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Published: 01:02, January 31, 2023 | Updated: 10:33, January 31, 2023
HKSAR should set up a cost-efficient tendering system
By Mathias Woo
Published:01:02, January 31, 2023 Updated:10:33, January 31, 2023 By Mathias Woo

The jaw-dropping price tags on the government’s mega development projects have raised public concern, with some challenging the authorities’ decision-making process in advancing projects such as the Lantau Tomorrow Vision and Northern Metropolis. 

The Hong Kong Special Administrative Region government announced recently that the budget for building three artificial islands off Lantau has ballooned by 16 percent to HK$580 billion ($74 billion). Furthermore, overspending is likely to become reality, as this has become the norm on most public works projects carried out in recent years. This situation, I believe, is closely related to the system of tendering.

The implementation of public works projects in Hong Kong, such as Lantau Tomorrow Vision, is led by the Civil Engineering and Development Department (CEDD), and the Development Bureau. The CEDD will source an international consultant from the United Kingdom or the United States to conduct a study on the project implementation. Consultancy studies on public works in Hong Kong are usually conducted by the same two or three British or US international consulting firms before the project is handed over to international surveying firms. Once the project cost estimation is approved by the Development Bureau, a Legislative Council committee will discuss the matter. 

The HKSAR government merely outsources the projects to the consultants and contractors without being involved in the construction process. This is not the case in Singapore where government officials, who conduct the preliminary studies, work with their consultants and contractors every step of the way. Thus costly mega-infrastructure projects, such as Changi Airport, are carried out based on a “bargaining model” under the joint efforts of consultants, contractors and government officials.

Hong Kong officials have always played a detached role in large-scale projects. With Hong Kong’s major infrastructure projects over the past two decades or so, the same few British and US companies have been directly responsible for implementation of the projects through the outsourcing model. So, what role can Hong Kong’s civil servants play in terms of cost control and cost-effectiveness?

As for small-scale projects, the “lowest bidder wins” approach prevails. Effective cost control requires the involvement of government officials, who are the chief accountable body, before the process of tendering and outsourcing begins. We should not allow officials to be exempt from responsibility or to be able to pass the buck on to consultants.

The main purpose of outsourcing work to international consultants is to bring in new technologies and new capabilities, and to facilitate knowledge transfer. Hong Kong, however, does not benefit from knowledge transfer in the current tendering system, which is monopolized by the “lowest bidder wins”. In terms of cost-effectiveness, government officials should be the chief accountable body in a preliminary study of the project. Yet, no one is held accountable for overspending on public works in Hong Kong.

 Under the current system — an outdated model from the 1990s — the consultant’s fee and the project fee are still pegged together, which should not be the case. This means the higher the project fee, the higher the consultant’s fee. This model does not make sense nowadays. A reasonable model would be to recognize that different types of projects require different types of consultants’ fees. 

In the long run, the agreements and contracts signed between the Hong Kong government and the engineering companies need to have a scientific and target-based approach in terms of project supervision, financial management, and cost control. For Hong Kong, Singapore is a very good model to learn from

In recent years, the government has adopted the design-and-build model, which is not ideal in terms of quality control, design application and maintenance. Nor does the government take subsequent issues concerning management and maintenance into consideration. 

To reform the tendering and outsourcing system in Hong Kong, we must first set a goal. Hong Kong is likely to face great financial challenges in the future, given the high cost of the Lantau Tomorrow Vision project. Under the current mechanism, the Lantau Tomorrow Vision project would continue to rely only on consultants from the UK or the US for budget planning; hence the risk would be extremely high.

Reform of the tendering and outsourcing system requires major changes. First, the Financial Services and the Treasury Bureau and the financial secretary must implement control measures over government spending on public works. They need to develop a hands-on approach to conducting research, taking preliminary studies of practices in the mainland and Singapore as a reference.

Second, the government should make it clear under what circumstances its officials need to seek the services of consultants. The functions and roles of consultants should be outlined and preliminary studies carried out.

Third, in terms of project cost control, it is important for the government to develop the capacity of civil servants, enhancing their ability to cooperate with academia in conducting substantial study and research work. This would enable government officials to have a precise understanding of the project before it is approved.

Fourth, it should also be the responsibility of the Legislative Council to understand, thus supervise, the latest situation in public works expenditure. 

Fifth, the design and guideline methodology for preliminary studies is necessary for getting the ever-growing costs under control.  

Facing the severe financial challenges anticipated for Hong Kong, prudent measures should be taken on all future public works projects to ensure effective implementation. 

One of the more crucial points is that the consultants repeatedly hired by the government are always the same few British or US firms. It is suggested that the government make it a long-term policy to encourage collaboration among industry-academia-research institutes and bring more universities and academic institutions onto the list of consultants. In fact, the government can learn from Singapore by encouraging small and medium-sized companies in Hong Kong to take the lead in cooperating with large international companies. And there should be a concerted effort from academic, professional and international bodies to back up the implementation of large projects together, making them case studies for the future. This will truly enhance the competitiveness of Hong Kong. 

Singapore has already nurtured several firms that specialize in green building engineering and sustainable architectural design of international standards. Singapore officials are generally more sophisticated and competent in their requirements for the aesthetics and engineering aspects of project works. In contrast, Hong Kong is still creating more and more outsourcing opportunities for those few British and US consultants, instead of creating more opportunities to develop the capabilities of Hong Kong officials. And there are no plans to reintroduce the basic concepts of cost control and quality engineering. The HKSAR officials are supposed to play the role of “gate-keeper” well. So, they should be well trained to strengthen their professional competence, so that they have more understanding of the development of the latest international engineering model, equipping them with various professional skills related to the tendering of public works.

In the long run, the agreements and contracts signed between the Hong Kong government and the engineering companies need to have a scientific and target-based approach in terms of project supervision, financial management, and cost control. For Hong Kong, Singapore is a very good model to learn from.

The author is a member of the Chinese Association of Hong Kong and Macao Studies and artistic director of Zuni Icosahedron.

The views do not necessarily reflect those of China Daily. 

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