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Message from the Director Message from the Assistant Director (Quantity Surveying) The Organisation of the Quantity Surveying Branch The Services and Activities undertaken by the Branch Project Cost Estimate Procurement and Tendering Preparation of Bills of Quantities Development in the Measurement of Building Services Installations Post Contract Administration and Final Accounts Term Contracts The Operation of Maintenance Term Contracts General Conditions of Contract Consultancy Management Subvented Projects The School Improvement Programme Dispute Resolution Advisors System Technical Audits Advisory Services Computerization and Information Management Training and Commitment to Continuous Improvement Special Articles Overview of ArchSD Tender Price Index and Contract Value (1986 to 2005) Life Cycle Costing From Theory to Practice The Development of Construction Mediation in Hong Kong Legal aspects of QS The High Street Project

Message from the Director


Yue Chi-hang
Director of Architectural Services

and Works Bureau since its establishment two decades ago. The 20 anniversary of the department witnesses the completion of a number of successful projects in recently years. To name a few: the Hong Kong Science Park, the Police Headquarters Phase III, the New Headquarters for EMSD, the Wetland Park, the New Territories South Regional Police Headquarter, the Ma On Shan Sports Centre, the Margaret Trench Red Cross School and many more. Other than proudly handing over these completed projects to our clients, we have also obtained awards and merits for some of these outstanding works, such as the Quality Building Award and the HKIA Award. The Quantity Surveying Branch (QSB) is one of the six functional branches, which have contributed tremendously to the success and achievements of the department. One of the objectives of the department is to deliver our quality services and completed products to our clients on time, with good value for money and within budget. In upholding this
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am delighted to see that the Architectural Services Department has become a prominent works department within the Environment, Transport

important objective, QSB effectively discharges its expertise in every facet of its interfaces with the project teams in areas such as cost estimation, tender documentation and evaluation, payment, cost control and finalization of accounts. Many of our colleagues in QSB have been serving the department for many years. They very often work under pressure and always work hard to meet deadlines. Their loyalty and dedication are deeply appreciated. Their hard work can be represented by the many public buildings erected in the past, which still serve well the people of Hong Kong. Our colleagues will face with new challenges as the department develops and meets contemporary demands of the government and the public. I am confident that our staff can accomplish their formidable tasks as they did in the past. I wish that this booklet will enlighten the readers in the department and in the industry alike, to march on with us up the path to build an even better working and living environment for the people of Hong Kong in the next 20 years and beyond.

Message from the Assistant Director


(Quantity Surveying)
Shum Kung-sher
Assistant Director (Quantity Surveying)

constituent branch since the departments inception, has progressed from strength to strength over the past 20 years. With the joint effort and support of all the staff in QSB, we have capitalized on our professional expertise and capability in undertaking a wide spectrum of services and made good achievements with new and innovative developments in many aspects of our work. Apart from playing a significant part in leading and promoting the quantity surveying profession in Hong Kong, QSB sets new standards for the local construction industry. QSB provides quantity surveying services for all public building works within the purview of ArchSD including procuring new buildings, renovation or refurbishment of existing buildings, and all the subsequent maintenance. QSB also provides professional advice on behalf of the department to policy bureaux, government departments, quasigovernment bodies and subvented organizations. We strive to maintain the highest possible standards in the delivery of our services, which include traditional quantity surveying services covering the preparation of cost estimates, tender documentation, postcontract administration, interim payment valuations and finalization of accounts. New operating modes are introduced to improve our operation and computer technology is also adopted in our services. Having

his year the Architectural Services Department (ArchSD) celebrates its 20 Anniversary. The Quantity Surveying Branch (QSB), as a
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been fully computerized in the delivery of our services for both capital works and maintenance works, our measurement and valuation services have also been extended to cover building services works. On contract administration aspects, QSB pioneered the introduction of the Dispute Resolution Advisors System 10 years ago and the system has operated successfully. We have gained valuable experience in adopting the Design and Build approach in the procurement of projects not just for capital works but also for minor works and fitting-out works. Our expertise has also been employed in developing the project managing role of the department. To respond to the needs and expectations of the local construction industry and the community at large, QSB has adopted a proactive strategy in planning and formulating the delivery of its services, and will continue to seek improvement in this regard. We will respond to constructive suggestions for improvement and will take proactive actions to elevate the standard of our services. In facing new challenges, we are prepared to explore new services for our clients such as strengthening our role in advisory services, to utilize our experience and expertise in research and development that will benefit the building industry and Hong Kong as a whole. Finally, I would like to take this opportunity to thank all my colleagues for their dedication and contributions in the past 20 years which will form a solid foundation for future development.

The Organisation of the

Quantity Surveying Branch

he Quantity Surveying Branch (QSB) is one of the six functional branches within Architectural

and information technology, quality assurance and procedures, contract advices and technical audits. There are seven groups operating under Division 1. The estimating unit of this division has been providing advisory services on the construction cost for the planning of West Kowloon Cultural District project. Division 2 This Division is responsible for the provision of quantity surveying services for government capital building projects and it has five supporting groups. The type and nature of projects handled by the Division vary. They may include primary and secondary schools, special schools, hospitals, correctional institutions, staff quarters, office buildings, law courts, libraries, sports complex, swimming pools, parks, police stations, and fire and ambulance

Services Department. Headed by the Assistant Director (Quantity Surveying), there are four divisions within QSB, namely Division 1, 2, 3 and Subvented Projects Division. Division 1, 2 and 3 are each under the supervision of a Chief Quantity Surveyor and the Subvented Projects Division is headed by a Chief Technical Advisor. There are also a number of individual groups under each division consisting of senior professionals, professional and technical staff. Division 1 This Division is responsible for the provision of advisory services in respect of professional and technical matters such as consultant procurement and management, preliminary project estimates, computer

stations etc. Examples of some of the recently completed projects handled by Division 2 are Science Park, Phase 1 in Shatin, Wetland Park in Tin Shui Wai, EMSD Headquarters in Kowloon, Police Headquarters Phase III in Wan Chai, Lok Ma Chau Boundary Crossing, Castle Peak Hospital Stage II, Phase 2 in Tuen Mun, and New Infectious Diseases Centre attached to the Princess Margaret Hospital in Lai Chi Kok. Division 3 This Division is responsible for the provision of quantity surveying services for Minor Works, Maintenance, Fitting-out and the School Improvement Programme (SIP). It comprises six groups, two located at the APB Centre, three at the Kwun Tong office and one at Queensway Government Offices.

Subvented Projects Division This Division provides professional, multi disciplinary advisory service to government departments responsible for awarding public funds to private organizations delivering educational, health and social welfare facilities. In addition, the Division examines and advises on government projects entrusted to private developers. By examining and commenting on construction cost, best practice, development standards, consultant and contractor procurement processes the Division ensures that subvented and entrusted projects offer quality standards of design at reasonable cost levels. This is achieved through a dedicated group comprising independent senior professionals, professional and technical officers working in concert to provide coordinated project advice through the Chief Technical Advisor.

Organization Chart of the Quantity Surveying Branch

activities nd ervices a the Branch The s by ertaken und

Project Cost Estimate


Hong Kong Disneyland

Cost estimate Project estimates are essential information in the submissions for the upgrading and approval of projects in the public sector. The Quantity Surveying Branch (QSB) is responsible for providing and collating all this information. Based on our past experience on a large variety of government facilities, QSB has maintained a library of cost data. With our cost information and estimating techniques, we provide cost advisory service on various design options for comparison and selection at the initial design stage of the project. During the project development period, our cost estimates could also be used as a tool to assist clients in exercising control on future financial commitment and in making decision on the change in original design to suit new requirements. Our cost management and control in this respect have resulted in a better use of public fund. Risk analysis In the preparation of Project Cost Estimate, QSB adopts the technique of Estimating Using Risk Analysis (ERA) to identify, assess and make allowance for uncertainty. The risk analysis technique is now further enhanced by the application of Systematic Risk Management (SRM) in public works projects following

the promulgation of the Risk Management User Manual by the Environment, Transport and Works Bureau in June 2005. SRM is to be applied throughout the project period for public works programme projects with cost estimates exceeding $200 million. Under this system, project team members are required to prepare and implement a Project Risk Management Plan. The aim of this process is to identify potential risk and have risk treatment for the sake of proactive project cost control. Cost advisory service Besides servicing on projects of the Architectural Services Department, QSB also provides building construction cost advisory service to other bureaux and government departments. With the rise in public expectation for quality service, the government has taken initiative to improve delivery of service by involving the complementary skills of private sector. In the construction industry, hybrid development modes with varying levels of private sector involvement in terms of risk sharing, financing, ownership and operation, etc. have evolved rapidly in recent years. Some examples are Ngong Ping 360 (franchisee project for design, construction and operation), Hong Kong Disneyland and AsiaWorld-Expo (joint venture

Redevelopment of Kai Tak Site

projects), and various outsourcing contracts. QSB has kept pace with this development and has been giving construction cost advice to projects in connection with the private sector involvement initiative. QSB is currently playing an active role by providing construction cost advice in the planning of several mega projects such as the West Kowloon Cultural District Development, Redevelopment of Kai Tak Site and the Promenade Development along our shore line. We envisage that the increasing utilization of private sectors skills and experience for better deliverables will enrich our cost library. We strive for a continuous improvement in the quality of our cost information and advisory service. Knowledge sharing In collaboration with the Census and Statistics Department, QSB has shared knowledge of local construction costs with the government of other countries by participating in the workshops on construction survey under the International Comparison Program. The workshops were organized by the Asian Development Bank and were held in Manila, Philippines in 2005 and 2006. Apart from sending representatives to attend international conferences, we also exchange cost information and
Ngong Ping 360

experience with departments and organizations of other countries through the internet. Through the Staff Exchange Programme with the Mainland, we have shared our knowledge and experience with officers from the Mainland in the past years. More officers from the Mainland local government are scheduled to visit QSB. QSB would continue to seize all opportunities to facilitate more exchanges of knowledge and experience with other countries and the Mainland in particular.

Procurement and Tendering

Introduction The procurement policy of the Government of the Hong Kong Special Administrative Region (HKSAR) is to obtain goods and services at the best value for money in support of the governments programmes and activities. The fundamental criteria of the governments procurement policy are public accountability, value for money, transparency, open and fair competition and equal opportunities are open to all domestic and foreign suppliers and services providers so long as they are eligible. Architectural Services Department (ArchSD) is specialized in the procurement and maintenance of all the government buildings. ArchSD always looks for innovative procurement initiatives to further safeguard governments procurement policy and interest. Procurement strategies The common procurement strategies employed by ArchSD for its capital and maintenance works are lump sum contract with or without quantities, remeasurement contract and design and build (D&B) contract. Re-measurement contract is mainly used in maintenance works because a lot of the requirements are so uncertain at tender stage whereas the other two strategies are normally used in capital works. Most of the capital works are procured by lump

sum contract. D&B contract was first introduced for ArchSD in early 1990s. The first D&B contract was the Design and Construction of RHKA Air Force Helicopter Hangar at Sek Kong, New Territories. With the D&B approach, contractors expertise in buildability and creative solution to technical problem can be brought in as early as the concept stage of a project has been completed. D&B is a fast-track procurement method and its application is on the rise since its first launch more than a decade ago. Another major change in procurement strategy is on the building services installation. It has gradually evolved from a direct contract to nominated subcontract of the building contract to now a domestic sub-contract within the building contract domains. Obviously such merger makes building contract administration more effective. Tendering process Tender invitation by open and selective tender through government gazette has a long history. Prequalification of contractors was not widely used until the design and build contract has gained more recognition. Not only limited to design and build projects, prequalification exercise is also used for some complex or large-scale developments. The HKSAR Government acceded to the Agreement on Government Procurement of the World

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Tai Po Complex

Trade Organization (WTO GPA) in 1997. Contracts for goods and services with a value over five million Special Drawing Rights (SDR), an equivalent of approximately HK$57.6 million in 2006, are governed by the requirements of WTO GPA. The objective is to provide an open and fair competition amongst eligible domestic and foreign goods and services providers. To fulfil WTO GPA requirements, tender invitation also needs to be advertised in local newspapers and selected overseas trade journals. Foreign consulates and trade commissions are also notified where appropriate. Consequently the construction industry of HKSAR is brought to the international stage. Advancement of information technology revolutionizes the tendering process in two aspects: the first one is the publication of tender invitation notice through the Internet and the second one is electronic tendering. The Electronic Tendering System (ETS) has gradually evolved. At present, electronic copy of tender documents stored in a compact disc together with hard copy of tender documents are dispatched to tenderers who can opt to return their tenders in hard copy or electronic format. Two-envelope tendering process was introduced in design and build projects in 1990s. Tenderers are required to submit tenders in two envelopes; one envelope contains all the required technical

submissions and the other envelope contains the prices. Tenderers proposal on design, methodology of construction, resources and resources planning, safety and environmental measures, construction waste management, etc. are the main elements in technical submission whereas their tender price either in the form of bills of quantities or schedule of rates forms the price submission. Tender assessment and award The tender assessment process has undergone dramatic changes in the past two decades. Tender assessment was used to focus on analysis of tender prices. A more comprehensive evaluation, not just on prices, but also on the performance and capability of the tenderers is now carried out. Tenderers past performance records, conviction records on environmental protection, site safety and employment of illegal immigrants together with their current workload in hand are all taken into account in an overall tender evaluation before making recommendation to the Tender Board for acceptance. Since 2004, these elements are adequately considered and covered in the formula approach tender assessment method. In the two-envelope tendering arrangement mentioned above, the tender assessment panel will

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study all tenderers technical submissions before opening their price envelopes. The assessment panel will carefully scrutinize each tenderers technical submissions against a set of predetermined criteria. If tenders are technically acceptable, their price envelopes will be opened. The result of technical assessment and pricing assessment are then combined at predetermined weightings to work out which tender scores the highest mark. The tender with the highest scores will then be recommended to the Tender Board for acceptance. Having taken the quality and price into account, this balanced tender assessment process is to ensure that the most appropriate tenderer is awarded the contract. In order to speed up the delivery time of capital works projects, in late 2001, the Finance Bureau introduced the Simplified Tendering directive, which streamlined tendering procedures for works contract valued below HK$50 million. For tenders meeting certain specified criteria, the director of the department is authorized to approve the tender recommendation. The use of this Simplified Tendering arrangement has reduced the overall tendering time of many small value works contracts. A refinement of the tender assessment process was initiated in 2004 when ETWB promulgated a marking scheme tender assessment method for contracts other than design and build and also replaced the pre-qualification exercise for non design and build contracts. A marking scheme with scores marked against predetermined criteria is submitted to the Central Tender Board for approval before it would be used in tender assessment. The marking scheme tender assessment concept is quite similar to the two-envelope system. Outlook The government and the general public are becoming more concern on issues such as, environmental protection, site safety, workmanship and sustainability

on building projects. However conflicting interests among various stakeholders in the construction industry need to be addressed. Advices from Independent Commission Against Corruption are taken in refining a fair and corruption free procurement process. To achieve our objective of striking a balance between quality and price, the procurement and tender assessment system of public works are under constant review, reform and refinement. Reviews have been carried out by ETWB to consolidate the changes within the construction industry and ArchSD is in full support in implementing these policies. Some of the initiatives are outlined below. Public Private Partnership Public Private Partnership (PPP) has been introduced to the territory on some infrastructure projects. Diversified models for project financing and contracting are adopted as pilot schemes to allow more private enterprises to take part in the construction and operation of public works projects. ArchSD, an expert in construction procurement and management, will take a proactive role in assisting ETWB and other client departments to look for projects that are suitable to be procured under the PPP arrangement and to formulate the most appropriate project delivery strategy. Partnering Non-contractual partnering arrangement has been implemented in recent years. The prime purpose is to bring out the full co-operation among all members of the project team consisting of the employers representatives, the contractors and the consultants. It is hoped that through their harmonious interactions in the project, positive outcome for the best quality, value for money and completion on time of the project can be achieved. Although the application of partnering system in construction contract is a new attempt, it is under constant review and further improvement.

