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KCRC investigation report on West Rail Contracts 2.
Statement by PCICB Chairman on KCRC's Investigation
Report on West Rail contracts 3.
Bonus Rewards for Outstanding Contractors 4.
MTRC hints at mainland links 5.
KCRC vows to do better 6.
K Wah reveals plans for hotel development 7.
Plan to reduce consultation time slammed 8.
Swire gives SAR $4b vote of confidence 9.
Lawmakers reject KCRC findings 10.
Plans to privatise Wetland Park management defy study
1. KCRC investigation report on West Rail Contracts The
Government today (May 16) welcomes the Kowloon-Canton Railway Corporation (KCRC)
Managing Board's decision to implement the recommendations in Ernst & Young's
investigation report on West Rail contracts. "There was public concern about
additional payments made by the KCRC under the supplemental agreements with Siemens
and other contractors for the West Rail project. The KCRC Managing Board was also
determined to review these agreements in order to see if any remedial or improvement
measures should be taken. Ernst & Young has conducted a thorough investigation
and the report set out detailed recommendations to strengthen the Corporation's
systems and procedures for contract procurement, monitoring and management. It
is very important that KCRC now takes all the necessary steps to implement these
recommendations," said a Government spokesman. "The Government took
a major step in December last year to separate the duties and functions of the
Chairman and the chief executive of KCRC. This has helped strengthen the corporate
governance of the Corporation. The investigation report suggested that consideration
should be given to appointing persons with knowledge and experience of major projects
to complement the existing Managing Board's knowledge and experience. We will
consider this suggestion when we review the appointment of Board Members later
this year. "The report also suggested that the Corporation could consider
appointing non-KCRC Board Members with appropriate technical skills such as expertise
in law, construction and engineering to the New Railway Projects Steering Committee
of the Managing Board. We welcome the decision of the Managing Board to pursue
this." "There are many challenging tasks ahead for KCRC arising from
its new railway projects and expanding patronage. The Managing Board and the management
of the Corporation should work together closely to tackle these challenges. The
Government will render full support to the Corporation in these endeavours,"
added the spokesman. [Source:
Hong Kong Government, 16 May 2002] 2.
Statement by PCICB Chairman on KCRC's Investigation Report on West Rail contracts
The following is a statement by Chairman of the Provisional Construction Industry
Co-ordination Board (PCICB), Honourable Henry Ying-yen Tang, on the investigation
report on West Rail contracts released by the Kowloon-Canton Railway Corporation
(KCRC) today (May 16): "As a pan-industry discussion forum, PCICB will examine
carefully the findings and observations contained in the investigation report
released by KCRC, particularly from the perspective of project supervision and
dispute resolution. Since risks and uncertainties are inherent in all projects,
the Construction Industry Review Committee (CIRC) has suggested that systematic
and effective risk management should be promoted as an effective tool to bring
about satisfactory achievement of project objectives. The major public sector
clients are driving this initiative by developing guidance notes to put in place
an integrated approach on the assessment and management of prominent construction
risks. In a highly competitive business environment, I would like to urge that
greater vigilance be exercised against the tendency of some bidders to make an
inadequate allowance to cover risks. Public sector clients should take the lead
by taking steps to accord due weight to both quality and past performance in the
tender evaluation process, and by promulgating concrete measures to screen out
exceptionally low bids. There is also an emerging consensus among industry stakeholders
on the advantages of resolving claims proactively and on the merits of adopting
a partnering approach to ensure timely project completion. Supplemental agreements
and alternative dispute resolution techniques, if administered properly, should
continue to be deployed in addition to arbitration and litigation. The PCICB will
take a close interest in developments arising from the investigation report and
will collaborate with public sector clients in pursuing the new initiatives on
risk management and dispute resolution." [Source:
Hong Kong Government, 16 May 2002] 3.
