MAJOR INFRASTRUCTURE PROJECT MANAGEMENT SYSTEM IN HONG KONG

CHOW Che King Hong Kong Academy of Engineering Sciences Abstract Within a few decades after World War II, the infrastructure development and economic growth, supporting each other reciprocally, have transformed Hong Kong into an international metropolis in the world. Following introduction of new technology, attraction of requisite staff and resources, we have built many world class infrastructure projects in this small place. The project management system gradually builds up with high transparency, and large variety, catching up with international standards. The paper introduces the advancement of infrastructure development in Hong Kong from the simple and basic forms to sophiscated systems developed to suit the large variety of projects nowadays. It touches on policy formulation, financial arrangement, organization, consultants employment, choice of contracts, site supervision, safety and quality control. In addition, it briefly described some of the major projects carried out in different stages, the methods adopted and the background at that time. These include early water supply schemes, land formation, transport, and new town development following, and later the airport core projects, expansion of road and rail networks, plus the recent cross-border projects. The article tries to illustrate the magnitude of infrastructure development in Hong Kong, its contribution to the economic growth, and the flexibility and multi-lateral characteristics of the management system. Keywords major management, Hong Kong (1) Introduction infrastructure, project serves as the region hub. The new town development programme is probably the largest in the world, housing half of the population in a well planned environment. At the same time, the project management also advances with time to international level. (2) Early Infrastructure Development

After World War II, there were so much to be carried out. Due to resource shortage, works were concentrated on repairs and reconstruction. The maintenance contracts are spilt into areas with a definite period, based on adoption of a Schedule of Rates. Items are grouped together according to trades with fixed rates. Works are measured up on completion and priced under appropriate items. Contracts are tendered on % of the Schedule of Rates basis. During the 1950s, population increased rapidly and industry grew up. Water shortage was most critical. The Tai Lam Chung Water Supply Scheme, started in 1953, was the largest engineering work in Hong Kong. Designed in UK, it comprised mainly of a 200 ft high concrete gravity dam and 4 earth dams. The contractor employed a capable project team with over 1000 directly employed residential site staff and workers. There was no detailed quality control manual and large site management staff of current scale, the works were efficiently executed and completed within 4 years. Later water supply came from enclosed seainlets cut off by dams, and water transport from East River in Guangdong. There is no longer water supply problem. (3) Project Management Manual

Located at the southern coast of China, Hong Kong has a small area of only 1103km2. Starting from a small fishing community, it has grown to become a modern world city, a prosperous trading port, and an important financial centre. Its gross domestic product exceeds US$150 billion. With a population of 6.8 million, the average GDP per capita ranks favourably with those in developed countries. Throughout this period, an important contribution comes from the development of its infrastructure systems. The 2000km of highways comprises of many expressways, major bridges and tunnels, linking up with Mainland China in the north. The railway systems are modernized, with still a number under planning. The container terminal is the busiest in the world, and the new airport efficiently

In the 1960s, economic development was led by massive export from manufacturing industry, resulting in high demand of land supply and transport infrastructure. To manage the vast number of projects, the Public Works Department started compiling a Project Administration Handbook, which covers the following chapters: 1. 2. 3. 4. 5. 6. 7. Project Planning Project Approval Land Matters Design and Estimates Contract Documents Tender Procedure Contract Management

8. 9.

Maintenance and Minor Works, and Works for and by Others Measurement Procedure

The Handbook was gradually expanded into 3 thick volumes listing out relevant project management details for executive staff to follow. Hong Kong being an international city, engaging many overseas consultants, contractors, materials and plant suppliers, it is important also for relevant bodies outside the Department to understand the local management system. (4) Project Categorisation

formal voting after discussion in the Finance Committee. Tender invitation can start after project inclusion in Category A. If the tender sum is higher than approved estimate, or increase of project cost is necessary due to various reasons during construction period, prior approval must be sought. The Audit Department within government, and the Public Accounts Committee of LegCo. will also regularly check the financial situations of these projects. (6) Tender Qualification

Infrastructure projects are mostly public works led. Those under government are divided into 6 categories for management by different professional departments, viz, Civil Engineering, Highways, Drainage, Waterworks, Territory Development and Building. There is a Capital Works Reserve Fund, established within the Budget to provide funds for the Public Works Programme with hundred billions project costs. There are over a thousand items in the Programme. Besides categorisation according to the nature of projects, they are also divided into Category A, B and C on the basis of their importance, likely progress and funds available. The items are reviewed regularly for follow-up actions, such as upgrading, down grading or deletion, and works estimate revision. Category C Project agreed by the relevant government committee in principle for inclusion in the Public Works Programme. Acceptance for implementation within 5 years. To proceed with detailed feasibility study, engineering design, contract preparation, land acquisition process, and relevant works as required by Ordinance. Project scope and cost approved. Design and contract ready for calling tenders.

