Hong Kong SAR encourages cost-consciousness in project delivery

Out-Law News | 16 Nov 2021 | 3:09 am | 2 min. read

Building up a cost-conscious culture will help to lower construction cost and use public resources more effectively in the Hong Kong Special Administrative Region (SAR), according to new report.

The project strategy and governance office of Hong Kong SAR Development Bureau recently published a brochure “Cultivating cost-consciousness in project delivery” (21-page /42MB PDF), in which it set out in detail the necessity for the Hong Kong SAR government to cultivate cost-consciousness  in future project delivery.

The publication follows the project cost management forum held in June 2021, at which the government and construction industry discussed and shared cost management best practices and insights. The forum agreed that the construction industry needs to further accelerate the principles of Construction 2.0 (56-page / 5.96MB PDF), which was launched in 2019 and prepared by the Development Bureau of the Hong Kong SAR in conjunction with KPMG, to tackle six challenges identified in the Hong Kong SAR construction market.

Turner Nicholas

Nicholas Turner

Partner

Cost-conscious project delivery is critical to ensure Hong Kong’s resources and public funds are used effectively and efficiently. 

Those challenges included a significant volume of future construction, high costs, unsatisfactory performance of large projects and site safety performance, declining productivity and lack of creativity and innovation. In addition, ‘high costs’ impacted on the other five challenges. It is "critical" to create cost awareness throughout the industry's supply chain in order to tackle these challenges, according to the newly published brochure.

Mohammed Talib

Mohammed Talib

Partner

Cost consciousness is an important factor in any procurement exercise, and the lessons derived from the Report will be of value to the private sector as well as the public sector. 

Nicholas Turner of Pinsent Masons, the law firm behind Out-Law, said: “Cost-conscious project delivery is critical to ensure Hong Kong’s resources and public funds are used effectively and efficiently. There have already been significant steps taken to ensure cost awareness and improved efficiency. Innovation and transformation of the construction industry is being encouraged throughout the industry via the construction innovation and technology application centre, which was established in 2017; there is widespread use of building information modelling and off-site fabrication and modular integrated construction is being encouraged.”

“There are also improvements in professionalism and site safety, and adoption of new methods of procurement through the use of the NEC form of contract to ensure risk is shared to those that can manage it better. There are challenges to overcome, such as an ageing workforce and productivity issues, which cost-conscious project delivery will help to achieve,” he said.

Mohammed Talib of Pinsent Masons, the law firm behind Out-Law, said: “Cost consciousness is an important factor in any procurement exercise, and the lessons derived from the report will be of value to the private sector as well as the public sector. The pace of change is not as fast in the private sector in Hong Kong SAR. Private sector participants will need to consider how the public sector experience of cost-consciousness can be delivered alongside the desire for iconic buildings, the need to develop complex and large-scale highly integrated projects, and the challenges of construction in the urban jungle of Hong Kong SAR.”

The brochure suggests four solutions including building up cost-consciousness in project delivery; focusing on project value during procurement with adoption of a wider array of procurement models; strengthening project governance to ensure “successful and satisfactory project performance”; and evolving to smart, safe and productive construction by adopting new methods of construction, data driven ways of working.

In October, the Hong Kong SAR chief executive Carrie Lam unveiled the Northern Metropolis plan, involving a total land area up to 300 square kilometres (sq km) which will be used to develop for housing and technology, which was described as "the most vibrant area where urban development and major population growth of Hong Kong SAR in the next 20 years will take place".

“Cost-consciousness project delivery will be a key factor in ensuring the successful delivery of this mega-project,” said Nicholas Turner.