Seeking Western wisdom

In one of the blocks at Sha Tin, gaping cracks appeared in the walls. When the building was demolished, at a cost to taxpayers of £20m, newspaper and tin were found in the superstructure. The housing authority promptly deflected criticism on to the construction industry, accusing it of shoddy standards and an absence of professional ethics.

A string of safeguards has now been put in place. In November 1999, all contractors were required to re-register with the Hong Kong Construction Association under more stringent assessment criteria, which included sending their top technical director and the authorised signatory of drawings to attend interview boards. "Some of the old contractors didn't get through the system," says Patrick Chan, the association's secretary-general.

In May this year, the Hong Kong government set up a nine-strong construction industry review committee, chaired by executive councillor Henry Tang, to look at ways of modernising the industry and improving procurement, quality and safety. As part of its investigation, the committee made a three-day visit to the UK last month to seek advice from the DETR and the Treasury on best-practice procurement, including partnering. "It will now look at how Hong Kong can reform along the lines suggested by Latham and Egan; we'll be looking at Movement for Innovation demonstration projects," says committee member Robin Whalley, managing director of Hong Kong-based engineering consultant Mott Connell. A report is to be published in December, and will serve as a blueprint for reform of construction in Hong Kong.

The initiative has been welcomed by the industry. "I remember reading the papers during the piling scandal and feeling so depressed," says Martin Hadaway, group managing director of Gammon, Asia's biggest contractor. "Everyone felt the same. The industry had to lift its game." Since February, he has been part of an informal taskforce of leading figures in Hong Kong construction that has been meeting to discuss ways of moving forward. "We decided to push forward different forms of contract that lead to better value, better service and better safety records. It's all about some form of partnering," says Hadaway.

The taskforce was set up by Russell Black, director of projects at the Mass Transit Railway Corporation, which already had partnering arrangements in place with contractors and consultants, including on the Tseung Kwan O extension.

Meanwhile, an investigation by the Independent Commission against Corruption fingered housing officials who accepted bribes from piling contractor Zen Pacific, and housing authority chair Rosanna Wong resigned. She was succeeded in September by engineer Cheng Hon-Kwan, whose industry experience is seen as a bonus. The housing authority has now entered into partnering arrangements with contractors, including Gammon.

Chan says the piling incidents are symptomatic of Hong Kong's lowest-price culture, which leads to cost-cutting, low quality and low supervision. Following lobbying from industry institutions, the housing authority changed the balance of assessment criteria from a 50:50 ratio of technical considerations to price, to a 70:30 split. Now, the industry is pressing for a "two-envelope" system, in which a shortlist of firms is drawn up first, and only then is the fee envelope opened.

Chan says that part of the problem is that the standard private contract, issued by the Hong Kong Architects' Association in 1973, is not up to today's requirements. "It gives clients a lot of flexibility to change their mind but allows the contractor no extension of time or the right to seek compensation." John Latter, project director of developer Cyberport Management, says high land values in Hong Kong have forced developers to drive down costs, awarding contracts to the lowest-price bidder. "Developing real estate in a high land cost environment is a complex business," he says. "Traditionally, the developer pays as much a day on interest charges as on construction. It puts a huge burden on contractors – it's hard to build quality buildings." The Hong Kong Construction Association has lobbied for six years to get the standard contact updated so risk is shared more equitably, but to no avail. "Hong Kong clients have an old-fashioned philosophy of risk-sharing," says Chan. "They don't see the possibility of a win-win situation – they think it must be win-lose." He hopes the government review committee's trip to London has started to convince them otherwise.