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Alternative sub-contacting strategy Sub-contracting is a common practice in the local construction industry. Poor management and coordination of sub-contractors always cause delay in project completion. One of the alternative subcontracting strategies under consideration is the introduction of Principal Building Services Subcontractor in a building contract. The main contractor is required to appoint one building services subcontractor from a pre-qualified list given in the tender document as a principal building services subcontractor who will take up a leading role to coordinate all the building services installations in the contract. The idea is to transform the multi-point contact situation into a single point contact arrangement for all the building services works. As a result a more efficient project management system is emerged to cope with present building services installations, which are getting more and more sophisticated. Value management and risk management The annual turnover of ArchSD on capital building works is over HK$7 billion and a large portion of the money is spent on projects with a value exceeding HK$200 million. The government is always mindful of the resultant benefits of spending taxpayers money. The value management mechanism is an ideal tool in making sure any perceived benefits can be abstracted from construction projects without sacrificing functionality, quality and performance. In 2002, the value management technique was adopted in some selected projects. The stakeholders in a building project i.e. the client department (the end user), the project team and the contractor shall meet in a workshop session to look at specific issues such as design options, construction method etc. in order to achieve value for money for the project. The System Risk Management is now a mandatory requirement for capital building projects with value over HK$200 million. A risk treatment plan is incorporated into the tender document for the Electronic tendering Life cycle costing

Tai Po Complex

tenderers reference. The plan will be used throughout the construction period for monitoring purpose. Should any potential risk arise it will be dealt with immediately.

The initial cost of an asset could be well below half of its whole life cost. Public buildings are becoming more and more complex, and the operation and maintenance costs have caused concern to the public as well as the government. It is envisaged that the use of more durable materials with low maintenance cost for public buildings is an effective means to reduce public expenditure in the long run. Starting from the second half of 2006, design and life cycle cost of materials proposed by tenderers is a factor of consideration in tenders for D & B contracts. Currently, ArchSD is actively involved in a series of life cycle costing research activities. The long-term goal is to set up a life cycle cost data bank to rationalize decisions on building designs such as building shape, component systems, materials, equipment etc. and their effect on maintenance programme.

At present electronic tendering is only applied to the dispatch and return of tender documents. Some studies are being carried out to validate a complete paperless tendering system and full utilization of contemporary information technology. Considerations will be given to its technical viability, ease of use for tenderers and cost-benefit in implementing the system.

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Preparation of Bills of Quantities

Procurement of building projects Most capital building projects are procured by way of lump sum contracts with quantities for tender invitation and subsequent post-contract cost control. Contracts for minor building projects are mainly let on the basis of lump sum contracts without quantities whereby drawings and specifications would form the essential parts of the contracts. Since the successful launch of the first design and build contract in early 1990s, ArchSD has had other alternatives in procuring capital building projects. The introduction of term contracts for minor building works and design and build term contracts enabled building works of low values to be undertaken by term contractors obviating the needs for documentation, tender invitation and evaluations which could be quite time-consuming. Bills of quantities (BQ) BQ is a document quantifying the works with detailed descriptions transferred by the QS from drawings/information provided by the architects, structural engineers or building services engineers. The units of measurement, the amount of information given and the items which are deemed to have been included are governed by some mutually accepted standard rulings stipulated in the contract. Each schedule or bill has money columns ready for pricing out. It serves as a vehicle for inviting tenders and an indispensable tool for controlling cost during and after construction.

Cut and shuffle method Before the introduction of computer for preparing BQ, QS in ArchSD usually adopted the cut and shuffle method. It was considered to be the most effective means to ensure the quantities so arrived at are an indication of what should be done by the contractor. For the cut and shuffle method, the QS would take off the dimensions from the drawings; entered the descriptions and dimensions onto the specially-ruled carbon back cut-and-shuffle papers. These papers resembled normal measurement sheets but they were perforated and could be ripped apart transversely into 3 equal slips. The carbon copies were kept for future reference purpose and they would be kept intact. To save times and efforts, full description of the items would be written on the slips which were supposed to be the master and all other or slave slips would contain the abbreviations only. During the working-up stage, the taker-offs calculations would be checked, the volume and the area, etc. of the works items worked out or squared and totals cast up. The cut-and-shuffle papers would then be cut into slips. Slips having same description would be grouped together with the master slip placed on the top. The quantities of associated slave slips would be further summed up and brought forward to the master slip to arrive at a total quantity. Finally the QS would sort the slips into desired order ready for the typing of the bill. The method was very labour-intensive. All

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Stanley Municipal Services Building

dimensions booking, mathematical calculation and checking, typing out bill pages and proof-reading were carried out manually. There was a supportive pool comprising both typists and machine operators to assist the QS. In the old days when staff resources were relatively scarce, QS would unavoidably compete for priority of services and preferential assistance from the pool if several projects were to meet deadlines around the same time. Computerization The computer system, RIPAC, was installed in 1989 which took full advantage of automation for the production of BQ. Inputting, squaring and almost all working-up processes are now carried out electronically. Editing and amendments can be easily performed by the QS with the help of a keyboard. Other appeals of the system are its multiple sorting capacities, easy storage and retrieval of data for postcontract cost administration. A standard phraseology for BQ description library was developed. Taker-off could select from the manual-driven computerized library and build up the works items normally encountered. Only a few rogue items would require further details to be input. The standard phraseology comprising a structured set of

4-level divisions of descriptions was complied with the 3 Edition of the Hong Kong Standard Method of Measurement for Building Works and ArchSD General Specification for Building. It was published in 1995 to raise the awareness of the industry to the ways of describing works items in the ArchSD-prepared BQ. The Hong Kong Standard Method of Measurement (HKSMM) At the time when no standard rules of measurement were in place, English Standard Method of Measurement had been followed in a general sense in government and private practice and adapted mainly by merging most labour items into their relative parent items. The adaptation, however, had been totally arbitrary depending on the discretion or inclination of the individual QS and consequently caused confusions. Prompted by the BQ-conscious sentiment and to ensure consistency of measurements, the Standing Joint Committee for the Hong Kong Standard Method of Measurement was established in 1960 to produce a uniform and local set of rulings for use by the industry. The committee comprised representatives from surveyors and contractors. It also had the duties of answering queries from the industry in relation to the interpretation
rd

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Primary school in Yau Tong

of these rulings and considering revisions that might be advisable. The Government Quantity Surveyors at various times (now the post of Assistant Director/ Quantity Surveying of ArchSD) had been actively involved in this committee since its inception by reason of their expert knowledge and long experience in dealing with local contractors in respect of measurement and contractual matters. They have been contributing their times and valuable expertise ever since to bring the document to its present stage. Through the committees determined effort, the third edition of HKSMM released in 1979 had eventually found its way into the public and private version of conditions of contract for building works. The effect of its incorporation into the contract conditions was of significance. The works which should have been measured in the BQ according to the rules in the HKSMM but were found missing or where insufficient quantities were stated, the shortfalls should be treated as deemed variations adjustable under the contract. Since the accuracy of quantities in BQ was somewhat guaranteed, contractors risk in respect of measurement errors would be thrown back to the client. The new fourth edition of HKSMM developed by the committee under the auspice of the Hong Kong Institute of Surveyors was released in 2005. It contains sections for building services works which were previously published as a separated document in its

first edition. Being the major user of the document, QSB has been active in developing the new standard phraseology for BQ descriptions with a view to adopt the new edition as soon as practicable. Outlook There have been many discussions recently over the procurement of capital public works by way of public private partnership approach. Currently, more public building projects are constructed under the design and build contractual arrangement instead of the traditional one based on BQ. As the procurement strategy changes, so must the contract documents; BQ may not be as fashionable as it was. However, transplanted from the British construction industry and modified progressively to suit local conditions, BQ is still working as the welcomed tool on account of its fairness between the contracting parties. Its importance and usefulness have been widely comprehended ever since it is introduced. Being a building works agent for the government, ArchSD will continue to assist formulating new or modifying old standards to suit the changing economy and government policy. ArchSD shall take the lead by setting out bench marks for the industry to follow. At the same time, we shall apportion equitably the risk in respect of quantities/measurements between the government and the contractors.

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Development in the Measurement of Building Services Installations

he use of bills of quantities can help improve cost control. It also promotes risk management in

base for ArchSD to develop a standard BS/BQ Model Bills. In early 1995, ArchSD had successfully established a standard model of BS/BQ in the computerised QUEST system. The success in the development of a standard BS/ BQ Model Bills was an important milestone in ArchSDs implementation of BS/BQ as since then ArchSD Management had firmed up its policy on the use of BS/BQ as a norm in the procurement of BS work of projects. The development work on BS/BQ in ArchSD has never ended with the success in the implementation of BS/BQ Model Bills. In 1999, a BS Standard Phraseology Library was successfully developed, which made the BS/BQ work more easy and efficient. In early 2000, based on the BS/BQ Model Bills, a computerised BS cost information system was established in the QUEST system. The computerised BS cost information system enabled ArchSD to build up a cost library on BS works, which should be very useful for project staff in the preparation of BS cost estimate and cost plan. In 2001, ArchSD had also actively participated in a review of the HKSMMBS organised by the Hong Kong Institute of Surveyors (HKIS). ArchSD had provided a lot of feedback/suggestions to the Review Committee on the practical applications of the HKSMMBS. After extensive consultations and discussions among the various professional bodies

construction contract as it enables fair sharing and allocation of risks between the employer of the contract and the contractor. The use of bills of quantities for building services (BS/BQ) work was a new initiative of ArchSD. ArchSD had done a lot in promoting the development and implementation of bills of quantities for building services work in the department and also the construction industry. The contribution of ArchSD in promoting BS/BQ dated back as early as 1984 when ArchSD encouraged the Royal Institution of Chartered Surveyors (HK Branch) to set up a sub-committee to draft a Building Services Standard Method of Measurement (HKSMMBS) for the local construction industry. After years of discussions, consultations and refinement, the HKSMMBS was finally launched in May 1993. In August 1993, ArchSD Management had committed to the implementation of this new contract procurement initiative. A dedicated staff team was formed to be responsible for the development and implementation of BS/BQ in ArchSD. As a start, 3 projects had been selected as a pilot scheme on the use of BS/BQ. These pilot projects had been successfully completed and the pilot study proved that it was worthwhile to promote the use of BS/BQ in ArchSD. The feedback and experience gained from the pilot study had provided a strong

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Hong Kong Science Park

and construction associations in the local construction industry, HKSMM4 (combined Building Works & Building Services) was finally launched by HKIS in November 2005. This new Standard Method of Measurement would be adopted for use by ArchSD in due course. Personnel competent on BS/BQ work are scarce in the local construction industry. As a result, training forms an important part of ArchSDs strategy in promoting the use of BS/BQ. A lot of training in the form of briefing sessions, hands-on workshops and seminars had been organised to develop staff in taking up BS/BQ work. Besides, ArchSD had also helped the local industry in developing personnel in BS/BQ work by organising external seminars and courses in collaboration with professional institutions and local universities. Through these training activities

and years of application of BS/BQ, ArchSD had built up a valuable asset of staff and expertise competent on BS/BQ work. With the increasing demand for sustainability, energy conservation and intelligence/automation in the design of modern buildings, the need for good cost control on building services work should become increasingly apparent and the trend on the use of BS/ BQ in ArchSD would continue. However, it is expected that the work on BS/BQ will be very challenging as building services installations of modern buildings are going to be increasingly complex and involving advanced technology/specialist type applications. The technique and skill of the staff responsible for BS/ BQ work should be enhanced in parallel with the development of new technology applied in building services installations.

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Post Contract Administration and Final Accounts


Introduction The post contract stage of a building contract starts immediately after the contract is awarded. As a member of the project team, a quantity surveyor (QS) works closely with other team members to ensure the project will be delivered in accordance with the terms and conditions of the contact and within the cost limit. The post contract quantity surveying services are: cost control and monitoring, certification of payments to the contractor and valuation of variations and settlement of the final accounts. Cost control and monitoring There are two objectives for cost control and monitoring. The first one is to estimate the implications of the proposed variations and the second one is to report the accumulated implications of variations and events, which have bearings on the final contract sum. A good cost control and monitoring system will enable the client to have a full picture of his expenditures and at the same time alert him to any overrun of the budget. Contract variation estimate Increased project complexity, tight programme in pre-contract stage, high expectation from the end users and the need to accommodate the last minute requirement render changes during the construction stage unavoidable. These changes should be reported as they arise and their effects monitored such that the project can be delivered without exceeding the approved budget. Cost reporting Governments procedures forbid an officer, without justifications, from committing expenditure of government funds before approval. To give project team members a clear picture of the financial status of the project, the QS will regularly issue financial statements, usually on a monthly basis, to show the overall project financial status with cost implications of the issued and proposed variations, adjustment of provisional quantities and provisional sums to date as well as anticipated prolongation/disruption claims to facilitate the project team to deliver the project within the cost limit. When it is apparent that variations and/or other events would lead to exhaustion of the contract contingency and the contract sum being exceeded, the QS will alert the project team to determine whether it is necessary to apply for supplementary funding and/or to adopt cost saving measures. Recently, ArchSD has adopted a web based Contract Variation Management System to monitor the issuance of variations from initiation to approval As part of the concerted cost control effort, the cost implication of any variation prior to its issuance will be made known to the initiator, who will seek approval in accordance with the relevant procedures and apply for supplementary funding should the contract sum be exceeded. In this regard, the QS always work closely with the other project team members and tender timely advice to them to arrive at value for money design solutions.