Bonus Rewards for Outstanding Contractors
The following is issued on behalf of the Housing Authority: Monetary rewards will
be given to building contractors which have performed exceptionally well and produced
high quality works for the Housing Authority (HA). The HA's Building Committee
(BC) endorsed today (16 May) the implementation details of a Bonus Scheme to provide
greater incentives for contractors to deliver quality products as well as outstanding
customer services. Under the new scheme, two bonuses will be awarded to deserving
contractors - a Construction Works Bonus upon contract completion and a Customer
Services Bonus upon expiry of the maintenance period. "The Authority attaches
equal importance to building quality during construction period as well as after-sales
customer services during maintenance period," said Mr Daniel Lee, Assistant
Director of Housing (Development). Only contractors which have achieved outstanding
performance, completed the project on time, satisfied site safety requirements
and maintained a clean discipline record will be considered, provided that they
have not been found guilty of any offence or malpractice that is detrimental to
the image and reputation of the Authority, Mr Lee noted. "The same set of
criteria applies to both awards though customers' feedback will also be used to
assess contractors for the Customer Services Bonus," he said. The Construction
Works Bonus, which is equivalent to 1% of the net contract value or $7.5 million,
whichever is lesser, is expected to be available to contractors of no more than
the top 25% of the projects. The Customer Services Bonus is up to $1.5 million
or 0.2% of net contract value, and will be awarded to those contractors which
can obtain good customer feedback in the independent customer surveys conducted
in the Maintenance Period. The introduction of a Bonus Scheme was earlier approved
by the BC as one of the quality initiatives to drive for improvement in construction.
Six projects scheduled for completion this year will be the first batch of projects
to be considered. The scheme will be subject to review in twelve months' time. [Source:
Hong Kong Government, 16 May 2002] 4.
MTRC hints at mainland links
The Mass Transit Railway Corporation could co-operate with mainland municipal
governments to develop rail links, MTR chairman Jack So revealed yesterday. ``It
may be possible in the future,'' he said after the MTRC's annual general meeting.
``But first we want to enter the market by providing consultancy services. So
added that the corporation was acting as a consultant for 33 projects in nine
cities, including Shanghai, Guangzhou and Shenzhen. The 2001 annual report said
the MTRC picked up 69 overseas consultancy contracts last year worth HK$71 million.
Apart from work on the mainland, the corporation was involved in projects in Bangkok,
Kaohsiung, Taipei, Singapore, Delhi and Sydney. On the Hong Kong front, So said
the MTRC signed a lease agreement with the government yesterday on Dream City,
or Area 86, the largest property development project of the railway's Tseung Kwan
O extension. ``We signed the agreement today after negotiating with the government
for two years,'' he said. MTRC property director Thomas Ho expected Phase I of
Dream City would be put up for tender or expressions of interest in the first
quarter of 2003. ``New flats in Tseung Kwan O will become more attractive, especially
after the MTR extension becomes operational in August,'' Ho said. He also dismissed
suggestions that the Tseung Kwan O development project would become less attractive
after a flood of new properties came on stream in the next five years. Ho made
his remarks 24 hours after Director of Lands Robert Pope, who retired on Wednesday,
said he expected an abundant supply of residential property in the next five years.
``There are a number of railway developments in prime locations,'' he said. But
Ho insisted the MTRC would open up new residential property projects according
to market demand. ``Our new flat supply in a year is usually less than a few thousand,
so I think our supply will not affect the market,'' he said. Dream City has a
residential gross floor area of 17.2 million square feet. This represents around
21,500 flats with an average size of 699 to 861 sq ft. Dream City also has 40,000
square metres of retail gross floor area and is divided into 14 stages. It is
expected to be completed by 2012. Ho said the MTRC would probably pay HK$150 million
to the government as premium for the depot at Dream City. He also said the property
development at Hang Hau Station, on the Tseung Kwan O extension, would go up for
tender next month. Over the next eight months, the MTRC will have to raise HK$2.5
billion as part of the HK$6 billion the corporation has estimated it needs for
working capital. Earlier this month, it raised HK$3.5 billion in retail bonds.
No decision has been made on how the MTRC will raise the rest of the money. The
corporation said its passenger numbers fell 5.8 per cent to 60.6 million last
month compared to 64.3 million in March. The number of passengers travelling on
the Airport Express also fell, this time by 3.1 per cent to 713,000 in April,
compared to March. [Source:
Hong Kong iMail, 17 May 2002] 5.
KCRC vows to do better
Kowloon-Canton Railway Corporation (KCRC) chairman Michael Tien has promised to
strengthen communication between the company's board and day-to-day management
in an effort to avoid a repetition of the management problems on the HK$46.4 billion
West Rail project. He was speaking to legislators after three senior KCRC executives
took the unprecedented step yesterday of publicly apologising for their failure
to keep the board properly informed about delays on the West Rail scheme. As predicted
by Hong Kong iMail on Wednesday, chief executive Yeung Kai-yin apologised to legislators,
saying: ``I am sorry that, as a result of these procedural difficulties, the managing
board has not been consulted as fully as it would like or in a timely manner.