Calling tenders for public works contracts is published in weekly government gazette, stating the extent of works, the Category and Group of eligible tenderers, and the closing date. The management department will analyse the tenders received according to established procedures, and submit recommendation for acceptance by the Central Tender Board comprising members from relevant departments. There is a fairly comprehensive system formulated for management of tenderers for public works contracts. They need to apply to the Works Bureau for admission, with details including their past contracting record, financial status, management staff and their experience, works depot and plants. After confirmation of contents, the contractors would be classified into 5 categories on the basis of their experience, viz, Buildings, Port Works, Site Formation, Waterworks, Roads and Drainage. A contractor can be listed under more than one category. Each category is divided into Group A, B and C with reference to the status of the contractor. Group A can tender contracts of value up to $20 million, Group B up to $50 million, and Group C exceeding $50 million. Contractors are normally given probation status before confirmation. They can be upgraded with proven performance, or down-graded on deterioration, and even deletion. Overseas contractors with track records can be included directly in Group C. Other specialist contractors or suppliers have their own lists. For exceptionally large projects that require special technology and plants, international tender procedure and pre-qualification are needed. Tenderers will submit their relevant skill, equipment, finance and management capability for checking. Those with special expertise can also form joint ventures to tender after approval. Since joining the World Trade Organisation, Hong Kong is required to inform other countries to let their eligible contractors to tender. (7) Contract Management

Category B

Category A

(5)

Project Approval

If the project is considered socially important, the public will be consulted, before it is included in the Public Works Programme for approval by the Finance Committee of Legislative Council, which is responsible for vetting the government budget, annual revenue and expenditure. Project details are initially submitted to the Public Works Sub-committee for recommendation. The Project Director needs to attend the monthly PWSC meeting for any explanations required. Differences in opinions would be decided by

Before starting work on site, the contractor needs to submit a works programme, listing out the important events in time sequences. For major contracts, a critical path network is often prepared to

show the related critical events and the consequence due to delay. The site management staff on both sides would need to meet at regular intervals to examine the progress and quality of works. Any deficiency should be drawn to the contractors attention to improve, failing which a written warning would be issued, or disciplinary action taken. Moderate offence takes the form of suspension for tendering, with downgrading or deletion for the serious cases. Each year, the contractor is required to submit a satisfactory audited report, failing which, similar action would be taken. In executing large complicated contracts, unforeseen variations may arise. The supervisory staff needs to make a fair settlement proposal on the basis of true records, for acceptance by the project manager and contractor. If necessary, it may need to go for mediation, adjudication, or arbitration according to contract conditions and seriousness of the disputes. (8) Site Safety and Quality Management

(9) Contract Arrangement

Forms

and

Financial

In late 1960s, the rising economy had created strong demand on many infrastructure projects of greater complexity and magnitude. New technology was needed and more varied forms of contracts were introduced. The private developers became more interested in such investment. International consultants and overseas contractors flocked to Hong Kong for more business opportunities. Project management also advanced a big step forward. (10) Design and Build Contract

Both safety and quality control call for great attention in site management. In the early days, not much attention was paid to site safety, resulting in high accident rates. Later government strengthens safety regulations, and promotes greater consciousness of precautionary measures. Various guidelines are issued for control of site noise, dust, foul gas, pollution, waste and demolition works. In 1990s, Works Bureau introduced a checking system and a safety plan to incluce payment to contractor up to 2% of contract value for complying with safety measures. A safety officer is engaged on large sites to educate the workers, to strengthen precautionary measures and to monitor the execution. Government would send independent checking teams for regular inspection. For dangerous events and works, such as deep trenching, formwork for large concreting, contractors need to obtain independent design check certificate from consulting engineers before proceeding with the work. Similar procedure is applied to design of major complicated structures. For instance, a particular expert was engaged to carry out an independent check of the Tsing Ma Bridge, on completion of its suspension deck design, and wind tunnel model test verification. Concurrently, Hong Kong also follows the adoption of international quality management system (ISO9001). Tenderers for major contracts would need such qualification. There is an approved supervisory manual and guidelines for working staff to follow. Later, consulting engineers and government departments also undertake to adhere to similar certification procedures.