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by electronic means. This system will enable the project team to access updated project financial information. Certification of payments A contractor will submit its payment application by the end of each period of interim certificate stated in the Appendix to the Form of Tender. Within 21 days of receipt of the contractors application, the QS shall value and certify payment in respect of the estimated value of the permanent works executed, temporary works or preliminary items, materials for inclusion in the permanent works not prematurely delivered to the site, sums payable to the nominated subcontractors, variations completed to date, adjustment of fluctuation in materials prices and labour wage rates, after taking into account of any works found unacceptable by the architect. In response to governments initiative of helping local business, QSB now adopts an administrative target of certifying payments within 15 calendar days from the date of receipt of contractors applications. If there are specialist subcontractors in the contract, the QS issues separate

payment notifications to advise these specialist subcontractors the certified percentage of their work done included in the payment certificates. Milestone approach of payment is sometimes adopted in contracts which links interim payments to prescribed milestones for the completion of significant stages of the works. This approach has been adopted in standard schools projects and design and build contracts. Unlike traditional valuation method, the QS certifies payment based on milestones/payment schedule included in the contract and achievement of these milestones by the contractor. This milestone payment method provides incentives for contractors to complete the works earlier in order to get paid. While less time is spent on the interim valuation process, cash flow prediction is also enhanced by the use of this payment method. Contractual advice The QS will provide contractual advice to project team members to achieve a smooth running contract. Usually team members seek QSs view on issues like whether an item has been included in the rate or not, whether certain provisions in the General Conditions of Contracts and/or Special Conditions of Contract

Tai Po Waterfront Park

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are relevant to a given situation, whether contractors claim on extension of time (EOT) is admissible. However for more complicated contractual/legal issues, advice from the Contract Advisory Unit and/or Legal Advisory Division (LAD) of ETWB will be sought. Building services installations QSB has since 1994 extended the post contract quantity surveying services to building services installations the value of which, in complex projects, could account for up to 50% of the contract sum. Most of the QSB staffs are well conversant with building services technology and, in the course of providing cost control service, integrate the quantity surveying skills with knowledge of various building services systems. Implementation of various government initiatives With increase of public concern on issues like site safety, environmental protection, management of subcontractors, ETWB has promulgated a number of measures to provide incentive for contractors to improve their performance in these areas. Provisions for payment to comply with these initiatives are included in the contracts and the QS will verify whether the contractor has complied with these obligations before certifying payments. QSB, in a way, actively contributes to the implementation of these initiatives.

the contractor are facts of life and in most cases inevitable. The majority of these disparities are due to differences in valuation concepts rather than difference in measurement of quantities. To reconcile disparities, the QS would proactively establish dialogue with the contractor as early as practicable to promote understanding and, if possible, seek consensus in the disagreements before escalating into disputes. Good negotiation skills, ability to maintain professionalism, objectivity, integrity and tactfulness working under pressure are essential elements in gaining cooperation from the contractor. Final accounts ArchSD makes every effort to achieve settlement of the final accounts within the measurement period. To this end, the QSB final account-monitoring framework stipulates final accounts settlement shall be completed in three distinct stages starting from the commencement of the measurement period. Progress of achieving each stage is closely monitored and recorded. The final accounts process actually starts at the commencement of the post contract stage. QS liaises with the project team and the contractors to collect and collate information required for valuation of variations and, where practicable, to agree the valuation as soon as these variations are issued. Outlook

Valuation of variations Conditions of contract stipulates Surveyor shall determine the sum which in his opinion shall be added to or deducted from the contract sum as a result of an order given by the architect... in accordance with the prescribed rules and to fix rates when the contractor and surveyor fail to reach agreement. In plain words, it is the QSs role to translate the variations into monetary terms in accordance with the terms and conditions of the contracts and to seek agreement with the contractor. Disparities between the assessment of the QS and

QSB endeavours to take the lead in the field of developing new framework to improve its post contract service. Drawing from experience and feedback from front line staff, means to improve the contractual framework are explored and operating procedures are under constant review. At present, the branch is exploring means to expedite final accounts and claims settlement, investigation into possible enhancement to the cost library to facilitate post contract cost control and cash flow forecast/monitoring, as well as reviewing best practices to minimize/mitigate contractual claims.

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Term Contracts

erm contracts are contracts with fixed contract period during which works or services are ordered

build minor works term contract covering the whole territory of the HKSAR. About 400 works orders were issued in the financial year 05/06 amounting to approximately HK$410 million. Design and build fitting-out term contracts Currently, there are 3 term contractors undertaking the design and build fitting-out works. These contractors are in the List of Approved Public Works Contractors under the category of Turn-key Interior Design and Fitting-out Works. These contracts have their own schedule of rates which comprise composite works items. In the financial year 05/06 about 190 works orders were issued amounting to approximately HK$185 million. Minor works term contracts This type of term contract covers both building and building services works carried out through the issue of works orders. Each term contract has a 3-year contract duration with total value around $300 million. It covers a wide range of projects like parks, public toilets, improvement works etc. Soft landscape term contracts This type of term contract covers soft landscape works with total estimated value for each term of a 3-year contract of around HK$20 million. The size of individual works order varies, ranging from a few plotted plants to extensive soft landscape works of

through the issue of Works Orders (for works contracts) or Letters of Appointment (for consultancy agreements). There are different types of term contract handled and processed through the Quantity Surveying Branch to meet different project requirements. Maintenance term contracts The works to be executed under this type of term contract include alterations, additions, maintenance, conversion, replacement, refurbishment, reinstatement, improvement and minor fitting out works. Works are re-measured on completion based on schedule of rates. In 2006, ten maintenance term contracts with duration of three years each have been awarded. Number of works orders issued in the financial year 05/06 is about 333,800 amounting to approximately HK$1.5 billion. Design and build minor works term contracts The works to be executed under this type of term contract include site investigation, feasibility study, design, supply, manufacture, delivery, site installation, demolition, construction, testing, commissioning, operation and maintenance of minor works. Works are re-measured on completion based on schedule of rates and the contractor is responsible for the design of the works. In 2006, there is one design and

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Po Kong Village Road school village

estimated value over HK$2 million. Examples of these works include the Hong Kong Flower Show at Victoria Park, soft landscape works at various parks/local open spaces, recreation grounds, etc. Term contracts for ground investigation and laboratory testing This type of term contract covers ground investigation and laboratory testing works within a 2-year contract duration. The data so collected provide important information for the design teams of the ArchSD in planning for the new projects. Quantity Surveying Branch provides pre-contract services of the term contract. Post-contract works are handled by the Structural Engineering Branch.

upgrading and improvement, building services installation, drainage, external works, landscaping, and alteration. The value of each minor works project normally will not exceed HK$15 million. A letter of appointment is issued for each project. Recently awarded term consultancy also covers capital works projects which are uncertain in scope but urgent in nature. The value of each capital works contract normally exceeds HK$15 million, but not HK$100 million. Similarly, a letter of appointment is issued for each project. The appointment of consultant through term consultancy is likely to continue in view of the anticipated increase in volume of minor works projects in the coming years. Outlook

Term consultancies Other than procurement of construction works through term contracts, the ArchSD also procures consultant services through term consultancies. Term consultancy operates in a way very similar to a term contract. A QS consultant appointed under a term consultancy is required to provide QS services on a pre-estimated number of projects or value of projects during the term of the consultancy agreement, which normally covers a period of 2 to 3 years. The types of project in a term consultancy are minor building construction works covering, new buildings, demolition, piling and/or foundation, geotechnical engineering works including slope

It is anticipated that the proportion of services outsourced to consultants will increase in the future. To ensure the quality of service is up to the expected standard, QSB will strengthen its quality control checking mechanism. QSB will also streamline the procurement strategies. For the design and build fitting out term contract, tender assessment by the formula approach and the common Schedule of Rates for Building Works would be adopted. For the ground investigation and laboratory testing term contract, consideration is being given for increasing the contract duration to 3 years. QSB will also explore other procurement strategies such as PPP type of term contract for slope maintenance.

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The Operation of Maintenance Term Contracts

Kowloon City Magistracy Building

aintenance term contracts are re-measurement contracts. Under the terms of the contract,

contractors are responsible for the measurement of the works. These measurements are submitted in the form of dimension books for our checking. Due to the large number of works orders, a provision known as batching and sampling has been adopted to speed up the finalization process. Works orders are grouped into different batches; from which random samples are selected for subsequent detail checking. The aggregate percentage error found in the sampled works orders will be applied to all other works orders in the same batch. This provision has been successfully operated for more than 30 years and has become a significant feature of our maintenance term contracts. With the launch of the ACTION II system in May 2006, the accounts finalization processes for ArchSD Property Services Branch term contracts are now fully computerized. Dimension books are submitted by contractors through the Internet, adjustments are keyed in directly onto personal digital assistants during site check, and payment certificates are signed electronically with smart cards. Works orders checking are now automatically assigned to individual staff by the system. With these new tools, we can manage our term contracts more effectively and efficiently. Apart from having a separate form of General Conditions of Contract, term contracts in many ways,

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differ from a normal building contract and require a different focus on contract administration from a QS perspective. The total number of works orders issued under all ten maintenance term contracts over the entire three years term may well exceed 1,000,000. Although over 90% of these works orders are valued under HK$1500, each of them has to be finalized individually. A large portion of the remaining works orders would involve other post contract processes such as interim payments, variations, extension of time, liquidated damages etc. similar to a normal building contract. In addition, there are also provisions such as claw back of interim payment for non-submission of dimension books, and batching and sampling checking of dimension books that are unique to maintenance term contracts. When problems occur, they need to be addressed immediately since a large number of works orders are issued every day. Whilst dimension books checking and assessment of star rates are daily routines, we are committed to meeting expenditure targets and early finalization of accounts. Unlike other one-off construction procurement, term contracts are catered for continuous requirements. Prior to inviting tenders for new term contract, a complete review of the current procurement strategies and contract administration would be held internally. These strategies may include tender evaluation criteria, grouping and pairing of term contracts, restrictions on tender award, and staggering of commencement of different types of term contracts. It is also the time for revising the Employers Requirements, based on experience gained from the previous term contracts. On the resources side, given the large volume of works orders involved, a large pool of technical officers is required for dimension books checking and quality control checking. Motivating a large pool of staff is a constant challenge. Recently, consultants have been engaged to take up some of the accounts checking. With outsourcing of the services, we expect the time for dimension book finalization will be shortened. Additional human resources will be re-deployed to conduct more quality control checking on work by in-house staff and consultants to ensure that the quality of services is up to standard.
Hammer Hill Road Leisure Pool

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General Conditions of Contract

The origin The Stores and Procurement Regulations (SPR) regulate matters relating to the management and procurement of government stores and services. They are applicable to all public officers. SPR345 is on Tender Documents. It requires that departments should use the standard forms of Articles of Agreement and General Conditions of Contract (GCC) for inviting tenders for various types of works contracts. Any deviation from this regulation should be consulted with the Department of Justice and approved by the relevant policy bureau and Financial Services and the Treasury Bureau. The GCC are prepared by the Environment, Transport and Works Bureau (ETWB). They aim at achieving the following objectives: (A) promoting the public interest in receiving the best value for money in the procurement of public works; (B) an optimal risk allocation to minimize the cost if risk materializes; (C) minimizing the total cost to the community, not to either of the contracting parties; and (D) the best international practice. The GCC are promulgated by ETWB in the form of Technical Circulars (TC). There are three sets of GCC available for use in building works, civil engineering works, and electrical and mechanical engineering works respectively. Each set has two versions: one for the one-off capital works contracts and the other Overall review of the GCC There were problems encountered in the use of the GCC since the promulgation of the 1985 editions. Only when several controversial disputes on risk for term contracts. There is also a GCC for Design and Build contracts, which is used in procuring work services adopting the contractors design and build approach regardless of the types of works. A set of GCC was also prepared in the past for the Airport Core Program projects and is no longer used after the completion of the projects. Some special features of this GCC, however, have been transformed into Special Conditions of Contract (SCC) for use in Mega Project Contracts (ETWB TC No. 26/2002 refers). The current GCC are the updated versions of the 1985 editions, which were based on and evolved from the ICE Conditions of Contract prevailing at that time. SCC for any newly introduced or changes in policy requirements are issued from time to time by ETWB to supplement the GCC. At the start of a new year, a TC on Library of Standard SCC is generally compiled and issued by ETWB to summarize and update all the SCC previously issued.

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Lai King Hospital

responsibility had surfaced in some major public works projects in 1996 and after, it was decided to engage an internationally renowned expert to review the identification and management of risks in the GCC. In March 1998, Jesse Grove, an attorney from New York, was appointed to carry out a fundamental review of the GCC and in particular the allocation and management of risks and to make recommendations on any modifications necessary in the interests of public finance based on international best practice. Jesse Grove submitted his report in September 1998. He advised that the risk allocation in the GCC was basically fair and congruent with the risk allocation practice in other international forms. Having said that, however, he recommended the government to take back the risk allocated to the contractor in the GCC on some controversial issues and suggested government making provisions in the GCC to simplify and tighten the variation and claim assessment and dispute resolution process. Jesse Groves report Jesse Grove made the following recommendations: (A) General issues a. Employer to take back some powers of the Architect; b. lump sum contracts instead of Remeasurement contracts; c. breach of contract by Employer is subject to f.

valuation in accordance with contract terms; d. right for Employer to terminate for convenience; e. right for Employer to accelerate the works; and f. avoid catch-all clauses as grounds for extension of time. (B) Specific issues a. Employer should accept the risk of unforeseeable physical conditions; b. Employer should retain the impossibility clause; c. Employer should require mandatory all risk insurance; d. Employer should accept the risk of third party interference; e. Employer should accept the risk of changes in law; Employer should let market forces operate regarding sub-contractor payment; g. failure of notice should give rise to damages, not forfeiture; and h. Employer should use dispute resolution advisers widely. (C) Variations should be simplified and tightened by: a. lump sum forward pricing of variation works; b. Contractors alternative design during the course of the works; c. Contractors entitlement to profit in claim settlement;

27

Tseung Kwan O Swimming Pool Complex, Library, Indoor Recreation Centre and District Open Space

d. Employer to fix the rate of head office overhead recovery; e. Employer to fix the rate for profit mark up; f. Contractor to escrow his estimating file as reference for dispute; g. global claim should be contractually prohibited; and h. liquidated damages for performance deficiencies. The changes recommended and suggested were so radical that they had attracted critical examination and heated debate both within Government and among stakeholders in the industry. Wind of changes While the debate on whose risks and who pays was in full swing in the construction industry in Hong Kong, the construction industry in the UK, Australia and other countries over the world had also gone through a considerable change in the procurement and contractual arrangement over the years. This wind of changes came to Hong Kong just in good time when Government was pushing ahead its public sector reform programme in which it was promoting its financial and management philosophy of getting private sector involvement, i.e. outsourcing and public private partnership, in delivering services to the public. In April 2000, the Chief Executive appointed the Construction Industry Review Committee (CIRC) to:

(A) examine the current state of the construction industry in respect of quality, quantity, environmental friendliness, manpower, safety and supervision; (B) identify specific actions and good practices to improve the efficiency and cost-effectiveness of local construction in terms of quality, customer satisfaction, timeliness and delivery and value for money; and (C) advise on an order of priority for implementation. The CIRC submitted a report Construct for Excellence to the Chief Executive on January 18, 2001 (the CIRC Report) containing 109 recommendations. The CIRC Report The CIRC Reports recommendations had covered changes to every aspect of the construction industry, which included: (A) Fostering a quality culture, such as: a. knowledgeable and involved client; b. importance of the planning and design stages; c. realistic project programming; d. clear accountability industry and project participants; e. regulating subcontracting practice and improving subcontractors performance;

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f.

quality site supervision requirements and quality assurance; and

c. implement construction worker registration scheme; d. foster an ethical culture; and e. wider use of direct labour through contractual arrangements.

g. raising the quality standard of renovation contractors and decorators. (B) Achieving value in construction procurement, such as: a. promoting and developing guidance notes on systematic risk management; b. reconsidering recommendations in Jesse Groves Report to achieve a more equitable allocation of risks between the contracting parties; c. contractual provisions for proactive and collaborative dispute resolution methods; d. wider adoption of a partnering approach; e. considering integration of a partnering approach into a new form of contract; f. wider adoption of the milestone payments approach; g. considering the merits and need of enacting security of payment legislation; and h. considering wider adoption of alternative procurement approaches such as target cost contracting. (C) Nurturing a professional workforce, such as: a. mandatory participation in continuing professional development activities; b. mandatory supervisors registration scheme;

(D) An efficient, innovative and productive industry, such as: a. process re-engineering to achieve better integration; b. wider use of standardization in component design and processes; c. wider use of prefabrication; d. wider application of information technology in project implementation; e. investment in construction-related research and development; f. facilitating regulators; g. more reliable records of underground utilities; h. lowering the cost of ready-mixed concrete; and i. export potential of the construction industry.