I am also sorry this may have played a part in bringing about this investigation
[by accountancy firm Ernst & Young].'' KCRC senior director, capital projects,
James Blake also apologised for not telling the board about the delays and failing
to consult it on remedial measures. ``We believed that we could solve the problem
on our own ... but events have shown that we failed. For this I take responsibility.
I admit we could have done better and I apologise for our errors of judgement.''
KCRC West Rail director Ian Thoms also expressed regret. Democratic Party legislator
Albert Chan called the apologies ``a great improvement'', saying he ``hoped they
represent a change in attitude'' by government organisations. He also ``commended
Yeung for his bravery'', but suggested the three donate part of their salaries
to the Community Chest to show the public they were sincere in their apologies.
Responding to Chan and other lawmakers who repeatedly suggested disciplinary action
be taken against the KCRC executives, Tien said that, although mistakes had been
made, they had not caused any financial loss. He added that Ernst & Young,
in an independent report commissioned by the corporation, had supported the KCRC's
partnership-based approach towards the West Rail contractors, which would result
in significant cost savings and an early opening of the 30.5 kilometre line. Consequently,
he could see no reason why the directors should be sacked or censured. Yeung said
later he would retire from the KCRC, confirming industry rumours, but said his
decision was unrelated to the wrangle. Tien was speaking after the KCRC published
the Ernst & Young report on its inquiry into payment of an extra HK$458 million
on three contracts. The cash was paid in supplemental agreements to the original
contracts, and included an additional HK$100 million payment to Siemens, the German
engineering giant, on its HK$287 million telecommunications contract. In a 320-page
report, Ernst & Young concluded that KCRC was right to negotiate supplemental
agreements, but said management had left the board in the dark on the seriousness
of the delays on the three projects. These covered the Siemens deal, the construction
of Mei Foo and Tuen Mun stations. Ernst & Young called for a radical shake-up
in management processes, with closer links between the board and the day-to-day
management. It recommended that ``one or two non-executive directors with specific
knowledge and experience of major projects'' be appointed to the board, and that
the railway projects steering committee should meet more often than the present
three-month intervals. It also said the committee should include members from
outside the KCRC, with expertise in construction, engineering and legal issues.
Tien told the Hong Kong iMail later that he supported ``beefing-up the steering
committee'' and that the board needed more help at committee level. He said no
outside experts had yet been identified. ``I haven't had a chance to talk to the
government yet about the report,'' he said. [Source:
Hong Kong iMail, 17 May 2002] 6.
K Wah reveals plans for hotel development
K Wah Real Estate has submitted a plan to convert a block of industrial land in
Tsuen Wan to build a four-star hotel, it was disclosed yesterday. The developer's
deputy general manager for sales and marketing, Czarina Man, said yesterday the
company had applied to the government to change the use of its Sha Tsui Road site
about two years ago, but approval was still pending. The initial plan was to build
a four-star hotel there ``but no more detail has been generated so far,'' Man
said. The company expected Tsuen Wan would become more important after government
renewal projects in the area were completed. ``We believe town planning at Tsuen
Wan will closely [link] with North Lantau development, to form a comprehensive
transport network for Chek Lap Kok International Airport and the Disney park in
Penny's Bay,'' Man said. Meanwhile, the company did not mind waiting because it
was making profits from renting the industrial building on site. K Wah said it
expected to reap HK$700 million from the sale of 108 luxury flats in its Grand
Excelsior project at Kowloon Tong. The project, on Waterloo Road, Kowloon Tong,
is a 32-storey tower with flats sized from 928 square feet to 1,323 sq ft. They
will be sold at prices ranging from HK$6,000 to HK$7,000 per square foot, with
the highest prices for upper-storey flats facing Kadoorie Hill. Sales begin on
May 25. The developer is aiming at high-end buyers favouring serviced apartments
- with hotel-style packages such as housekeeping, clubhouse and property management.
Owners, especially those often overseas and planning to lease their flats, could
also be provided with tenancy management. ``Many prospective buyers, especially
professionals such as doctors and lawyers, have approached us about the properties,''
Man said, forecasting that the project would ``make a great hit'' as there was
not much new luxury residential property around Waterloo Road. The developer would
not confirm whether there had been any internal subscription. [Source:
Hong Kong iMail, 17 May 2002] 7.
