
1 [1957] 2 All ER 118, 121“The test is the standard of the ordinary skilled man exercisingand professing to have that special skill. A man need notpossess the highest expert skill at the risk of being foundnegligent... it is sufficient if he exercises the ordinary skill of anordinary competent man exercising that particular art”.
2 1 [1988] 18 Con LR 1“A professional man should command the corpus of knowledgewhich forms part of the professional equipment of the ordinarymember of his profession. He should not lag behind otherordinarily assiduous and intelligent members of his professionin knowledge of new advance, discoveries and developmentsin his field. He should be alert to the hazards and risk inherentin any professional task he undertakes to the extent that otherordinarily competent members of the professional would bealert. He must bring to any professional task he undertakes noless expertise, skill and care than other ordinarily competentmembers would bring but need bring no more. The law doesnot require of a professional man that he be a paragoncombining the qualities of polymath and prophet.
3 [1996] 58 Con LR 1054 [2006] EWHC 5 (TCC)5 [1889] 2 Hudson’s BC (4th Edn), p.147; 7 Digest 449, 4786 [1973] 230 E. G. 9737 [2001] 76 Con LR 1(CA)
Conclusion
We can see from the above brief analysis that although
quantity surveyors may be negligent even in their
traditional role, there are relatively few cases involving
that role. As mentioned in the above cases, even if
there are errors or discrepancy in estimates and
costs, it would be difficult for an employer to
successfully prove a professional negligence claim.
However, quantity surveyors must remind
themselves that once they venture out of their
traditional role, say, take up the project management
role, their scope of responsibility would go beyond the
normal duty that they have in their traditional role.
They would then be open to risks and potential claims
as shown in the above-mentioned case of Pride
Valley.
Editor’s note
Mr. Gilbert Kwok had been a QS graduate of the
ArchSD before qualified as professional QS. He is
now practicing as a solicitor in the private sector
specializing in construction.
and specification for the works.
Pride Valley, a company specializing in baking
naan and pitta breads, employed Hall & Partners to
provide a full project management services for the
construction of a new factory from inception to design,
construction, commission and hand-over. A fire
destroyed the factory rapidly because it spread through
expanded polystyrene insulating panels in the building.
Pride Valley claimed that the fire was caused by the
negligence of Hall & Partners because they as the
project managers had failed to warn Pride Valley
against the use of expanded polystyrene filled panels.
After considering the letter of appointment, the court
held that Hall & Partners owed a duty to advise Pride
Valley the risks of fire of using expanded polystyrene
filled panels as they undertook to prepare a design
brief, draft appropriate employer’s requirements and
specify materials to be used.
However, the judge found that Pride Valley’s claim
failed as Hall & Partners’ advice would have been
rejected even if the advice had been given because
Pride Valley emphasized that the factory should be
built to a budget and specification should be to those
minimum standards required by the building and fire
regulations.
Hong KongScience Museum
69
The High Street Project comprised the construction
of a district community centre cum singleton
hostel on the existing site of the old mental hospital
(also well known as the “ghost house”) at the junction
of High Street and Eastern Street in Sai Ying Pun. I
was fortunate enough to have the chance to be
involved in this public works project which allowed me
to learn and observe how the project team dealt with
the associated risks of the project professionally and
how collaborative teamwork contributed towards the
successful procurement and delivery of the project.
This article aims at sharing with the readers some of
the experience I have gained.
The construction floor area of this contract was
about 17,200 sq m. Apart from the construction of the
community centre cum hostel; the project also included
the preservation of the facade and verandah of the
existing building. All the works were carried out
through a one-single-contract approach and the
contract sum was approximately HK$348 million.
The contract conditions used was the Government
General Conditions of Contract for Building Works,
1993 Edition. Construction was started in July 1998
and completed in February 2001.
The major risks and challenge associated with this
project lay in the needs (i) to demolish the substantial
part of the existing building to provide space for the
new construction whilst at the same time not to affect
the structural stability of the remaining facade and
verandah along High Street and Eastern Street; and
(ii) to carry out structural stabilization, refurbishment
and architectural preservation to the remaining facade
and verandah of the building which was listed by the
The High Street Projectby Chan Fat-yau
70
strengthen the retained facade/verandah during
construction stage and after completion of works
respectively were designed by the employer’s
engineers. Construction sequence for works critical
to the structural stability of the facade/verandah was
pre-determined and specified in the contract.
Construction works were closely monitored by the
site supervision team so that remedial actions could
be taken promptly if anything went unexpected.
Although the employer had decided to take up
most of the risk, the remaining risk of construction
and workmanship was still considered significant.