(E) A safer workplace and an environmentally responsible industry, such as: a. incorporating safety planning and management system in public works projects; b. strengthen safety training, promotion and performance; c. practising the concept of sustainable development and sustainable construction;

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d. encouraging green designs, environmentally friendly designs, energy efficient designs; e. practising the concept of life-cycle costing; f. abating environmental nuisance during construction; and g. wider use of recycled materials and minimize the generation of demolition materials. On September 28, 2001, the Provisional Construction Industry Co-ordination Board (PCICB) was set up and one of its Terms of Reference was to consider and take forward the recommendations in the CIRC Report. Unlike Jesse Grove Report, there was no time allowed for further debate on the CIRC recommendations. A tight time frame, ranging from at once to 5 years, was set for implementation of the recommendations. The implementation Five years have passed since the release of the CIRC Report. What have been done by ETWB, particularly what changes have been made on the GCC due to the impact of the CIRC recommendations? The most obvious phenomenon is the greater numbers of TC issued introducing contract requirements on site safety and environmental management, construction and demolition material disposal, and site cleanliness and tidiness matters. Carrots and sticks are provided in contracts to encourage contractors to improve their performance on these aspects. There are also a considerable number of TC issued covering additional contract requirements on sub-contracting arrangement and management, employment of qualified supervisors, tradesmen and workers, etc. aiming at improving the traditional loose and non-value added industrial practice. On the contractual side, particularly on GCC, it appears that the following recommendations in Jesse Groves Report have been implemented: (A) ETWB TC No. 17/2004 Impossibility/ Unforeseen Ground Conditions/Utility Interference; (B) ETWB TC No. 23/2004 Right of the Employer

to Terminate for Convenience and Risk Allocation with respect to Changes in Law; (C) ETWB TC No. 25/2004 Contractors Designs and Alternative Designs. Changes have also been introduced on a wider perspective, e.g. (A) ETWB TC No. 35/2002 Implementation of Value Management in Public Works Projects; (B) ETWB TC No. 32/2004 Reference Guide on Selection of Procurement Approach and Project Delivery Techniques; (C) ETWB TC No. 6/2005 Implementation of Risk Management in Public Works Projects; (D) ETWB TC No. 7/2005 Procurement of Construction Related Insurance; (E) Documents on Dispute Resolution Adviser System (1999 Edition); (F) Guidelines for Milestone Payment for Public Works Building Projects (August 2002); (G) Manual for Alternative Dispute Resolution Techniques (August 2004); (H) Documents on Voluntary Adjudication System (2004 Edition); (I) Administrative Handbook on Dispute Avoidance and Resolution Mechanism (November 2004); and (J) Practice Note on Adoption of Non-contractual Partnering in Public Works Contracts (March 2006). Looking forward Apart from some controversial issues, most of the recommendations made in the CIRC Report have been implemented. The outstanding issues may drag on for some time before compromise can be reached among stakeholders in the industry. The wind of changes, however, is still blowing though it is now blowing toward a new direction : a change in delivery approach, e.g. contractual partnering and private public partnership. How far it will go is still a question mark. As quantity surveyors and public officers, we always face changes and we shall get prepared for the changes to come!

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Consultancy Management

Outsourcing policy It is the ArchSDs practice to employ consultants to assist in the design and management of projects. This happens when certain expertise is not available inhouse, or when there is a shortfall in resources. The latter has often been the prime reason. For many years, to cope with the uncertain and fluctuating input of projects under the Public Works Programme, outsourcing has proven to be a very effective means to ensure optimum deployment of resources in the ArchSD. With gradual development of the local construction industry and in line with the HKSAR policy of a leaner government, the ArchSD has since 2002 embarked on a re-engineering programme to outsource more projects to the private sector, while allowing the department to be more focused on planning and management related issues. Selection and appointment of consultants The considerations involved in the selection of a consultant are different from those for the selection of a contractor. In the latter case, the finished product is clearly defined in the tender documents. Once it is ascertained that the tender specifications are met, tender prices and the tenderers ability to deliver the product are the only considerations. However, in the case of consultancy services, the finished product is described in less absolute terms. Consultants are given the latitude to devise their own methodologies
Hong Kong Central Library

and solutions to satisfy the parameters and deliverables specified in the invitation documents. A tender should be conducted in a manner, which fosters open, fair and equitable competition. In the assessment of submissions for a consultancy, the following questions should be answered: (a) Is it the clients intention to accept a scheme which is better in terms of quality but costs more in terms of fees? (b) By how much should the scheme be considered better before the client is prepared to pay the extra incremental cost? Are the consultants bidding for the consultancy made aware of this margin?

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Hong Kong Film Archive

(c) Is it possible to quantify the extent to which the quality of a particular proposal is considered better than the others? Are the consultants made aware of the methodology or criteria for quality assessment? To balance quality and price in the selection of consultants, a two-envelope system is adopted. The technical proposals are first assessed before the fee envelopes are opened. Based on a formula with preestablished weightings between technical and fees, the consultancy submission with the highest combined score will be selected. In order that a level playing field is available to all consultants, the following information will be provided in the invitation documents: (a) the clients requirements in terms of project objective, scope, programme, services and deliverables (b) criteria for assessing the technical aspects of a consultants proposals (c) weighting of technical : fee (usually 70% : 30%)

Generally, the technical : fee weighting is 70:30. For complex projects where more emphasis is placed on the consultants technical competence and experience, a higher weighting, e.g. 80:20, may be adopted. For more straightforward assignments, the weighting may be lower, e.g. 60:40. Relative to the tender stipulations, the consultants are required to submit their technical and fee proposals in separate envelopes. The technical proposals are first assessed by an assessment team prior to the opening of fee envelopes. Being unaffected by any prior knowledge about the fee proposals, the assessment team is allowed to conduct the technical assessment in an objective manner. Once the technical assessment is approved by an independent board or a designated officer (depending on value of the consultancy), the fee envelopes are then opened. The overall winner will be determined by applying the predetermined technical to fee weighting. The operation of the two-envelope system is illustrated in the following flow chart:

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action can be taken promptly. A performance management system is in place to monitor and report on the performance of all consultants. Special attention is given to those consultancies which unsatisfactory performance is reported. From a long term perspective, the consultants are induced to provide good services, as their respective performance scores are linked to the marking schemes in the evaluation of bids for future consultancies. Conclusion and outlook Consultants are an extended arm of the ArchSD in the delivery of services and projects. To be accountable for the expenditure of public money, selection of consultants must be based on open, fair and equitable competition. On the other hand, to achieve value for money, selection must not be based on cost alone. Balancing quality and cost requires enormous skills and experience. The two-envelope system has proven to be effective in: (a) providing a platform for open, fair and equitable competition (b) providing a systematic and objective mechanism for balancing quality and cost in the selection of consultants Consultants management Except in some special circumstances where the scope of work cannot be pre-determined with certainty, such as in the case of a term contract, bids for consultancies are usually invited on a lump sum basis. As such, it is essential for the consultants to be clearly advised of the services that they are expected to provide. Any ambiguity in the consultancy brief may invite misleading or inadequate proposals from consultants. It may also result in unnecessary arguments and claims during execution of the consultancy. It is also essential to maintain good communication with the consultants on the project requirements and the governments operational procedures. The consultants should be properly alerted to any deviation from quality targets or procedures so that corrective (c) facilitating the selection of the most costeffective proposals Through dialogues with the consultants, a partnering approach is being adopted to ensure value for money in the selection process and continual improvement in the consultants performance.

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Subvented Projects
History The Grant-in-aid Schools Division was commissioned during the 1960s in response to a social need for more educational facilities. It was apparent that the government did not have adequate resources to handle the projects and it was agreed that a limited policy of funding private schools with public money could be developed. The phenomenon of private schooling was not new to Hong Kong. Religious groups, Kai Fong societies and vested self-interest groups had for a long time building schools funded by private donation. These private schools were also in full control of their students admission process. The governments plan is to provide funding to private school operating bodies to expand and upgrade their facilities in order to accommodate the growing numbers of students. Initially, the mechanism was simple. The subvented body would sign a service agreement with Education Department (ED) and a team of consultants would be hired to submit a development plan to ED and ArchSD. The latter would check the design standards and cost against similar schools built by the government. If everything was in order, 80% of the capital cost would be granted to the subvented body. Upon the acceptance of the funding proposal, the school operator would be required to fund the other
Tseung Kwan O Hospital

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Hong Kong University of Science and Technology

20% of the building cost. The apportionment of the 80:20 capital cost funding would be based on the cost of the awarded tenders for the building contracts and other ancillary contracts. Variations to the building contract without prior approval would not be allowed for funding. The system had become so successful that more school operating bodies were formed to exploit this new source of capital funding. In 1986, the headquarters of ArchSD was relocated from Murray Building to Queensway Government Offices. In order to rationalize all subvented projects, a new division named Subvented Projects Division (SPD) was formed. A new post, Chief Technical Advisor/Subvented Project Division (CTA/SP), was created. The new division, in addition to subvented schools, also took on other subvented projects including social welfare projects, subvented hospitals, clinic and health facilities, universities, projects under Head 708 entrusted to non-government organizations (NGO) and the maintenance responsibility for subvented schools. In 1991, the Property Services Branch took over the responsibility for the maintenance of subvented schools. The Hospital Authority (HA) was established in 1992 and all subvented and subsidized hospital projects were gradually passed to HA, but SPD still retains the maintenance and vote control responsibility.

Function SPD aims to maintain fiscal responsibility of the government using a model of audit control while at the same time allows flexibilities to the NGO, such as allowing the employment of their own design team, the fusion of public funding with private donation to enhance the scope of the project, etc. The function of SPD can be divided into the following two categories: I. SPD provides advisory function given to Subventing Departments and Policy Bureaux on the following: a) preliminary project proposals and preliminary estimates. b) approval of the Technical Feasibility Statement. c) procurement of consultants following governments best practice. d) submission to Public Works Sub-Committee (PWSC) of the Finance Committee to secure project funding. e) draft tender documents, lists of tenderers and pre-tender estimate based on governments best practice. f) approval of tender recommendation based on governments best practice. g) approval of final account and final statement of actual expenditure. h) budget reconciliation should the approved project estimate be exceeded. II. SPD is also responsible for the procedural management and financial accountability of

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Hong Kong Polytechnic University

Special and Entrustment Projects for Government Accommodation (GA) undertaken by private development under land sale/grant. SPD provides advice on the following:a) compliance with lease/sale/grant conditions and technical schedules. b) rough indication of cost and liquidated damages amounts for proposed GA. c) development control and landscape advice to Lands Department and Planning Department. d) PWSC Submission. Staff in SPD comes from a multi-disciplinary background comprising architects, quantity surveyors, building services engineers, structural engineers, geotechnical engineers and landscape architects. It is quite common that a piece of advice given to a subventing department or a bureau needs to go through a lengthy process and requires the collaborative effort of officers from different disciplines within SPD. However, as it is the general policy of the government to speed up the delivery process of projects undertaken by subvented organizations, the department is committed to providing all advice within the number of days as pledged in the Government Printed Estimates. Outlook SPD has good experience in providing advice to various departments and bureaux in the Social Welfare Reform Programme, School Improvement

Programme, Hospital Redevelopments, Landslip Prevention Programme and various Entrustment Projects. The latest record shows that, currently, SPD is handling approximately 1,090 projects with a total value of about HK$42 billion. Each year, SPD offers an average of 12,000 advices generated from approximately 4,600 requests. The trends in projects undertaken by SPD are moving towards larger scale with sophisticated construction techniques, materials and elaborate mechanical and electrical service requirements. SPD has the opportunity to experience unique design and construction technique, comment on unusual procurement processes and oversee complex project disputes. ETWB recent policies supporting energy efficiency have been studied by NGO with a view to implement such initiatives in their projects. As a result, funded institutions constantly test the boundaries of subventibility with cost in use and sustainability submissions. Inevitably, SPD will be required to consider such submissions as relevant in the establishment of the supporting subvention level. As a result of the 3+3+4 education reform soon to be implemented by the government, it is anticipated that there will be massive developments and changes in university and school premises to cope with the new policy. With the wealth of experience and expertise possessed by the staff of SPD, the department will strive to provide the best services in facing the challenges lying ahead.