Plan to reduce consultation time slammed
A Government plan to fast-track public works projects by halving the consultation
period has been severely criticised by legislators. Lawmakers attending a planning,
lands and works panel meeting yesterday told Deputy Secretary for Works Kwok Ka-keung
that the proposal to shorten the statutory consultation period should be withdrawn.
At present, the period required for lodging and resolving objections under the
law could take 17 months from the date the project is gazetted. Kwok said the
government proposal - to be tabled in Legco in July - aimed to cut this down to
between one month and eight months. He said the lengthy consultation period ``caused
unnecessary delays to the implementation of public works projects''. Engineering
sector legislator Raymond Ho said the government should cut red tape instead.
``I think the bureaucracy is the biggest problem in the government. They waste
a lot of time in handling inter- departmental correspondence, which has often
delayed projects for several years,'' he said. Democrat Albert Chan said the process
should be speeded up, but not at the expense of the public's consultative rights.
``I know that most people affected by projects don't know what will happen until
the very last minute,'' he said. [Source:
Hong Kong iMail, 17 May 2002] 8.
Swire gives SAR $4b vote of confidence
Swire Pacific - Hong Kong's major commercial landlord - is spending more than
HK$4 billion on three office projects, reflecting a major confidence boost to
the city's economic future, according to chairman James Hughes-Hallett. Speaking
after yesterday's annual general meeting, he revealed construction costs alone
on the three projects - two new and one redeveloped with a total floor area of
1.7 million square feet - approached HK$3 billion. ``We're seeing some signs of
recovery and, accordingly, have maintained our confidence in the future,'' Hughes-Hallett
said. ``We're putting our money where our mouth is and investing in the future.''
Swire has started construction on Pacific Forum, an office building in Admiralty.
Work on the Cambridge House project in Quarry Bay is almost finished, while Aik
San and the Melbourne Industrial Building in the same district will be redeveloped.
Swire also expects a bright future on the mainland as the demand for offices and
shops is expected to surge following China's entry into the World Trade Organisation
(WTO). It plans to invest more than HK$2 billion in a 55-45 joint venture with
the Guangzhou Daily News Group to build a commercial complex housing a retail
centre, offices, a hotel and cultural facilities. But Hughes-Hallett said the
company would not shift its focus of investment from Hong Kong to the mainland.
``The profile of Hong Kong internationally should be very good at the moment and
the successful conclusion of China's entry into the WTO should be very good for
Hong Kong,'' he said. ``I think that's the main Hong Kong story for this year.''
Still, Swire's executive director Keith Kerr said the company would not aggressively
buy land because it already had enough on its plate. ``We are not in an active
mode on replenishing our land bank in the short-term,'' Kerr said, adding it could
trigger a land sale from the reserve list should it want to buy land later this
year. Swire had cashed in HK$350 million by selling 18 homes at its luxury apartment
complex, the Albany, in the Mid-Levels in the first three months of the year,
a company official said. It pocketed HK$300 million by selling nine prime homes
last year. ``The situation is still quite fragile [in the short term] because
the economy is not yet on the recovery track,'' Kerr said. Swire, which has business
interests in aviation, beverages and marine, said its net profit rose 5.8 per
cent to HK$4.1 billion last year. Its share price closed unchanged yesterday at
HK$47.20. [Source:
Hong Kong iMail, 17 May 2002] 9.
Lawmakers reject KCRC findings
Legislators have criticised the auditor's report into the KCRC's controversial
Siemens deal, accusing the railway of trying to protect its management. Some also
called for Kowloon-Canton Railway Corporation chief executive Yeung Kai-yin to
resign or take a wage cut as punishment for his part in the scandal, in which
Siemens was paid $100 million above its contract fee for work on the West Rail
project, despite not meeting contractual requirements. They have threatened to
use the legislature's privilege and powers to conduct further probes. In a subcommittee
meeting of the Legco transport panel specially set up to deal with railway matters,
both Democrat and Democratic Alliance for the Betterment of Hong Kong lawmakers
said they were not satisfied with the auditor's probe. Speaking after the meeting,
Democrat Andrew Cheng Kar-foo said the rail operator's management had "intentionally
protected" its members in the scandal. Mr Cheng called for harsher punishments
for Mr Yeung and said his party would pursue the issue. "Resignation, demotion,
pay cuts or scrapping of gratuities are all suitable punishments, which would
give a symbolic message. An oral apology is not enough," he said. He said
the Democrats believed the report findings were "unacceptable", and
would reserve the rights to evoke the Legco (Power and Privileges) Ordinance to
summon confidential documents and witnesses for questioning. His colleagues James
To Kun-sun and Albert Chan Wai-yip agreed that harsher punishment was needed.
