NEC Client of the Year 2017 finalist: Development Bureau, Hong Kong SAR Government

Value: Works contracts (with project estimate around HK$18B (£2B)) and consultancies (with project estimate around HK$200M (£20M))
 
NEC3 contracts/options used: NEC3 ECC Options A, B, C and D, ECSC, TSC Option A, PSC Options A, C and G
 
Start-finish dates: Since 2009 and on-going

Main project team members: 
- Development Bureau, Hong Kong SAR Government 
- Steering Committee and Working Group for NEC Pilot Projects 
- Works Departments, Consultants and Contractors for NEC Pilot Projects 

Project scope:
The Development Bureau (DEVB), as the policy and client bureau for public works procurement in Hong Kong, has been promoting collaborative partnership in the implementation of works contracts undertaken by the Works Departments (including Architectural Services Department, Civil Engineering and Development Department, Drainage Services Department, Electrical and Mechanical Services Department, Highways Department and Water Supplies Department) so as to enhance the management efficiency and cost effectiveness of public works projects in Hong Kong. 
 
As early as 2009, DEVB has promulgated the adoption of various NEC procurement options in significant numbers of public works projects so as to advocate the Works Departments and construction industry stakeholders, including consultants and contractors, to build up the required expertise, knowledge and experience in NEC.  As at end 2016, NEC form has been adopted in over 60 works contracts (with project estimate around HK$18B (£2B)), of which eight already completed, and in 12 consultancy agreements (with project estimate about HK$200M (£20M)).  The NEC projects cover a wide variety of works nature and scope, including site formation, government buildings, drainage and sewerage works, highway works, submarine pipelines, electrical and mechanical facilities, geotechnical works, and operation and maintenance works, which have demonstrated DEVB’s upmost efforts in pursuing the spirit of mutual trust and co-operation in public works procurement.  One of the largest NEC projects undertaken is the complex and mega scale design-and-build project for Tin Shui Wai Hospital (with project estimate about HK$3B (£300M)) in NEC3 ECC Option A completed in 2016.  For the target cost options, namely NEC3 ECC Options C and D, they have been used in 15 works contracts, including mega projects Happy Valley Underground Stormwater Storage Scheme (with project estimate about HK$1B (£100M)) and Tseung Kwan O-Lam Tin Tunnel-Road P2 and Associated Works (with project estimate about HK$2.5B (£250M)).
 
Starting from 2016, DEVB has been further extending the adoption of NEC form in much more public works projects in Hong Kong.  The total number of NEC works contracts has increased from about 30 in early 2016 to over 60 in end 2016.  NEC form is now commonly used for capital works contracts for public works projects managed by the Works Departments as far as appropriate.  We have also exercised our best endeavours to adopt the target cost options (ECC Options C and D) in some larger scale and complex projects, such as those exceeding HK$1B (£100M). The NEC form has helped to alleviate uncertainties as perceived by the contractors which in turn would reduce risk premium allocated in tenders.  Moreover, with the target cost arrangement, this will help align the common goal and objectives of the contractual parties with a view to achieving saving in terms of cost and time through collaboration.
 
In October 2016, DEVB has published the Practice Notes for the Works Departments and the industry stakeholders in using NEC ECC for public works projects procurement with a view to aligning the practice and codifying the knowledge and experience harvested. In addition, to streamline the legal vetting and approval processes, standard contract documents and sample templates have also been provided for reference by the Works Departments and the industry stakeholders, thereby encouraging the wider adoption of NEC form in public works projects.  We are also actively preparing the Practice Notes for NEC PSC and TSC which are scheduled to be released in 2017 tentatively.
 
DEVB has duly gauged the feedbacks and views of the colleagues from the Works Departments and representatives from the industry stakeholders including NEC experts, contractors and consultants throughout the formulation process of the Practice Notes.  With concerted efforts, we have established clearer guidance on a number of recurring issues pertaining to NEC procurement in the Practice Notes, such as developing effective partnering spirit, criteria for selecting suitable main Option, drafting of tender documents and setting the appropriate level of payment checking for target-cost contracts, etc.  We have also arranged briefings to the Works Departments and the industry stakeholders to share information and exchange views for future enhancements of the Practice Notes.
 
Notwithstanding that qualitative benefits regarding the use of NEC ECC have been much appraised by the industry in Hong Kong, DEVB has decided it is an opportune time to enhance the performance by taking it to the next level with the introduction  of a benchmarking mechanism to measure its quantifiable benefits in holistic and systematic manner through like-with-like comparison between NEC ECC contracts and traditional General Conditions of Contract (GCC) form, and subsequent application of the knowledge harvested by the players for continual improvements.  We have established Key Performance Indicators (KPIs) to measure the cost and time performance aspects of NEC ECC contracts and formulate further improvement goals.  From the preliminary analysis results, NEC ECC pilot projects in general could deliver certainty for the project outcomes in terms of cost and time performance.
 
A new chapter of the NEC’s journey in the procurement of Hong Kong public works projects has just unfolded.  DEVB is determined and optimistic that NEC will continue help to shape the collaborative work culture in the Hong Kong construction industry for its sustainable growth and development.
 

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