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The School Improvement Programme

chool Improvement Programme (SIP), involving a budget expenditure of more than HK$20

supervision duties are outsourced. Consultancy agreements are awarded in packages and construction contracts in groups. Totally, there are 5 phases, 34 packages, 157 groups, and 667 feasible schools. The construction agents comprise 17 design consultants, 11 quantity surveying consultants and 54 building contractors. Two project management consultants have also been engaged for the last two phases. A concurrent construction programme of a large number of schools, from feasibility study through tender procurement to completion, is a feature specific to the SIP. The huge volume of work has not lowered our commitments to time, cost and standard.

billion, was promulgated under the Education Commission Report No. 5 on Improving the Physical Environment of Schools. ArchSD is honoured to take up this meaningful task of bringing the existing primary, secondary and special schools to the latest standard. The Quantity Surveying Branch (QSB) has dedicated a team of professional and technical staff to this programme. The programme commenced in the 1990s and is now almost completed. The improvement works, all carried out in the existing school premises, are in many ways constrained by the existing site conditions, which vary from one school to another. There are many improvement options, ranging from addition of new or annexed blocks, extension on the roof, to alteration of existing accommodation. The management boards of the schools can choose to implement the programme on their own or to invite ArchSD to build on their behalf. Over 90% of the schools in this programme are built by ArchSD. The SIP is targeted for phase completion. Each phase comprises a number of packages and each package embodies groups of schools. Basically, the design and

Holy Family Canossian School

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Holy Carpenter Secondary School SKH Good Shepherd Primary School

have been regulated to two per week and the financial limits of tenderers are also relaxed to ensure sufficient competition among them. SIP tendering programme is extremely tight that there is almost no float time. The time for each activity is pre-fixed. Each party is expected to adhere strictly to the programme. The project team would meet regularly to exchange views, to review assessment progress and to resolve problems encountered, all for Standardization is an effective tool to ensure integrity and consistency. There are over a hundred construction contracts in the SIP. An index system using the phase-package-group combination has been developed to identify each contract. For example, 343 means Phase 3 Package 4 Group 3. The procurement procedures, as described in the Integrated Management Manual, are consolidated into standard checklists to facilitate planning, monitoring and checking. Inviting a large number of tenders at the same time would have strong impact on the construction resource and competitiveness of the tenders. Tender invitations the purposes of avoiding time or budget overrun and ensuring consistency. SIP tender documents are issued in batches. Feedbacks from preceding tender exercises are valuable experience for improvement. This experience-learning is achieved through the process of knowledge management where the feedbacks are collected, discussed, assimilated, disseminated and stored. In addition, regular meetings are held to encourage collective experience sharing and problem solving. QSB SIP team is honoured to participate in the SIP which has provided a better learning environment for the next generation.

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Dispute Resolution Advisors (DRAd) System

Introduction In Hong Kong, construction is a tough business since competition has become so intense that most contractors are now operating at very low profit margins. With the increasing demand for better performance by clients and the demand for nontechnical issues such as socio-economic requirements and public interest group pressures, construction projects have become much more complex. It is believed that many contractors with tight margins are required to pursue all available means to protect their bottom line by filing claims whenever possible and backed up by lawyers and consultants. It is not uncommon that some projects are eventually led by claim consultants, lawyers rather than professional project managers. As this phenomenon has become more evident, the construction industry has expressed strong demands for curtailment of proliferation of avoidable claims and disputes and a closer involvement and integration of different parties. Evolution of the dispute resolution Over the years, the construction industry has dealt with the resolution of claims and disputes through a variety of solutions. Arbitration is the most popular option, as it is less expensive and faster than litigation. However, it has become increasingly more costly and time consuming, less satisfactory and adversarial. Other alternative dispute resolution methods like mediation have been adopted for public works contracts in settling disputes. However, the inherent drawback of mediation is that it could not avoid the
Chai Wan Complex

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occurrence of construction claims and disputes. The development of the Dispute Resolution Advisors (DRAd) system by the Architectural Services Department in early 90s has proved to be very effective in avoiding claims at their roots and resolving disputes before they escalate to formal disputes. Experience has demonstrated that the presence of a mutually selected, technically knowledgeable and experienced neutral party tends to promote agreement on problems that would otherwise proceed to arbitration or litigation. Prevention is better than cure The primary benefit of the DRAd system is claim avoidance. At the beginning of the project, the DRAd would study the project and the contract documents thoroughly and identify potential problems so that all parties would pay particular attention to them. Besides, the DRAd would establish procedures and communication channels in order to foster positive relations, trust and cooperation that are necessary for the parties to resolve problems efficiently and amicably. During the regular project meetings, the DRAd would try to trace any sign of potential problems and
Quarry Bay Park

claims and review the status report of outstanding issues. The parties are therefore led to focus on early identification and resolution of problems and, in the event of an impasse, use the DRAd for prompt assistance. Less claims and disputes There has been concern that the active participation by the DRAd during the construction stage would encourage contractors claims and disputes. This is not the case. In fact, the presence of the DRAd could deter the contractor from filing unjustifiable claims and promote partnering. One of the major causes of claims and disputes for a construction project is that problems could not be identified promptly or have been left unresolved or unattended for a long period of time so that simple issues would develop into more difficult and complex as time progresses. With the active involvement of all parties and the DRAd, the construction process is so transparent that neither party could pretend the nonexistence of any potential problems or unresolved issues. For the designers, they could not ask the contractor to proceed with the works without providing him with sufficient construction details. On the other hand, the contractor could hardly claim for any discrepancy or deficiency in the contract documents if he has ample time and opportunities to disclose the issue. In these cases, if either party commits any foul playing, the cooperative working environment would inevitably be damaged. Quick settlement is better than no settlement Win or lose, parties find it more productive to resolve issues as they arise, so they can progress the construction without carrying the baggage of unresolved claims and disputes. The uniqueness of the DRAd system is the tight time frame that each party has to observe in the case of a dispute not being resolved at site level. The owner of a Group C contractor once said, The

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essential thing is that if I know at the very beginning that Im losing money in a particular incident, there are various options for me to recover it during the course of construction. Once the construction has been completed, I could do nothing other than claim my money back from the client. Resolve differences in the field The DRAd is a catalyst which helps the client and the contractor to more objectively assess their respective positions. Once an overall picture is shown, both parties are more than willing to settle any differences instead of bearing the risk of long delays and substantial costs in arbitration and litigation. Basically, if a dispute arises, the DRAd allows both parties the opportunity to argue or defend their case in a private and professional manner in the light of the relevant contract documents, correspondence, drawings and the facts of the dispute. If it still could not be resolved at site level, it would quickly be escalated to the senior management of both parties who would take a broader view in evaluating their position. The concept of right or wrong The attitude of the parties often plays a critical part in determining whether a dispute could be resolved successfully and promptly. For construction professionals, they are trained to observe well-defined principles like rules, standards, regulations, guidelines and procedures. When they are faced with the task of settling disputes, they have difficulties in accepting the word pragmatism because it seems to be the opposite of principled and that is unprincipled. In fact, pragmatism does not necessarily mean the absence of principles but can mean the flexible application of principles. It can also mean a refusal to be driven into impractical action by rigid principles. The DRAd, who is a neutral and experienced professional, could facilitate the parties to look into the problem from different perspectives and explore options where both parties could accept.

Way forward Since the DRAd is a neutral person and acquainted with the actual construction of the project, we may consider extending the role of the DRAd to other administrative functions such as giving opinion on the report of contractors performance. Further, in order to allow project officers to appreciate the extent of the use of the DRAd in resolving claims and disputes for various types of projects, a database on case studies would be established for internal reference. Alternatively, workshop on the use of DRAd would be organised. Obviously, for confidentiality reasons, only limited amount of details could be presented.

Pamela Youde Nethersole Eastern Hospital

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Technical Audits

ne of the duties of the Contract Adviser, as stipulated in Works Bureau Technical Circular

deputy head of the department and copied to the relevant division heads and ETWB. Technical audits cover the various stages of a contract. The pre-contract stage includes the preparation of the tender documents, the contract provisions, tendering procedure and tender assessment. The post-contract stage includes construction activities, site checking, contract administration, settlement of final accounts and claims. At present, there are two Contract Advisers in Architectural Services Department leading two teams of auditors each comprises Quantity Surveyors, Principal Survey Officers and Survey Officers. The Contract Advisers shall determine which work stage or stages shall be audited. The audit officers shall audit the items in accordance with the Checklist in the Manual and list out the findings in the technical audit report. The audited items are usually the normal activities and requirements of a contract such as tendering procedures, payment certificates, extension of time, variation orders, completion certificate and maintenance certificate, etc. ArchSD has a high regard for technical audits. A Contract Practice Review Committee (CPRC) is in place to review the technical reports received and to oversee the implementation of any follow-up actions arising from the technical audits. The CPRC is chaired by the Deputy Director and its duties are as follows: fact finding of the non-conformities observed in the audit reports directing the project officers concerned to take appropriate remedial action

No. 15/2002, is to conduct technical audits on works contracts including term contracts and those contracts handled by consultants. These technical audits are to be carried out in accordance with the guidelines in the Technical Audit Manual on Works Contracts (the manual) promulgated under Environment, Transport and Works Bureau Technical Circular (Works) No. 53/ 2002. The history of technical audit can be traced back to 1974 (PWDTC No. 9/74) when the post of Contract Adviser was first established. According to the manual, the objectives of Technical Audits are as follows: (a) to check whether laid down procedures/ requirements are strictly complied with by project staff, and if not, the reasons for noncompliance; (b) where appropriate, to check objectively whether reasonable skill and care have been exercised by project staff in carrying out their technical duties; and (c) where laid down procedures/requirements are not being followed by project staff, to recommend measures which may be applied to prevent future repetition. The Contract Adviser shall submit quarterly Activity Reports to the head or deputy head of the department with copies to ETWB. These reports show the technical audits carried out during the previous quarter and the programme for the next quarter. Individual technical audit reports are to be submitted to the head or

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Shatin Ma On Shan Swimming Pool

reporting to AACSB on non-performance of consultants bringing to the attention of all project staff as general issues of any specific procedural nonconformities

quite a number of ambiguous clauses in our contract documents, grey areas in our contract requirements, inconsistent or conflicting procedural requirements in the Office Quality Manuals, etc. This has assisted the department in bringing tremendous improvement to our documents in contract administration. The technical audit process will also facilitate government in the implementation of new policies such as site safety, environmental management, construction and demolition waste disposal, site cleanliness, sub-contractor management, energy efficiency and risk management, etc. Once these policies have been promulgated, auditors will include the relevant items in their audit agenda. The department is fully aware of the positive results that technical audits bring and is highly supportive of the system. As the department under the reengineering programme has increased the proportion of the works being outsourced to consultants, it is anticipated that the technical auditing function will be strengthened with majority of the audits to be conducted on projects handled by consultants. Besides technical audits, procedures and works of ArchSD are also subject to other audits or checking by the Commissioner of Audit and ICAC. Quality audits are also conducted regularly under the Integrated Management System of the department. Audits are also conducted on consultancy agreements. All these audit and checking activities serve to maintain and enhance the quality standard of the services rendered by ArchSD. Elevating quality standard is always a major objective of the department.

recommending issues of technical instructions to cover anomalies clarification of ambiguities and laying down or revising procedures for proper contract administration

The Secretary of CPRC shall issue Technical Audit Corrective Action and Preventive Measures Request to the appropriate Head of Grade or Project Director who will propose any required corrective action and preventive measures and specify a date for its completion. The whole process of a technical audit will be completed when CPRC is satisfied with the proposed corrective action and preventative measures. As a project would be audited for different stages including the final account, it is inevitable that inhouse staff and consultants have to keep the documents in store for a certain period of time after completion of works and made ready for audit purpose. Technical audits have a direct positive effect on the performance of the contractors, consultants and inhouse staff as well. Other than increasing their awareness of all laid down procedures and requirements, feedback from the audit reports would help prevent recurrence of non-compliances and ultimately improve the performance standard of all parties. Audits conducted in the past years have identified

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Advisory Services
In retrospect Monitoring and advisory service is one of the key programme areas undertaken by ArcSD. In unison with the direction and pace of the departments policies and strategies, QSB has strengthened its resources for this programme area through redeployment of staff to cope with the expanded scope of advisory services it delivers. A dedicated advisory services division of the branch, headed by Chief Quantity Surveyor/1, has thus been established for the purpose. The Subvented Projects Division, led by Chief Technical Advisor / Subvented Projects (CTA/SP) and used to be a dedicated division directly accountable to Deputy Director of Architectural Services on matters related to subvented projects, has been integrated with QSB as one of its constituent divisions. At a glance Assistant Director (Quantity Surveying) (AD(QS)), as head of QSB, is vested with authority to give advices to policy bureaux, other government departments, quasi-government bodies and subvented organizations. AD(QS) further delegates the authority to designated officers who monitor the process and appoints advising officers to formulate advice. The advising officers will attend meetings, co-ordinate the collection of information and prepare documents as necessary. Today QSB undertakes to provide a diversified scope of advisory services, which may be broadly categorized into the following aspects: (b) Contract advice The spectrum of advisory services under this category is wide and varied. It generally covers all contractual matters concerning works contracts and consultancy agreements. More specifically, these may be related to contractual disputes, mediation, arbitration, re(a) Quantity surveying advice This primarily covers the provision of professional advice and support on all matters relating to quantity surveying, including procurement and contract administration. QSB offers advices to policy bureaux and government departments on policy and technical matters relating to building construction costs and project information. This encompasses aspects such as costs, cost indices, tender price indices, estimating, cost planning, cost modeling, cash flow, budget control and financial reporting of works contracts.

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Hong Kong Wetland Park Phase 2

entry in works contracts and consultancy agreements, liquidation, public complaints and litigation. Technical audits on works contracts and QS consultancies also fall within this category. (c) Management of consultants and Dispute Resolution Advisors (DRAds) The branch coordinates, manages and advises on matters relating to quantity surveying consultancies procured by the Department. It assists AACSB in the list management of consultants and selection of consultants under the categories of Architectural, Building Services, Structural Engineering, Quantity Surveying, Landscaping and Building Surveying. Moreover, it administers the list of Dispute Resolution Advisors jointly with the Hong Kong Construction Association and provides advice and support to the reporting and review system on the performance of DRAds. (d) Research and development QSB takes up a prominent role in providing comments on, or undertaking the drafting of, revised or new contract provisions prepared for works contracts and

consultancy agreements to ensure compliance with any policy changes, enforcement of new statutory requirements or amendments to existing legislation. To better serve the needs of QSB in the delivery of its services, the branch develops and maintains a database of costs, building cost indices, tender price indices for building works, standard phraseology for bills of quantities, model bills of quantities, standard method of measurement for the building elements, and a very comprehensive library of standard contract documents. (e) Subvented projects advice The scope of advisory services under this category covers matters relating to the procedural management and financial accountability of subvented funding awarded under capital grant, lottery funding or donations for building projects authorized through policy bureaux or government departments, and other special and entrustment projects for government, institution or community facilities undertaken by private development under land sale/grant. Monitoring of subvented projects and provision of advices are normally undertaken by advising officers assigned by

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Victoria Park

increasing number of technical audits. So long as value for money, compliance with requirements and procedures and financial accountability continue to be the catchphrases in the management and administration of works projects procured by government or other organizations in CTA/SP in the Subvented Projects Division which features multi-disciplinary groups comprising senior professionals, professionals and technical grade staff. Looking ahead There has been a steady increase in the demand for advisory services undertaken by the department over the years, which in turn reflects the growing need for advices provided by QSB spanning all categories briefly described above. Technical audit on works contracts, for instance, has been identified as an area warranting increased allocation of staff resources to augment the branchs capacity in dealing with an receipt of subvented funding, the advisory role of the department, and hence the complementary roles of its constituent branches, will look certain to evolve and grow in all aspects. The prospect of expanding and further strengthening the provision of advisory services by QSB appears as bright as ever. The branch will gauge its available resources to cope with the prospective demand for its advisory services when formulating strategies and planning resources. What is more, it will seize every opportunity to explore new frontiers of services beneficial to the fulfillment of purpose for the key programme area of Monitoring and Advisory Services.