In 1967, Hong Kong started to build the widest road to modern traffic engineering standard, the new Waterfront Road along the northern shore, 4km long, 50m wide, dual 3 lanes carriageway with verges and service road. Ten flyovers and footbridges were then built with prestressed concrete construction. Contractors collaborated with prestressing system manufacturers, or employed consultants to submit their own design for the structures at lump sum price. The group of contracts attracted a number of international prestressed systems to establish themselves in Hong Kong. The technology was first applied in precast beams and pretensioned piles, and later expanded to continuous curved decking and box girders. About the same time, a private developer has completed the ocean terminal project, catering for berthing of 80,000 ton ship at Tsimshatsui with upper decks for shopping arcades. The work was designed and built by a British contractor, starting a new area both for tourism and international contracting. Since then, this form of contract was adopted in many major infrastructure projects, recent cases being 2 cable stayed bridges at Kap Shui Mun and Ting Kau. Such contract is simpler for the project manager to administer, but there exists a higher risk for contractor, who may have to overcome some unforeseen difficulties. (11) Build and Transfer Form

Government may require the developer to undertake an engineering project under the land lease conditions, and to transfer it for public use on completion. The first Tsing Yi South Bridge set an example. The southern part of Tsing Yi Island was planned for industrial development, including power station, oil storage and cement works. The developers were required to jointly construct this bridge to link up with Tsuen Wan. The work itself was supervised by the Highways Office. A new technique, double cantilever prestressing segmental construction was introduced in this bridge construction, and was widely adopted in later similar works.

In some private development projects, government may also require the developer to undertake certain community facilities, footbridges, or access road to comply with town planning requirements, and to transfer them to public on completion under land lease conditions. (12) Build, Operate and Transfer Project

help to subsidize fares. Shares can also be floated in the stock market. Similarly, the Airport Authority was set up for developing Chek Lop Kok Airport and subsequent operation. Besides, there are Industrial Estate Corporation, Science Park and Urban Renewal Authority established to deal with their relevant project implementation. (14) Private Infrastructure Development

Certain projects, such as the Hong Kong Cross Harbour Tunnel, was deemed to be financially viable for adoption of this form of contract. The government do not have to invest; the developer will derive profits on tolls during operation; and the work will be handed back to public at the end of a fixed period. The initial shareholders of the company included a bank, several commercial firms and government. The consultants first introduced the submerged tube tunnel construction technique to Hong Kong. The contracting consortium comprised of 3 companies from UK, USA and HK. Huge circular steel segments were fabricated on a waterfront site, after which they were towed to be sunk in a pre-dredged trench in the seabed, and linked together. The tunnel was open to traffic in 1972. As it was the first fixed crossing between Hong Kong Island and Kowloon, the traffic flow increased rapidly, and so was the toll revenue. The UK bank loan was quickly paid up. The high profit did favour the floating of shares to the public later. At the end of 30 years contract period, the tunnel became public. The subsequent tunnel projects were also contracted on similar terms, including the Eastern Harbour Crossing with 4 traffic lanes and 2 MTR tracks, the 4km long Tates Carin Tunnel in N.T. East, the 6 lane Western Harbour Crossing, and the Tai Lam Tunnel in N.T. West. However, the traffic flow is not as high as initially expected, the operators have to bear financial hardship in their early years of operation. (13) Public Infrastructure Corporation

