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Hong Kong regulator to extend government works contract

The Development Bureau of the Hong Kong Special Administrative Region (SAR) has decided to extend the time allowed for government works contracts and private projects land leases building covenants (BC).

The maximum extension period will be six months. This policy applies to all the ongoing government works contracts and all leases with unfulfilled BC, according to the regulator’s statement.

Infrastructure expert Alvin Ho at Pinsent Masons said: “This represents a very significant lifeline for the construction companies in Hong Kong. The latest wave of Covid-19 has severely disrupted the construction industry. Contractors are faced with shortages of labour and materials due to the unprecedented measures imposed by the governments in Hong Kong SAR, mainland China and beyond to curb the stem of the virus. In the past four waves of Covid-19 the issues of costs and extension of time remained to be dealt with under the terms of the construction contract. For the first time this has now been met with administrative intervention by the Development Bureau.”

“It remains to be seen as to how ‘flexible’ time extensions of up to six months will be granted by the works departments concerned. The announcement is also deliberately silent on the issue of time costs which can be very significant for the bigger projects. In the wake of this new announcement, parties to public works contracts should review their contractual positions under ongoing construction projects. Where parties have already been in discussion regarding the delay and associated costs arising from the Covid-19 pandemic, the announcement may provide some guidance and facilitate such discussions,” he said.

The regulator made the move due to the continuing significant impact of Covid-19 on the Hong Kong construction industry. It also encourages the industry to handle the contract time limits flexibly for development projects which are not limited by land lease contract terms.

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