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Computerization and Information Management


The good old days In stark contrast with the contemporary look of our office at Quantity Surveying Branch (QSB) today, the picture in mind of a typical scene of our workplace in the good old days may probably arouse a strong sense of nostalgia, be it carried with affection or dislike, among officers who first joined QSB in 1987 or earlier. It was a fact of life in those days that our officers were inundated with piles of paperwork ranging from bills of quantities, specification documents, drawings, right to technical circulars and instructions of all descriptions. Documents of various kinds were presented in hard copy almost without exception. Exchange of electronic copies of documents was virtually unheard of. By and large, information management remained to be an inevitably manual task for officers generally. Whether bulky or not, paper documents gradually mounted up over time and took up considerable desk Use of information technology in our workplace From 1987 to 1999 The rapid advance of information technology (IT) in the 80s provided the opportunity of introducing IT to our QS practice, thereby revolutionizing the then heavily manual process of preparing and producing the bills of quantities (BQ). The benefits of improved and shelf space in officers workstations. Rows and stacks of lever arch files, box files and case files of paper documents proliferated in the office. Except those documents filed under QSB core services files which were kept centrally by QSB General Registry, filing of all other documents relating to works projects became the responsibility of the officers. It can be easily imaged that those who did not have a habit of filing their documents in good time could find it a nightmare when attempting to locate and retrieve a particular document.

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operational efficiency and cost-effectiveness through the utilization of IT in our workplace were readily evident to the branch management. In December 1987, the initial phase of a comprehensive computerized Quantity Surveying system QUEST was installed in QSB as a pilot system. The system comprised a mini-computer using PICK operating system. The application software was a quantity surveying package commonly referred to as RIPAC. It comprised a contract document production module (RIPAC I), a post contract module (RIPAC II) and an estimate/cost planning module (EVEREST). In 1990, following a successful trial, the pilot system was expanded with a replacement microcomputer using the UNIX operating system and networked with 92 text (dumb) terminals and other peripherals. The application software deployed included RIPAC together with an additional module, PCMS (Project Cost Management System). An integrated office system called UNIPLEX was also implemented for use in QSB.

In 1995, the system was further expanded with a super-micro UNIX server for running UNIX applications and a Novell server for running MS-DOS and MS Windows based applications. The number of terminals was increased from 92 to 151, with the additional terminals all being PC-based personal computers. The use of IT in our workplace brought significant changes to the ways we used to work. It also made available various electronic channels of communication and information exchange, which went far beyond the telephones, the fax machines or the medium of people coming face to face with one another. Most notably, we dispensed with the traditional cut-andshuffle method of preparing BQ and made use of the application software RIPAC to assist us in building up item descriptions, sequencing bill items in the billingup process, and generating BQ in hard copy or to electronic files in text format. With a substantial proportion of the manual chores done away with, the billing-up process became largely automated. This availed the branch management of the opportunity to re-focus staff effort on other crucial aspects of our
North Point Government Offices

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Sai Kung Waterfront Park

work in producing the BQ and compiling other parts of the tender documents, thus enhancing the overall efficiency and productivity of our staff. Using UNIPLEX, QSB developed and released its first online QS Manual which included a project procedures guide known as QSB Quality Manual and a library of standard contract documents, forms and letters, instructions, circulars and QS practice notes. Information on indices, prices and other references was also made available on this online facility. Besides having access to the QS Manual, users could make use of the word processor and spreadsheet modules of UNIPLEX to prepare documents in text format. Text documents prepared or received could be organized and saved in the server electronically and the file manager module of UNIPLEX was deployed to assist users in managing their information. Moreover, users were able to prepare their schedule measurement of quantities for BQ using the spreadsheet module of UNIPLEX which was linked to RIPAC for final BQ production. Communication and exchange of information among users within QSB were markedly facilitated with the use of the electronic mail module of UNIPLEX and the availability of broadcast messages over the

QUEST system. Above all, the implementation in the late 90s of an email system called Lotus cc:Mail in the Department further enhanced the ease of communication and information exchange among parties within or outside QSB. From 2000 till the present Progressive acquisition of better servers, PCs and application software to add to the existing inventory or to replace obsolete ones was made in the ensuing years to cope with increased workload, growing demand from users, and logistic improvement to the system. Just before the year 2000, the QUEST system underwent a thorough physical checkup by way of a Y2K compliance exercise and enhancement was introduced to the system to ensure that it was Y2K compliant. This was then followed by a major QUEST Upgrade exercise in 2002 to bring forth a significant enhancement to the system covering servers, PCs, and application software comprehensively. To ensure compliance with governments policy in electronic tendering, a separate exercise was also carried out in 2002 to procure an application entitled ArchSD ETendering System, which has become a major complement to RIPAC.

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memory cards. Hard copies of the same documents, if rendered superfluous, can be disposed of in an environmentally friendly manner. Popular e-mail applications like web mail, Notes Mail, Outlook Express, etc., have been adopted for use in the Department and the old e-mail applications UNIPLEX Mail and Lotus cc:Mail have become obsolete. What is more, users now have ready access to both the Intranets and the Internet, which implies an immeasurable amount of useful information virtually at their fingertips. Above all, the implementation of the Branch Today the QUEST system has on board over 200 PCs networked to several high-performance servers. The UNIPLEX application software has served its honour gloriously and has been replaced with contemporary and popular software products like Microsoft Word, Microsoft Excel, Adobe Acrobat, etc. With improved bandwidth in the cabling network, an Intranet for QSB was developed and launched in March 2002. The QSB Intranet, built upon the success of the online QS Manual, is a central repository of information on QS practice and procedures which is accessible to users in QSB as well as those in other Branches of the Department. It has succeeded the online QS Manual and now contains a much wider spectrum of information, ranging from a very comprehensive library of standard contract documents, forms and letters, to a rich database of project cost data and tender information. The classic Message of the Day corner on QSB Intranet, a web version based on the mode of broadcast messages via the UNIX platform, is arguably a must for all QSB users to visit as they logon to the QUEST system. Equipped with powerful servers, PCs and a robust network, users have been able to manage their information with considerable ease and can have different options at their disposal. Electronic documents in various file formats, for instance, may be filed locally in users PCs, archived under designated folders in the ArchSD Network Folder System, or even stored in removable media such as CD, DVD or Looking ahead The use of IT in our workplace at QSB will continue to be conducted in accordance with the policies and strategies set by the Policy Management Committee (PAC) of the department and follow the procedural directions given by the Departmental Information System Management Committee (DISMC), the executive arm of PAC on IT matters. Information management will certainly be further facilitated with the forthcoming launch of the electronic Document Management System which will encompass all branches in the department. When it comes to considering prospective deployment of resources in IT within QSB, the Branch management will continue to attach priority to serving its operational needs and enhancing the quality and standard of services it delivers. Integrated Management System procedures on document and data control has laid down a sound framework for managing information in QSB. Accessibility of e-mail and availability of various services over the computer network have meant a tremendous impetus to our endeavour in aiding and promoting communication and information exchange. Information management has been made much more convenient and user-friendly. This would not have been possible without a sound IT infrastructure of modern and efficient computer hardware and network firmly in place in both QSB and the department.

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Training and Commitment to Continuous Improvement

raining is an effective means of uplifting the quality of human resources for the delivery of

services in line with the business goals of an organization. To supplement the training provided or organized by ArchSD and CSTDI on computer technology, safety, national studies, general management, language and communication, quality and environmental management (Q&EM), QSB has long developed training plans to enable its staff to acquire and update job-specific and profession-related knowledge and skills to meet operational needs and fast evolving circumstances. Another objective of the plans is to enable professional staff to achieve continued professional development (CPD) as required by professional institutions. Over the past 20 years, QSB has gone through many drastic changes. Labour-intensive operation such as typing, squaring up dimensions in the documentation preparation stage has now been performed by electronic gears. On the other hand, measurement and cost control of BS works which were not kept under QSBs roof in the past have been transferred to QSB. More outsourcing of QS services under the re-engineering process in return increases the need of in-house resources for advisory and managerial roles. QSs are also required to take up vibrant and demanding duties associated with project management under the re-engineering concept. All these transitions would not have been successful without proper training. For professional training in relation to contract administration, dispute resolutions and contractual claims, apart from nominating QS officers to attend
Cheung Sha Wan Wholesale Food Market Market Office

seminars organized by external organizers, lecturers from various companies and local universities will be engaged for in-house lectures. Courses on the use of the BQ production software and comprehension of building services technology and measurements have also been arranged. CPD events in the form of talks by guest speakers or by way of experience sharing sessions presented by in-house veterans have also been organized. Some of the topics convened in the past are risk management, project management,

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consultant management and accounts finalization, all aiming to increase staff awareness and effectiveness in performing their existing and future duties. To keep abreast of the latest development worldwide in respect of quantity surveying and cost engineering, some officers have been sent abroad to attend international conferences focusing on these topics. These officers share with their colleagues what they had gathered during the trip upon their return. Some had been attached to overseas QS firms for a short period of time to gain at a close range of how their counterparts were practicing in the vastly different economical and political climates. This type of exposure is not only mind-broadening but helpful in the future career development of the staff by establishing precious links with QSs in other countries. QSB officers are encouraged to attend those courses and seminars offered by ArchSD, CSTDI and CSB to boost their skills in IT application and Putonghua proficiency. These are helpful for their personal development. QSB also supports the bureau
Caritas Medical Centre

and departmental initiatives in quality, environment and health by nominating staff to attend related courses and seminars. Q&EM awareness training, seminars and courses on environmental protection issues, internal auditor courses and Q&EM documentation course are some of the examples. In the light of limited funding and resources, the Branch would allocate the training opportunities fairly among all officers to meet operational and career development needs. We are not complacent with our past and current achievements in training. We always strive for continuous improvement as advocated in the ISO 9001:2000, strengthening the delivery and the overall performance of our services. In the years to come, we shall read the signals within and outside the department and look for more training opportunities. We hope that appropriate expertise can be tapped to better equip our staff for the impending changes that lie ahead. The training of QS graduates To support ETWBs initiatives of nurturing young prospective QSs, each year QSB will take in a handful of fresh university graduates and provide them with the training, guidance and exposures necessary for them to obtain professional qualification in 3 years time (revised to 2 years from 2007 intake to match new HKIS requirement). They are mainly attached to the capital works division assisting in mainstream work. Arrangements will be made to post them to the various sections of QSB and the Project Management Branch to enable them to acquire the necessary experiences that may assist in their professional qualification examinations. Recently, two QS graduates have been attached to the Shenzhen Construction Bureau and the Shenzhen Public Works Bureau for short term training. Furthermore, all our QS graduates are encouraged to attend experience sharing sessions and CPD events organized by QSB to enrich their professional knowledge and experience.

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ial Article Spec

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Overview of ArchSD Tender Price Index and Contract Value (1986 to 2005)
by Jessica Chow and Katherine Leung

Tender price index for building works The Tender Price Index (TPI) of ArchSD for building works has been published quarterly since 1970. It acts as an aid to index link building cost data for estimating purposes. With the base of 100 at the first quarter of 1970, the TPI indicates the general cost trend of government building projects based on contractors pricing in bills of quantities for accepted building tenders through competitive tendering on new works contracts let by ArchSD. TPI trend Over the past twenty years, the TPI witnessed the fluctuation in local and global economy. The TPI trend from 1986 to 2005 was shown in Fig.1. With the overall port and airport development strategy

announced in October 1989, Hong Kong experienced a construction boom during 1990s and reached historical height in 1997. Infrastructures such as Western Harbour Crossing, West Kowloon Expressway, Tsing Ma Bridge, etc. were developed to open up remote area in Lantau and a new international airport was built at Chep Lap Kok. The TPI generally indicated a continuous rising trend in tender prices at that time as vast construction works were competing for limited resources. However, the cheers faded when the Asian financial crisis started in Thailand in July 1997, dot.com bubble burst in 2000 and global economy went into recession in 2001. The economy of Hong Kong faced the downturn and the construction industry shrank after 1997. A combination of recent shocks like the terrorist

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attack of September 11, the outbreak of SARS, and the US-led wars in Afghanistan and Iraq induced even worse situation with negative economic growth, high unemployment rate, deflation, etc. in Hong Kong. Shrinkage of construction works was inevitable as more properties turned into negative asset. The TPI generally indicated a continuous drop in tender prices since early 1998. Recently, there has been an economic rebound in Hong Kong after the signing of CEPA and introduction of Individual Visit Scheme in June and July 2003 respectively. The TPI picks up gently. More building projects in the public sector have started or planned to start in the near future. It is expected that the future TPI movement will reflect the increasingly active construction industry. Contract value Broadly speaking, the value of a building contract is determined by the design and quality standard of its works, the site conditions and development constraints, and the prevailing price level in the market at tender stage. In order to compare different contracts on common basis, gross building cost approach is normally adopted for estimating purposes. That is the construction cost of superstructure including building services for a building contract, which eliminates most of the unique factors of the site like development constraints. Recently, a cost study of gross building cost for primary schools built during 1986 to 2005 has been carried out. The simplistic and uniform design requirements of school buildings together with a large number of school contracts available each year provide a good study basis. Fig. 2 is a scattered diagram of the gross building costs of primary schools plotted against the TPI. It is revealed that the trend of gross building costs of primary schools follows that of the TPI. In other words, the gross building costs of primary schools were on the rising trend during 1990s, peaked in 1997, generally decreasing from 1998 to 2000, and gently picked up again after 2000.
Kei Wai Primary School (Ma Wan)

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Life Cycle Costing From Theory to Practice


by Francis Leung and Alvin Ng

f itself, life cycle costing (LCC) is not a new idea. The concept is not particularly complex either.