Some infrastructure projects are basically commercial enterprises. There is no need for them to become public. Thus, the private sector is encouraged to develop container terminals in stages. Starting from 1974, container throughput has risen to over 20 million TEU (twenty foot equivalent unit) in 2003 (including mid-stream handling), the highest in the world. Such projects are planned by Government to phase with long term development. Subject to confirmation by feasibility study, sites are tendered by public auction. The developer would proceed with reclamation and installation of mechanical equipment. The latest Terminal No. 9 is now partially completed. However, due to the high development cost over HK$10 billion, and keen competition from nearby similar facilities being closer to the production base in the region, there are doubts on further expansion in Hong Kong, hence the site of Terminal 10 is further delayed. Besides container terminals, energy projects are all developed by the private sector. The earlier electricity power stations adjacent to urban areas have all been relocated to more remote sites, that can satisfy stringent environmental requirements. With quite favourable development terms, there is no shortage in electricity over the years. The same applies to telecommunication. With the rapid advancement in technology and the popularity of mobile system, Hong Kong maintains to be an important information centre. Fuel supply with oil and gas also depends on market economy, as long as they can satisfy government requirements and environmental protection considerations. (15) New Town Development

Many infrastructure projects are important to the area development, but are difficult to impose charges, or they are commercially not viable, because of low usage level. For those systems that are capable of staged development and financially viable, public corporations will be set up for operation on commercial principles. They will be granted fabvourable lease conditions and equity shares for establishment, and can borrow loans from banks; so as to reduce demand on public funds. The Kowloon Canton Railway and the Mass Transit Corporation took over the original facilities and planning from Government, and continued with railway construction and operation. 190km length of railways are now completed, and many still under planning. They are allowed to carry out podium property developments in conjunction with private companies for profits that

The New Town Development Programme is a large conglomerate of super projects in Hong Kong. The building up of each new town is a major item of its own. It takes over 20 years from planning to substantial completion of each community, stretching over commercial/residential, industry, education, medical, and recreation development, besides infrastructure. Management-rise, it also succeeds in establishment of a new matrix system. The Programme was established in 1973, when Hong Kong economy strength was felt sustainable to provide a reasonable environment for a massive population to improve their poor living

conditions. A dedicated Department was set up to build 3 major new towns in Shatin, Tsuen Wan and Tuen Mun. A separate multi-discipline team of engineers, town planners, architects, and landscape architects led by a senior Project Manager was made responsible for development of each area, designed to modern planning standards and balanced development principles with housing, commercial/industrial uses, and community facilities to be added in phase with population build-up. Each new town development was subject to detailed site selection and feasibility study, in accord with the Territory Development Strategy. The development area, population and external infrastructure links were formulated, based on which an Outline Development Plan, detailed Layout Plan for individual areas, and overall Development Programme were prepared. The 10 years Programme contained all relevant information such as land uses, population distribution and growth, housing, commercial/industrial development, community projects and infrastructure items. Progress was updated each year with annual editions for circulation to all relevant bodies and available for public information. With continuous dedication efforts from both public and private sectors and adequate resources, the Progamme gained great success, and was later expanded to include urban development areas. Within 30 years, 9 new towns are built up, 10,000 ha of land formed, about 1000 km roads extended, many river courses improved, sewage treatments plants built, new water and electricity supply systems added, 3 million people housed and numerous community facilities completed, at a combined cost of several hundred billion dollars. (16) New Airport Core Projects

private with Build, Operate and Transfer contract. Besides, Kap Shui Mun Bridge contract was awarded on Design and Build method. Most other contracts were entrusted to consulting engineers for design and supervision, with government departments taking up the rest. Throughout the construction period, the managing departments had monthly meeting to review progress and related matters. For the Airport and Railway items, the equity fund issue had to be settled with Sino-British Agreement. With joint efforts, most items were completed before the 1997 handover date, with the airport and railway projects 1 year later. The combined costs of these project add to HK$160 billion. (17) Recent Infrastructure Development

In recent years, there are some changes in the economic pattern and social opinions in Hong Kong. While public infrastructure works slow down a little, there are some new major Private Finance Initiatives projects coming up, such as the Cyber Port in south western Hong Kong Island, and the Disneyland Park in north western Lantau. Both projects were negotiated with a single developer without going through tender procedure, while government is supporting them with concerted planning and infrastructure building. The Penny Bay is reclaimed for the American company to develop their tourism project, with all related designs being mutually agreed prior to construction. For public works, the managing departments are promoting a new non-binding post-award project partnering approach in a few selected contracts. Procedures and technical proposals in structured format are developed to implement the concept and process of partnering with the common view of improved works quality and higher cost effectiveness. Design and Built contracts are practiced on a large scale, cases being the Ting Kau stayed bridge construction, and the major culvert construction contract in Tseung Kwan O, where the contractor proposed large precast culvert segments by launching to replace the original consultants design of traditional cast-in-situ method. In the field of funding, government recently adopts a new public loan fund to enable more public infrastructure projects be started. Both private develops and government are also looking for opportunities to create new Public Private Partnership projects for mutual benefits. (18) Cross Border Projects

