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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

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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.

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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.

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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

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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.

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Organization Chart ofthe Quantity Surveying Branch

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The services and activities

undertaken by the Branch

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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

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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

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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

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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

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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.

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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

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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

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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:

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33

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

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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.

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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

53

Special Articles

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