to visualize the challenges facing ArchSD, where numerous decisions are made daily on planning and procurement of building projects, selection of materials and equipment, and operation and maintenance of facilities. On top of all these, there is the need to keep track of relevant actual costs which should be the only source of justification for future investment decisions. These challenges are universal. In countries where sustainable construction and LCC are more advanced, e.g. the UK, there is as yet no industry consensus on LCC procedures and practices and there is a lack of robust historical data on running costs . From a positive side, Hong Kong may not be too late in catching up on LCC R&D and application. With more emphasis being placed on sustainable construction in recent years, the HKSAR Government has been actively promoting LCA 2 and LCC. In the Construction Industry Review Committee (CIRC) Report published by the Hon. Henry Tang, the following recommendations were made: a coherent policy framework that anchors the concept of sustainable construction firmly in the context of sustainable development; and a broad base of public support, ensuring the need for sustainability is understood in the community; relevant model and data that support due recognition of life cycle costs and life cycle performance of materials and components in assessing tenders; and
1

Initial investment does not represent the true total cost, until future costs of operation, maintenance and ultimate disposal are considered and for comparison purposes discounted to present value. It does not take an expert (like quantity surveyors) to make good sense of the application. Yet, many researches and developments on LCC over the years, local and international, have been limited to academic analysis. Considering also that there has been very few reliable or quotable data on LCC, the gap between LCC in theory and LCC in practice becomes evident. Few people will challenge the notion that whilst costing a bit more initially, an energy-saving light bulb is a better bargain than a traditional tungsten one when the electricity bill is taken into account, not to mention the fact that it is also more environmental friendly. Why then is the tungsten light bulb still popular on supermarket shelves? An average consumer may be excused for not doing the arithmetic, but what about an organization as big as the ArchSD, having an annual turnover of over HK$7 billion on capital works projects and HK$2 billion on maintenance activities? Money may not be the only concern. The equation gets complicated when one starts to consider other factors such as product functionality, aesthetics, consumer behaviour, brand loyalty, etc. If the choice of one light bulb raises enough questions, it is not hard

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EMSD Headquarters

guidelines on use of alternative materials and systems that can help improve the environment, energy and economic performance of buildings. Through a consultancy study recently completed by the Electrical and Mechanical Services Department (EMSD), a comprehensive understanding of the international efforts on LCA/LCC is achieved. Some international coefficients and data concerning environmental performance of materials/M&E systems are also converted for local use. Being an agent responsible for a large number and a wide diversity of construction projects, the ArchSD has accumulated over the years a wealth of knowledge and experience in new works and maintenance activities. A massive amount of costing data is available. Based on robust historical data, further research work may provide conclusive information for the purposes of supporting reasoned investment decisions involving alternative building layout and choice of materials/systems. However, before the data can be usefully applied for LCC purposes, a structured approach will need to be adopted for data capture, archive and presentation. A database management system will need to be devised. Under the directive of our Assistant Director (Quantity Surveying), a working group has been set up to pursue LCC in ArchSD. The working group pulls together efforts of various branches to

review current practices and data availability identify practical issues and problems identify LCC development potentials assess applicability of LCC to ArchSD projects make recommendations on LCC to the ArchSD Senior Staff Forum oversee development of LCC in ArchSD.

In developing LCC, regard will be paid to the following: practical issues at technical and management levels compliance with international standards flexibility of data structure to allow communication with databases of others data accuracy and reliability quantification of LCC benefits.

Bridging the gap between theory and practice appears to be the greatest challenge. Soon after commencement of the research, the following have been identified for more focused study: Owner/cost-bearer relation Owner/designer/user communication Matching funding with LCC Project team communication Material/component properties, life expectancies, replacement/depletion assumption

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strengths and weaknesses, and to explore LCC potentials. (b) LCC comparators A database will be set up to keep track of LCC of facilities/projects. The data will be held in a format, which complies with international standards and will facilitate interfacing and data exchange with LCC systems of other organizations. Materials/components where LCC has a high impact on ultimate cost will be identified. Relative to internationally recognized standards, further research will be conducted with a view to designing a robust database structure. Medium-term (c) Management system Building on the database structure and benchmarks, a management system will be developed to facilitate the collection, archiving and analysis of data. Technical and organizational issues affecting Cost data in different format (bills of quantities for new works vs. term contracts for maintenance) Data collection and archiving Data accuracy and reliability Database management Implications on organization and operation. LCC implementation will be addressed. (d) Alternative design/investment decisions With gradual build-up of a database, LCC techniques may then be applied to the evaluation of alternative design/investment options. A framework will be developed for assessment of alternative design/ investment decisions. Long-term (e) Economically Most Advantageous Tender (EMAT) A framework will be developed for the implementation of EMAT 3 . (f) LCC trend analysis/indices Based on combination of materials and design alternatives, cost data or indices may be published to assess the variability of LCC according to different Short-term (a) Activities review A comprehensive study of ArchSDs current activities grouped into capital investment, financing, operation, and maintenance. Relative to the collected data, further studies will be conducted to identify geographical and/or socio-economic conditions. A consultancy study has recently been commissioned to embark on a preliminary review of ArchSD activities and compile cost comparators which have a high impact on ultimate cost. Some examples of these comparators are: external wall system, HVAC

If, in the earlier scenario, the need for justifying an energy-saving light bulb has not yet received the attention it deserves, the practical issues identified above certainly underscore the challenges in our attempt to make sense of the massive but loosely scattered data in an organization as large as the ArchSD. In dealing with such a complex subject, a step-by-step approach is adopted. The overall strategy, broken down into phases, is as follows:

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system, electrical system and roofing system. Based on the findings of the preliminary consultancy study, the ArchSD LCC strategies will then be subject to review and fine-tuning. The relations between policies, strategies, stakeholders and data are illustrated in Diagram 1. With increasing emphasis by the industry on sustainability and renewable energy, there is a pressing need to bridge the gap between LCC theory and practice. Being a big organization responsible for a major share of capital formation in the building sector, the ArchSD is best placed to take a lead in these important R&D areas. Returning to the debate over the choice between energy-saving and tungsten light bulbs, it may still take some time and effort before sufficient data comes in for one to claim victory and drive the other off the supermarket shelves. It is reassuring, though, that some new light has been shed on the subject.
1 UK National Audit Report on Improving Public Services through Better Construction, March 2005 2 Life Cycle Assessment (LCA) is defined by the Society of Environmental Toxicology and Chemistry as an objective process to evaluate the environmental burdens associated with a product, process or activity by identifying and quantifying energy and material uses and releases to the environment, and to evaluate and implement opportunities to affect environmental improvements. 3 Task Group 4 Final Report on Life Cycle Costs in Construction, European Commission, Oct 2003

Diagram 1 Consultancy for R&D of Life Cycle Costing in ArchSD (Phase I)

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The Development of Construction Mediation in Hong Kong


by Leung Hing-fung 1

n my early days with the Architectural Services Department in the mid eighties, mediation was a

Contractor shall... give effect forthwith to every such decision of the Architect unless and until the same shall be revised in mediation or arbitration as hereinafter provided. (authors emphasis) The mechanism of mediation in government contracts has largely retained its shape and there has not been much change since its introduction into the GCC. Over the years thereafter, rules of mediation have been developed to facilitate the use of mediation in the resolution of disputes. The most commonly used Rules of Mediation are The Government of Hong Kong Special Administrative Region Construction Mediation Rules (1999 Edition) 4 and the Hong Kong International Arbitration Centre (HKIAC) Mediation Rules (1999 Edition) (respectively for the pubic sector and the private sector). Appointment of mediators (where the parties fail to agree) in the former rules in fact relies much on the HKIAC. Within the government, the use of mediation has also been adopted subsequently in the airport contracts and other government building and civil engineering contracts 6 . On the other hand, the private sector of the construction industry pales when compared to the government in the use of mediation for resolving disputes. For many years in the past, the standard form of building contract used in the private sector has largely been modeled on the English JCT 63 standard form. There is no mediation mechanism provided in that somewhat dated form or its counterpart in Hong Kong.
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term almost unheard of for most practitioners in the construction industry. As a schoolboy freshly graduated from the university and then a young professional, I was always curious in what mediation was all about. At professional grade within the government structure, even if there was going to be a genuine mediation case, it was unlikely that one would have the opportunity to participate in the actual mediation meeting. Well, those were the days. Mediation has proven to be an effective means to resolve disputes. Nowadays, the use of mediation has infused into many sectors and is popularly accepted in general commercial, insurance, housing, community, work place conflicts and personal injuries compensation disputes. It has been developed into what is now commonly recognized as a skill essential for leadership 2 . The promotion in the use of mediation through the use of Standard Forms of Building Contract In the years after I have left the civil service, that is 1990, a mediation clause was, through some intelligent mind in the government and for the first time in the history of Hong Kong, introduced into the Government General Conditions of Contract (GCC). Clause 86(1) of the GCC 1990 says: If any dispute or difference of any kind whatsoever shall arise between the Employer and the Contractor... it shall be referred to and settled by the Architect... the
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Public Health Laboratory Centre at Nam Cheong Street

The wider use of mediation by the government to resolve disputes was nicely echoed in the Report of the Construction Industry Review Committee published in January 2001. In March 2005, with the joint effort of Hong Kong Institute of Surveyors, Hong Kong Institute of Architects and Hong Kong Institute of Construction Managers, a new standard form of building contract was published . The dispute resolution clause of this new standard form introduced a mediation procedure for the private sector of the construction industry. Clause 41.3(1) of the new standard form of building contract provides: If the dispute is not resolved by the Designated Representatives within 28 days of the dispute being referred to them by the Architect under clause 41.2, either party may give a notice to the other party, by special delivery, to refer the dispute to mediation and the person to act as the mediator shall be agreed between the parties. (authors emphasis) Although mediation is by itself a kind of dispute resolution method relying on the voluntariness of the parties, the reliance on a clause in standard forms of contract to bring the parties to mediation has constantly been included in the repertoire of those who are promoting the use of mediation in many parts of the world.
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Bringing the parties to the mediation table is one thing and whether the parties have a genuine intention to settle the dispute by mediation is another. Mediation clauses in standard forms can at best serve the former purpose. How the parties may have the intention to settle their disputes through mediation is actually the crux of the question. To this end there is no solution other than through long-term education of the prospective users and long-term practice to improve mediation process. Moreover, no system can work without the support of competent practitioners and competence of mediators is therefore an essential key. The promotion in the use of mediation through the court mechanism Unlike in many civil law countries, where often the judge could act as the mediator for the parties disputes after the case has been filed in court, most courts in common law countries have adopted a relatively hands-off approach towards mediation . Moreover, in many of these countries mediation is usually imposed through a specific mediation statute or provisions in the general civil procedure legislation . In Hong Kong, there has been no statute-imposed mediation system. However, the court has made its debut in introducing mediation through a pilot scheme
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Veterinary Laboratory at Tai Lung Farm

in the family court in 2002. Cases in the Construction and Arbitration List of the Court of First Instance have been targeted to be the 2 kind of cases for which the court would promote the use of mediation. Therefore, on 1 September 2006, a Practice Direction
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and Law Society of Hong Kong. Some of these bodies have their own accreditation system for mediators. The current list of mediators under the HKIAC panel contains more than 200 names and the number of mediators under the Joint Panel of Hong Kong Institute of Surveyors and Hong Kong Institute of Architects is about 20. It can be anticipated that more practitioners in different professions will be interested in developing into that area of practice. Other than disputes in the construction industry and family court mentioned above, mediation has been used to resolve general community and commercial disputes in the private sector on the one hand and relied on by the government for land, housing and building management disputes on the other. Naturally construction is one of the major arenas for mediation. Future development of mediation in Hong Kong In most developed countries, mediation was incorporated into the legal system either through a specific mediation statute or the general civil procedure legislation. This is at least the case for the United States , United Kingdom, Australia and the Continental Europe. In this respect Hong Kong looks somewhat under-developed and should work hard to pick up. Most importantly, any system involving a 3 rd partys act to influence the disputing parties settlement
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started

to take effect such that lawyers representing parties in cases in the Construction and Arbitration List of the Court of First Instance are imposed a duty to advise their clients to enter into an agreement to mediate, failing which without acceptable reason may result in cost sanction. The Practice Direction in effect has started a pilot scheme of voluntary mediation, which operates from 1 September 2006 to 31 August 2008. There are obvious reasons that mediation can be a preferable method for the resolution of certain kinds of disputes over litigation. It is expected that the court will encourage more types of cases to be referred to mediation. Cases in building management, land compensation and personal injuries cases are on the wish list of the general mediation practitioners. Mediation practice in Hong Kong Nowadays, the use of mediation for resolution of various kinds of disputes has developed in both the private sector and the government. The application covers contractual and non-contractual disputes. At present, there are different bodies maintaining their own panels of mediators, such as the HKIAC, Hong Kong Institute of Surveyors and Hong Kong Institute of Architects (Joint Panel), Hong Kong Bar Association
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terms would entail the question of justice. This remains the case despite the fact that in mediation the mediator does not impose onto the parties any settlement terms. Even if the disputing parties are not looking forward to a fair and just outcome, the procedure must be fair and just so that those administering the system and the mediator would be answerable to the disputing parties who rely on them based on trust. Unlike judges, which are bound by the strictest standard in moral sense, the conduct of mediators is governed generally by the code of conduct issued by the organization administering the panel to which the mediator belongs. The upholding of mediators conduct and competence is essential for the development of mediation in the construction industry and indeed in any other sector in Hong Kong. Moreover, despite the fact that there are many mediation cases in which lawyers represent one or more of the parties, the conduct of lawyers in mediation cases remains an area yet to be improved in their code. Conclusion Gone are the days when mediation was treated almost like heresy in the construction industry. If one now clicks on any search engine in the computer for the word mediation or mediator, one would end up with tens of millions of results. Most of these
References: a. Boulle, L. & Nesic, M., Mediation Principles, Process and Practice, Butterworths, 2001 b. Caller, R., ADR and Commercial Disputes, Sweet & Maxwell, 2002 c. Gerzon, M., Leading Through Conflict: How Successful Leaders Transform Differences into Opportunities, Harvard Business School Press, 2006 d. Goldrein, I.S., Structured Settlements: A Practical Guide, Butterworths, 1997 e. Mackie, K., Miles, D., Marsh W. & Allen, T., The ADR Practice Guide Commercial Dispute Resolution, Butterworths, 2000 f. Newmark, C. & Monaghan, A., Butterworths Mediators on Mediation, Leading Mediator Perspectives on the Practice of Commercial Mediation, Tottel Publishing, 2005 g. Roe, S. & Jenkins, J. Partnering and Alliancing in Construction Projects, Sweet & Maxwell, 2003 h. Stitt, A.J., Mediation: A Practical Guide, Cavendish Publishing, 2004

websites are related to mediation appointing bodies, mediation administration bodies and mediation practices. Moreover, one could observe that there are relatively few such bodies in Hong Kong. Clearly in respect of the popularity in the use of mediation to resolve disputes, Hong Kong should quicken its pace when compared with many other developed countries. Despite the fact that mediation is a voluntary process and relies entirely on the parties agreement, some sort of external impulse is needed to set it in motion. There are many examples to show that the assistance through the use of standard forms of construction contracts, the court, and the law, are amongst the most widely used means. It is through more use of mediation more situations favourable for its use will be unfolded. Most importantly, competence and conduct of mediators are the essential elements in forming the linchpin for the successful development of construction mediation in Hong Kong.
1 2 LEUNG Hing Fung worked in the Architectural Services Department from 1984 to 1990 See for example the work of Gerzon, M., Leading Through Conflict: How Successful Leaders Transform Differences into Opportunities, Harvard Business School Press, 2006 Government of Hong Kong General Conditions of Contract for Building Works (1990 Edition) Issued by the Works Bureau in 1999 See the General Conditions of Contract for the Airport Core Programme Civil Engineering Works, 1992 Edition See for example clause 86 of the Government of Hong Kong General Conditions of Contract for Civil Engineering Works See paragraph 5.63 in the Report Construct for Excellence published in January 2001 under the chairmanship of Sir Henry Tang The Agreement & Schedule of Conditions of Building Contract for use in the Hong Kong Special Administrative Region, Standard Form of Building Contract, Private Edition, with quantities 2005 Edition See for example Article 178 of the Italian Code of Civil Procedure See for example the U.K. Civil Procedure Act 2005 Ditto Practice Direction 6.3 Construction and Arbitration List Pilot Scheme for Voluntary Mediation See for example the Uniform Mediation Act, which has been adopted by e.g. Illinois, Nebraska and New Jersey

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Editors note
Mr. Leung Hing Fung had been a QS graduate and QS of the ArchSD. He is now the Associate Professor of the University of Hong Kong and also practicing as a barrister.)

