OUT-LAW ANALYSIS 8 min. read
Hong Kong SAR is looking to a new approach to deal with increasing construction costs. Photo: Cheng Xin/Getty Images
10 Aug 2026, 9:45 am
The Hong Kong Special Administrative Region (SAR) has long been admired for its ability to carry out large and complex infrastructure projects with a level of reliability that few places can match.
Its contractors, engineers and project managers work in one of the most demanding environments in the world, and the city’s record remains impressive.
Yet this sits alongside a more uncomfortable truth. Hong Kong SAR is still among the most expensive construction markets anywhere. Even as the city earns international praise for quality, it continues to top cost rankings across Asia and frequently appears at the upper end of global comparisons.
This contradiction has prompted the HKSAR Development Bureau to look more deeply at how public works are planned and delivered and to address structural cost pressures that cannot be solved simply by pushing teams to work harder or faster.
It is within this context that the administration is examining new procurement approaches with the potential to improve consistency, reduce waste and give the industry more stability.
One of the models receiving particular attention is the framework procurement contract, a system long used in the UK that is credited with simplifying repetitive work and improving programme level planning. Hong Kong SAR has already tested the idea through a pilot ground investigation framework and may adopt it more widely, as the development of the Northern Metropolis intensifies.
The rest of this article considers why the framework model has gained traction in Hong Kong SAR, how it operates in practice and what contractors and legal advisers should be thinking about as the administration tests whether this imported concept can be adapted to local conditions.
Hong Kong SAR continues to face construction costs that are exceptionally high by international standards. A combination of complex site conditions, demanding regulations and labour-intensive methods contributes to this. Many projects require multi-layered approvals from different departments and a level of supervision that slows progress and adds cost.
Contractors also include substantial risk allowances to protect against underground conditions, design changes and extensive coordination duties. Together these factors create an environment where even routine public works carry significant expense and where long-term budgeting becomes difficult.
At the same time, modernisation has been uneven. Technologies such as modular construction, digital tools and data-driven planning have gained traction in other advanced markets but are still applied inconsistently in our construction sector.
Many contractors and consultants continue to rely on manual processes that limit efficiency and reduce the ability to coordinate effectively. Opportunities for automation, digital quality control and better forecasting remain underused.
These gaps keep productivity lower than it could be and make it more difficult for the industry to handle large volumes of work with predictability.
These pressures are emerging at a moment when Hong Kong’s procurement system is itself showing strain. The fiscal environment has also tightened. The administration has recorded successive large budget deficits, prompting calls for greater discipline in capital spending and closer scrutiny of value for money. Several public works projects have been delayed, adjusted or reduced in scope, and major transport proposals have been revisited with an eye to cost-saving design.
As a result, there is growing urgency to find procurement structures that reduce duplication, improve efficiency and help deliver public works in a more stable and predictable way.
A framework procurement contract is a long-term arrangement that allows a client to procure works or services repeatedly without undertaking a full tender process each time.
Rather than treating every project as a new and isolated exercise, the client carries out a substantial assessment at the outset. It selects a group of qualified contractors or suppliers who meet the standards required and appoints them to a panel that remains in place for a defined period, usually three to five years.
One way to picture this is as a circle of trusted suppliers – similar to a panel of law firms – chosen once, so that the client does not have to restart the entire market search every time a familiar need arises.
Once the panel is set, individual projects and works orders can be awarded far more efficiently. Competition is maintained, but through shorter and more focused processes. This may involve ‘mini-tenders’ among suppliers or a clear set of allocation rules that determine how work is distributed. The client retains the benefits of competition and performance oversight, while avoiding the delays and administrative burden associated with full tenders for every task. Under the UK Procurement Act 2023, this type of arrangement sets out the rules, pricing principles and conditions that govern future awards.
For contractors and suppliers, a framework offers a degree of stability that is rarely found in traditional procurement. Because work is expected to arise repeatedly over the life of the framework, suppliers can plan manpower, equipment and investment with greater confidence.
This is one of the features that has drawn interest in Hong Kong SAR. Experience in the UK shows that well-structured frameworks encourage earlier contractor involvement, better integration between design and construction and more consistent planning across entire programmes rather than on a project-by-project basis.
The working environment becomes more collaborative and predictable.
Hong Kong SAR’s interest in the framework approach stems from a need to resolve long-standing inefficiencies.
Numerous reviews have highlighted high transaction costs, fragmented workflows and uncertainty that drives up risk pricing. Frameworks offer a structural way to address these problems by creating a more predictable, coordinated and collaborative platform for procuring public works.
The first attraction is that frameworks streamline procurement. Under the traditional system, even highly similar projects require full tenders. This repetition consumes manpower, lengthens approval timelines and slows the start of construction.
By establishing commercial, technical and procedural requirements upfront, frameworks allow later procurements across different works departments to move more quickly and consistently. This aligns with Hong Kong’s ambition to simplify documentation, modernise internal processes and use digital tools more effectively.