Mr Chan said Mr Yeung should have his salary cut and the amount donated to the
Community Chest. The DAB's Lau Kong-wah said "public anger" was smouldering
due to the lack of punishment. He said his party also reserved the right to use
Legco's privileges in further inquiries. "The reality is that the public
has to pay an additional $100 million - if that happens in a private firm you
would either have a pay cut, demotion or even [be] sacked," he said. Lau
Chin-shek, of the Confederation of Trade Unions, said the lack of details provided
by the management to the auditors - accountancy firm Ernst and Young - could amount
to a cover-up. "The report is not complete, not detailed and lacked credible
witnesses. To conclude the investigation like this is a joke . . . We want the
truth, the whole truth," Mr Lau said. But the Liberal Party's Miriam Lau
Kin-yee, chairwoman of the panel, said after the meeting that her party had come
to the "preliminary belief" that the report was truthful. She also said
the punishment for Mr Yeung and his colleagues should not be too harsh if they
were not found to have played "dirty tricks". Acting Secretary for Transport
Paul Tang Kwok-wai said the Government welcomed the report. The subcommittee will
meet again next Wednesday to follow up the issue. [Source:
SCMP, 17 May 2002] 10.
Plans to privatise Wetland Park management defy study
Officials are planning to outsource the management of the $476.5 million Hong
Kong Wetland Park - despite a recommendation to the contrary by government-commissioned
consultants. The UK-based consultants concluded there were conservation, political
and administrative advantages to having the park managed by the Government rather
than a profit-making company. Government management could ensure money-making
would not be over-emphasised at the cost of conservation, said consultants MET
Studio Design and the Wildfowl and Wetlands Trust. The 64-hectare park in Tin
Shui Wai is due to be completed in 2005. It will include a 10,000 square metre
visitor centre and re-constructed wetlands. Authorities this week placed newspaper
advertisements seeking information from companies to aid plans to outsource the
park's management, maintenance and operation. Government documents state that
the "service provider" would be responsible for habitat and wildlife
management, planning visitor centre exhibits, developing educational programmes,
promotion and marketing, day-to-day operation and facilities management. Senior
Wetland Park Officer Edmond Lam Yiu-fong denied the Government was failing to
follow the recommendations of the $1.1 million report. "The Government will
be responsible for setting the development direction, management objectives and
park policy," he said. The Department of Agriculture and Fisheries would
have overall management of the long-term development of the park and civil servants
would oversee the performance of any park management "contractor", he
said. However, the consultants' report envisaged the majority of park staff would
be direct employees of the department, with support services provided by outsourced
staff. "Having considered a range of management models including profit-making
companies . . . it was concluded that the most appropriate management model would
be management by Government," the consultants said. Management of the park
would involve co-ordinating all areas of work, including promotion, the consultants
said, likening it to the task of running a museum. Think-tank Civic Exchange's
head of research, Lisa Hopkinson, also an environmental activist, said outsourced
management was not necessarily a problem if the park's ecological goals were clear
and closely supervised. The park's primary purpose was to mitigate the environmental
effects of the development of Tin Shui Wai as a new town, with tourism and education
being secondary objectives, she said. Ms Hopkinson said that if the Government
decided to go ahead with the plans, it should select a company on the basis of
quality rather than simply taking the cheapest bid. The consultants' report estimated
the cost to the Government of running the park directly at $33 million a year,
or $38 million if it was run by a public body. Dr Ng Cho-nam, director of the
Conservancy Association and conservation officer of the Hong Kong Birdwatching
Society, stressed the importance of supervision over the management of the park
to balance tourism and ecological needs. The consultants predicted the park would
serve 350,000 to 400,000 visitors a year, but the department is advising interested
companies, after revised estimates, that the project would serve about 500,000
people annually. [Source:
SCMP, 17 May 2002] |  |
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