This Programme originated in 1977 when Government decided to relocate the airport from Kai Tak to Chek Lap Kok. The overall planning was completed in 1983, and Tsing Ma Bridge contract was ready for tender. However, it was suspended then. In 1989, the whole project re-started and expanded in scope to include 10 major items. An overall coordination department was established with the support of an international expert management team. Under a high level monitoring committee headed by the Chief Secretary, the Airport Authority was made responsible for the airport itself, Highway Department for 4 related items, viz, North Lantau Expressway, Lantau Link, Route 3 (Tsing Yi section) and West Kowloon Expressway, Territory Development Department managing Tung Chung, West Kowloon Reclamation, Central Reclamation Stage 1 and supporting infrastructures. The only commercially viable West Harbour Tunnel Crossing project was tendered to

Following agreement on the future of Hong Kong, the local government and Guangdong authority have collaborated to implement several cross border projects with good progress. The Shenzhen River

training works are far advanced with most sections widened and re-aligned. New bridges at Lo Wu and Lok Ma Chau are completed. The Shenzhen Western Corridor project is under construction with both sides handling respective sections and approach roads. Two even larger projects are under active consideration, the new high speed rail link between Guangzhou and Hong Kong, and the Hong Kong/Zhuhai/Macau Bridge across the Pearl River Delta. The latter scheme can be an ideal one for public/private partnership infrastructure. The author of this paper has made some suggestions for this work in earlier seminars held in Hong Kong, Zhuhai and Beijing. (1) A corporation be formed with supports from municipal governments in the region and interested private sector to appoint a joint consulting firm for production of a best overall scheme including design, financing and management organization structure. (2) Consider rail addition to the crossing and an all weather route, as with Lantau Link in Hong Kong. (3) Overall planning of navigation requirements for the whole Delta to produce the most cost benefit arrangement, not only for port development, and also for the crossing design. (4) Consider adjacent land development in conjunction with the crossing to improve its financial viability, as in the earlier route proposal from Zhuhai, making use of the 2 islands as intermediate landing points, rather than building artificial islands for a new alignment. (19) Conclusion

The recent Pan Pearl River Delta 9+2 Regional Development Agreement, will open up further the huge potential available in Mainland China. The development of professional services under The Closer Economic Partnership Arrangement (CEPA) will also facilitate mutual co-operation for an even better project management systems to the benefit of our infrastructure development and continuous economic growth. Reference 1. - 2003, My Life as an Engineer 50 years of Infrastructure Development in Hong Kong (in Chinese), Hong Kong University Press, 2003 (ISBN 962 209 6336). Engineering Hong Kong 50 years of Achievements Hong Kong Academy of Engineering Services and Hong Kong Institution of Engineers, 1997 Hong Kong 2003 (Report) Information Services Department, HKSAR

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About the Author Age 70, male, born in Hong Kong. Graduated in University of Hong Kong in 1955. He serves continuously for 40 years in HK Government works departments, having occupied senior positions as Head of Civil Engineering Office and Director, Territory Development Department before retirement. Some of the major projects undertaken by him include site supervision of Tai Lam Chung dams, leading Tsing Ma Bridge design, feasibility study of Chek Lap Kok International Airport, and later Shatin and Tseung Kwan O new town development, as well as urban expansion schemes. In addition, he participated in university education and professional training. After retirement, he was appointed Honorary Professor in University of Hong Kong, and Hong Kong Affairs Adviser by Central Government, PRC. He is a Fellow of Hong Kong Institution of Engineers, and a Council Member of Academy of Hong Kong Engineering Sciences. He has written many papers for local and international seminars, and helped to organise conferences. His book on 50 years of Infrastructure Development in Hong Kong published by Hong Kong University Press summarizes the progress of public works and their management system.

The demands on infrastructure projects are increasing with time. Besides works progress, quality and cost, greater attention is needed on site safety, environmental considerations, financial arrangement, and social opinion. The success depends on a comprehensive management system, flexible implementation skill, promotion of new technology, and right choice of the most cost effective contract form.