Contractors 'should consider supply issues' in Hong Kong land-reclaim contracts

Out-Law News | 05 Mar 2019 | 9:09 am | 1 min. read

The Hong Kong government's plans to reclaim 1,700 hectares of land to ease land shortages will give contractors tendering opportunities, but also bring potential risks, an expert has said.

The Hong Kong government’s plans to reclaim 1,700 hectares of land to ease land shortages will give contractors tendering opportunities, but also bring potential risks, an expert has said.

Construction law expert Alvin Ho of Pinsent Masons, the law firm behind Out-Law.com, said the government's 'Lantau Tomorrow Vision' plan could lead to immense demand for materials, particularly sand.

"The overall market for manufactured sand is experiencing competing demands, particularly from the construction industry in the mainland," Ho said.

"The cost of the reclamation works will continue to rise due to a shortage of sand supply from China and subsequent rising prices, easily leading to serious budget overrun and delays," Ho said.

Ho said the 2018 construction of an artificial island during the development of the Hong-Kong-Zhuhai-Macau Bridge, the world's longest sea crossing, was delayed due to insufficient supply of marine sand.

"Contractors bidding for reclamation projects should carefully assess the risks relating to the supply of sand and ensure that the contract provides for an appropriate mechanism for claiming additional payment due in price fluctuation of sand," Ho said.

"Shortage of construction materials should be considered as one of the delaying events entitling contractors to an extension of time. Contractors should also be prepared to face more challenges in procuring sand up to the standard required by the environmental permit and a robust inspection mechanism has to be put in place to check materials supplied by the subcontractors," Ho said.

The Hong Kong government announced in February that it had accepted eight recommendations made by the Task Force on Land Supply (19 page / 238KB PDF), which include creating 1,000 hectares of artificial islands as well as reclaiming land.

Secretary for development Michael Wong said the government would bring together relevant departments and adopt an "infrastructure-led and capacity creating approach" to planning to ensure Hong Kong had a sustained supply of land.

The Lantau Tomorrow Vision project was announced by Hong Kong chief executive Carrie Lam Cheng Yuet-ngor in October 2018.