Secondly, it offers a more balanced competitive environment. Reliance on one-off tenders tends to favour large contractors with the resources to bid continuously, gradually narrowing the supplier base. The administration is conscious of the need to broaden participation and maintain diversity.
A well-designed framework keeps multiple qualified contractors involved over several years while enabling both established firms and new entrants to access opportunities. It also reduces the extent to which contractors must price in unknowns. With a clearer pipeline and, where suitable, earlier involvement in design, contractors can price more accurately and with less defensive contingency.
The third advantage is improved delivery. Many issues identified in local studies, including inconsistent standards and slow adoption of modern methods, stem from a project-by-project approach.
Frameworks allow recurring work to be organised at a programme level, enabling consistent processes, better coordination of resources, stronger knowledge sharing and greater use of standardised and technology-enabled methods.
For these reasons the administration is studying frameworks closely. Their success will depend on thoughtful design and implementation. The market in Hong Kong SAR is intensely competitive and shaped by long-established procurement habits.
Early pilots, such as the ground investigation framework, will play an important role in determining how the model should operate, how suppliers should be engaged and how it can be adapted to the local legal and institutional setting.
For contractors and suppliers, the introduction of frameworks brings a different mix of commercial and operational considerations. These can present challenges, but they also open opportunities for firms that are prepared to adjust the way they work.
Competition remains intense under a framework. Experience from overseas markets shows that contractors still need to submit bids for each call off, often within tight timeframes and without any assurance of future workload. Admission to a framework is only the first hurdle.
There is no guarantee of volume once a contractor is on the panel, and in some cases clients may intentionally award only a very small number of work orders in each batch to keep competitive pressure high among panel members.
This makes it difficult for contractors to judge how much investment, manpower and equipment should be committed for a framework. It also places pressure on bidding teams and can lead to fatigue, especially when several call offs are released in close succession.
Contractors that streamline their internal processes, sharpen their bid discipline and build the ability to respond quickly are more likely to maintain a steady flow of work and demonstrate consistent performance throughout the life of the framework.
Pricing arrangements also evolve under a framework. Preset pricing structures and open book requirements limit the ability to adjust risk or margin across a portfolio of projects, and they tend to leave less room for commercial manoeuvre. This environment can further drive down pricing because contractors need to be competitive enough to be admitted onto the panel in the first place, yet may still have to lower prices again to win individual work orders against other participants.
Although pricing pressure is sharper, frameworks also reward firms that improve productivity, use data more effectively and demonstrate transparent, well controlled costs. Contractors that invest in efficiency and repeatable delivery systems are better placed to remain competitive without undermining long term sustainability.
Operational complexity may also increase, particularly where different government departments issue call offs using different NEC options or apply those options in varying ways. Contractors cannot choose which departments they work for under a framework, and different works departments may issue orders through the same arrangement. Each may have its own expectations, documentation requirements or administrative practices. These inconsistencies can create confusion or cause delays.
Contractors that invest in NEC capability, provide targeted training and develop internal guides for dealing with different departments will be better positioned to operate confidently and build a reputation as reliable long-term partners.
None of these challenges makes the framework model unsuitable for Hong Kong SAR. Instead, they highlight areas that require careful planning and a thoughtful transition from traditional tendering practice. With clear governance, appropriate risk allocation and practical safeguards, frameworks have the potential to offer both government and industry a more stable and forward-looking basis for delivering public works.
The shift toward framework procurement has significant implications for the legal community. It is not simply a procedural change but the introduction of a structure that combines a long-term overarching agreement with individual project contracts.
Experience in the UK shows that frameworks require close coordination between legal drafting, contract administration and governance. Guidance from NEC and FAC-1 stresses the need to ensure that the framework aligns with the terms of individual NEC contracts.
Even small inconsistencies in pricing mechanisms, early warning procedures or risk allocation can lead to practical difficulty. Similar issues will arise in Hong Kong SAR, particularly for contractors still becoming accustomed to NEC.
Risk management also takes a different form. A framework may span several years and involve multiple departments. This shifts the focus from project-level risk to programme-level risk. Lawyers must therefore consider not only the obligations within each contract but also how performance requirements, remedies and governance mechanisms operate across the entire framework.
Another important feature is the rise of behavioural obligations. Modern collaborative contracts, including FAC-1 and the NEC suite, emphasise cooperation, transparency and early supply chain involvement as central expectations.
These provisions are not merely aspirational. Courts may be required to determine whether parties have met duties to act collaboratively or in a spirit of mutual trust.
Lawyers must therefore draft these obligations with care, ensuring they are clear and enforceable without inadvertently increasing liability or creating ambiguity.
A version of this article first appeared in the June 2026 issue of Hong Kong Lawyer, the official monthly publication of The Law Society of Hong Kong.
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