The project team adopted a one-single-contract
approach to reduce the risk of possible avoidance of
liabilities by the contractor and considered that
prequalification of tenderers was necessary. The
contractor selected from the list of prequalified
tenderers was proved to be competent and completed
the works on time to the satisfaction of the architect.
Antiquities Advisory Board in 1992 as a Grade I
historical item. Furthermore, the risk of possible impact
on the structural stability of the remaining facade and
verandah during the construction of the piled
foundations and superstructure of the new building
could not be under-estimated.
Things could go wrong at any work stage. The
non-existence of a well-structured risk management
system in those days did not prevent the project team
from identifying the associated risks and managing
them in a professional manner. To address the
aforesaid challenges and risks, the project team had
to deal with issues such as (i) how to provide an
adequate but not excessive budget to cover the risks;
(ii) how to strengthen the retained facade/verandah
both during the construction stage and after the
completion of works; (iii) how to carry out the demolition
and construction works without affecting the structural
stability of the retained portion of the building; (iv) how
to allocate risks between the employer and the
contractor; (v) how to select a capable contractor to
carry out the works; etc.
I do not intend to describe in detail here what the
project team has done to manage the risks as what
they did may not be the only absolute solution. In this
project, the employer decided to take up quite a
substantial part of the aforementioned risks.
Temporary and permanent structural steelworks to
71
Throughout the whole process of project
development, it was observed that the existence of a
collaborative team was one of the key success factors
to manage the risks and achieve the successful
completion of this project. The risks of this project
could not be handled properly without both the
exercising of expertise and professional judgment by
individual team members and the co-operation among
them. It is considered that partnering mentality of
team members is the backbone of all teamwork. The
essential elements of a partnering mentality include (i)
a focus on the procurement and delivery of the project
instead of on one’s own need, (ii) a concern about
what other members may require and (iii) trust in other
members. These depend a lot on the personalities of
individuals and with an organization structure
supportive to team spirit.
Needless to say, the contractor is an important
member of the project team, after all he is the one who
72
carries out the construction works. However the
traditional adversarial relationship between the
employer and the contractor would not contribute to
good team spirit. Furthermore, the current competitive
bidding environment does not foster a partnering
relationship between these two parties. The NEC
Engineering and Construction Contract (ECC)
developed at the end of the last decade attempts to
provide a solution but the effectiveness of this contract
approach is still being tested.
Nowadays, although the hardware (i.e. contract
form and arrangement) for a partnering relationship
between the employer and the contractor is still not
well in place, the existing mechanism available can
still be used for the development of the software
aspect of partnering.
For the success of the partnering approach, the
following contract arrangements and good practices
should be adopted from the early stage of the contract,
(i) clear contract requirements,
(ii) contract design or employer’s requirements
are fully developed at design stage to avoid
numerous post-contract variations and
clarifications,
(iii) good communication with clients to prevent
unnecessary and late changes, and,
(iv) reasonable allocation of risks, etc.
These are very useful in avoiding non-constructive
arguments, which are detrimental to any possible
partnering relationship between the employer and the
contractor. This is true even if the ECC is used.
In the High Street Project, the design team and the
contractor were able to maintain a good working
relationship throughout the whole contract period.
This could not be possible if there were no good
contract arrangement and administration.
In recognition of the high quality standard of the
project, the Architectural Services Department was
awarded the Certificate of Merit, Quality Building
Award 2004. The award was also perceived as
recognition of the collaborative team spirit of all those
involved in the project, which we all treasured.
97
Acknowledgement
Berry, Peter
Chan, Fat-yau
Chan, Joseph
Chan, Roy
Chan, Stephen
Chan, Wai-hung
Cheung, Sara
Chow, Jessica
Fan, Wing-kwong
Fok, Man-kwong
Fung, Apple
Ho, Chung-kin
Ip, Chuen-ching
Ko, Man-fai
Kwok, Gilbert
Kwok, Wai-ching
Lai, Charles
Law, Po-shing
Law, Wai-hung
Lee, Fu-sang
Lee, Kenny
Lee, Yuk-shing
Leung, Francis
Leung, Hing-fung
Leung, Ian
Leung, Katherine
Leung, Sheron
Shum, Kung-sher
Tam, Kin-shung
Tang, Amy
Tinsley, Norman
Tong, Joseph
Tsui, Diana
Wong, Ben
Wong, Keith
Wong, Mickey
Wong, Tammy
Wong, Wingo
Yim, Tommy
Yu, Rachel
Published December 2006
Design and production
China Trend Building Press Ltd.
Felix and Simon of China Trend Building Press Ltd.
The Editorial Board wishes to express its
appreciation to the following persons who
have made contributions to the successful
publication of this book:
Editorial Board:
Chan, Rimmy
Ng, Alvin
Wong, Chi-lok
Wu, Vincent
Yau, Jeff