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Legal Aspects of QS
by Gilbert Kwok

Introduction I am honoured to contribute an article for the publication to mark the 20 anniversary of the Architectural Services Department. This event is also a special occasion to me as I had received quantity surveying training in ArchSD for a few years before embarking on my legal career. In this article, I hope to provide some insight into the legal aspects of quantity surveying which would be of interest to you. While the nature of the work of quantity surveyors and lawyers is different, a common feature of both professionals is that they may face negligence claims from clients. With the assistance of one of my associates Fanny Leung who is also a quantity surveyor, I wish to cover the following topics: 1. the professional liability of quantity surveyors in general; 2. the traditional role of quantity surveyors and the corresponding liability; and 3. the additional role of quantity surveyors and the corresponding liability. In preparing this article, we have tried to identify relevant Hong Kong cases. There appears to be no Hong Kong cases involving professional negligence claims against quantity surveyors. We have therefore checked whether there are relevant UK cases. Again, surprisingly, whereas there are many cases involving other professions such as lawyers, architects and engineers, there are relatively few professional negligence actions involving quantity surveyors.
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While this lack of court cases may be due to the fact that quantity surveyors are luckier than other professionals, I do not believe they should rely too heavily on this factor. This is especially true now that quantity surveyors have broadened their scope of services, such as providing project management services and hence exposing themselves to greater risks of being sued. Professional liability of quantity surveyors in general In this article, I would like to focus on quantity surveyors liability in the tort of negligence. Professional negligence is a subset of the general rules on negligence to cover situations where a professional who undertakes a specific task and professes some special skill in carrying out that task is in breach of the duty of care owed to his client. Similar to other professions, such as doctors and lawyers, a quantity surveyor owes a duty of care to his client. It is the breach of such duty, which may give rise to professional negligence claims. It is therefore important to quantity surveyors to know the standard which is required of a professional as this will be fundamental in establishing a breach of duty, thereby giving rise to a professional negligence claim. By relying on the well-known case of Bolam v Friern Hospital Management Committee 1 that sets out the test of negligence for persons who hold some special skill, one would expect a quantity surveyor to exercise the standard of skill and care of an ordinary competent surveyor.

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Education Resources Centre cum Public Transport Interchange at Kowloon Tong

The case of Eckersly v Binnie & Partners provides further guidance on the skills and knowledge expected of a competent professional man. Those quantity surveyors who have freshly joined the profession must bear in mind that the above cases suggest that the standard expected is that of an ordinary competent member of the profession in question. Hence, whether a quantity surveyor is experienced or not he or she will be judged by the same standard.

evidence of negligence if the quantity surveyors concerned are able to prove that reasonable care has been employed during the exercise of estimation. The question of a consultants liability in respect of an allegedly negligent estimate cropped up in the case of Copthorne Hotel (Newcastle) Ltd v Arup Associates . Copthorne claimed that Arup was negligent because the actual piling cost turned out to be 975,000, which was more than double its original estimate of 425,000. Copthorne sued Arup for the difference between actual piling costs and the original estimate. The court rejected Copthornes claim because mere discrepancy between the estimate and actual piling costs was not enough to establish negligence; the piling costs may have increased for other reasons such as a change in market conditions. As a result, if the quantity surveyors exercise all reasonable skill and care in preparing the estimate, an incorrect estimate in itself may not necessarily be negligent. Procurement strategy Quantity surveyors play an important role during the tendering stage not only in preparing cost estimates, but also advising on the procurement strategy suitable for the project. To ascertain the most appropriate procurement strategy to carry out the project, it is essential to plan and assess various options and adequately advise the client on the pros and cons of
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The traditional role of quantity surveyors and the corresponding liability


Costs estimates Quantity surveyors are usually required to provide a cost estimate based on the architects or engineers design before the employer decides whether to proceed with the project concerned. If the quantity surveyors overestimate the price, the employer may abandon the project, which they indeed are able to afford. On the other hand, if the quantity surveyors underestimate the price, the employer may experience cash flow problem or fail to meet the payment to contractors. However, an incorrect estimate does not necessarily lead to professional negligence. To some extent, estimation is an art, which involves professional judgment. If actual construction cost turns out to be higher or lower than the estimate, this is not in itself

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proceeded to enter a formal contract with the contractor. As the work progressed, more that 7,500 variation instructions were issued and 2 million of cost overruns occurred. Plymco claimed against ASM and argued that the cost overruns could have been avoided if ASM exercised reasonable care and skill when performing the services. Plymco argued that
Hong Kong Heritage Discovery Centre

ASM should have advised them not to enter into one construction contract but rather divide the works into two separate contracts, one for the construction of Argos store, for which the design had been developed and the other for the remaining works which would be procured later after the design was adequately advanced. The judge held that ASM had breached its duty of care to Plymco because ASM did not give Plymco proper advice on the two-stage tendering process. The court further considered that had ASM given correct advice on the procurement method, Plymco would have accepted the alternative process of awarding two separate contracts and achieved the completion of the project at a reasonable cost. Bills of Quantities Quantity surveyors have used bills of quantities for more than a century as a cost control document that enables tender evaluation, valuation of interim payment and variations as well as project final account preparation. Although quantity surveyors are expected to be familiar with standard methods of measurement when preparing bills of quantities, errors in the preparation of bills of quantities are common; most of them are processing or arithmetical errors, such as doublecounted items and clerical errors in calculation. It seems that an occasional slip or error may be insufficient to sustain a claim of professional negligence. In the case of London School Board v Northcroft, Son & Nicholson , it was held that a few errors in the measurement of quantities or in the computation of an interim valuation might not necessarily be negligent.
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available options. In the recent case of Plymouth & South West Co-operative Society Limited v Architecture, Structure & Management Limited , the court had to decide whether a firm called Architect Structure Management Ltd (ASM), the architect for the project, who also performed quantity surveying services for the project, was negligent when advising on a procurement strategy. Plymouth South West Co-operative Society Ltd (Plymco), a retailer, decided to redevelop its flagship store at Derrys Cross. Plymco appointed ASM to perform architectural, structural engineering, design, procurement, quantity surveying, costing and valuation services for the project. Plymco provided ASM with a budget figure of 5.5 million. ASM prepared an initial estimate of the proposed redevelopment in the sum of 5.65 million and confirmed that they could tailor the redevelopment to meet Plymcos budget. At that time, Plymco had already secured a tenant, Argos, for the new development and Plymco required ASM to ensure the works to be completed by certain date to meet Argos occupation requirements. Given the tight budget and time constraint, ASM recommended a two-stage tendering process. By the end of the second stage, almost 90% of the works included in the tender document was described as provisional or prime cost sums. The only detailed design capable of being priced was related to the Argos store. Plymco expressed its concern to ASM about the amount of provisional sums within the tender documents but ASM assured that those provisional sums would be monitored against actual expenditure. Considering this assurance by ASM, Plymco
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Kwai Chung Public Mortuary

That case concerned the question whether the quantity surveyor concerned was negligent in making two clerical errors, one in the sum of 118 and the other in the sum of 15, in preparing an interim valuation for the buildings of a value of 12,000. On the other hand, in Tyrer v District Auditor of Monmouthshire , it was held that the defence of claiming the mistake being a simple mathematical error was not sufficient to rebut an allegation of negligence. The case concerned a mathematical error made by a quantity surveyor in preparing an interim certificate, which led to the approval of excessive quantities and rates and irrecoverable overpayments to the contractor. The court held that the quantity surveyor was negligent for his failure to fulfill the obligation to ensure adequate checks were made and his failure to appreciate that the quantities and rates were excessive. Valuation and preparation of final account Most construction contracts require valuation of interim payment to be made for the amount of work executed and the value of unfixed goods and material stored on site. The consequence of overvaluation is potentially significant as it can lead to difficulties for the employer if for instance the contractor becomes insolvent. In the case of a lack of fairness in valuation, it may damage the employers legal position in the
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subsequent arbitration or litigation with the contractor. Accordingly, despite the fact that interim valuation can be corrected and the employer may in the end suffer no loss, quantity surveyors should at all times exercise reasonable skill and care. Variation work is an inevitable part of a construction project. Quantity Surveyors are usually required to evaluate variation work in the preparation of final accounts. Unlike valuation of interim payment, valuation of variation work and the preparation of final accounts require precision as final accounts may not be corrected once they have been agreed by the contractor concerned.

Additional role of quantity surveyors and corresponding liability


Quantity surveyor as project manager Quantity surveyors are increasingly being called upon to perform non-traditional roles such as project management. If you have to provide such services, you should review carefully your contract with the employer, which should clearly set out the scope of such project management services. This need for special caution is illustrated in the case of Pride Valley Foods v Hall & Partners 7 . In Pride Valley, the court had to decide whether a quantity surveyor acting as project manager was negligent and in particular whether his duty included warning clients of potential fire hazards in the design

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Conclusion We can see from the above brief analysis that although quantity surveyors may be negligent even in their traditional role, there are relatively few cases involving that role. As mentioned in the above cases, even if there are errors or discrepancy in estimates and costs, it would be difficult for an employer to successfully prove a professional negligence claim. However, quantity surveyors must remind themselves that once they venture out of their traditional role, say, take up the project management role, their scope of responsibility would go beyond the
Hong Kong Science Museum

normal duty that they have in their traditional role. They would then be open to risks and potential claims as shown in the above-mentioned case of Pride Valley.
1 [1957] 2 All ER 118, 121 The test is the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest expert skill at the risk of being found negligent... it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art. 1 [1988] 18 Con LR 1 A professional man should command the corpus of knowledge which forms part of the professional equipment of the ordinary member of his profession. He should not lag behind other ordinarily assiduous and intelligent members of his profession in knowledge of new advance, discoveries and developments in his field. He should be alert to the hazards and risk inherent in any professional task he undertakes to the extent that other ordinarily competent members of the professional would be alert. He must bring to any professional task he undertakes no less expertise, skill and care than other ordinarily competent members would bring but need bring no more. The law does not require of a professional man that he be a paragon combining the qualities of polymath and prophet. [1996] 58 Con LR 105 [2006] EWHC 5 (TCC) [1889] 2 Hudsons BC (4th Edn), p.147; 7 Digest 449, 478 [1973] 230 E. G. 973 [2001] 76 Con LR 1(CA)

and specification for the works. Pride Valley, a company specializing in baking naan and pitta breads, employed Hall & Partners to provide a full project management services for the construction of a new factory from inception to design, construction, commission and hand-over. A fire destroyed the factory rapidly because it spread through expanded polystyrene insulating panels in the building. Pride Valley claimed that the fire was caused by the negligence of Hall & Partners because they as the project managers had failed to warn Pride Valley against the use of expanded polystyrene filled panels. After considering the letter of appointment, the court held that Hall & Partners owed a duty to advise Pride Valley the risks of fire of using expanded polystyrene filled panels as they undertook to prepare a design brief, draft appropriate employers requirements and specify materials to be used. However, the judge found that Pride Valleys claim failed as Hall & Partners advice would have been rejected even if the advice had been given because Pride Valley emphasized that the factory should be built to a budget and specification should be to those minimum standards required by the building and fire regulations.

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Editors note
Mr. Gilbert Kwok had been a QS graduate of the ArchSD before qualified as professional QS. He is now practicing as a solicitor in the private sector specializing in construction.

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The High Street Project


by Chan Fat-yau

he High Street Project comprised the construction of a district community centre cum singleton

1993 Edition. Construction was started in July 1998 and completed in February 2001. The major risks and challenge associated with this project lay in the needs (i) to demolish the substantial part of the existing building to provide space for the new construction whilst at the same time not to affect the structural stability of the remaining facade and verandah along High Street and Eastern Street; and (ii) to carry out structural stabilization, refurbishment and architectural preservation to the remaining facade and verandah of the building which was listed by the

hostel on the existing site of the old mental hospital (also well known as the ghost house) at the junction of High Street and Eastern Street in Sai Ying Pun. I was fortunate enough to have the chance to be involved in this public works project which allowed me to learn and observe how the project team dealt with the associated risks of the project professionally and how collaborative teamwork contributed towards the successful procurement and delivery of the project. This article aims at sharing with the readers some of the experience I have gained. The construction floor area of this contract was about 17,200 sq m. Apart from the construction of the community centre cum hostel; the project also included the preservation of the facade and verandah of the existing building. All the works were carried out through a one-single-contract approach and the contract sum was approximately HK$348 million. The contract conditions used was the Government General Conditions of Contract for Building Works,

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Antiquities Advisory Board in 1992 as a Grade I historical item. Furthermore, the risk of possible impact on the structural stability of the remaining facade and verandah during the construction of the piled foundations and superstructure of the new building could not be under-estimated. Things could go wrong at any work stage. The non-existence of a well-structured risk management system in those days did not prevent the project team from identifying the associated risks and managing them in a professional manner. To address the aforesaid challenges and risks, the project team had to deal with issues such as (i) how to provide an adequate but not excessive budget to cover the risks; (ii) how to strengthen the retained facade/verandah both during the construction stage and after the completion of works; (iii) how to carry out the demolition and construction works without affecting the structural stability of the retained portion of the building; (iv) how to allocate risks between the employer and the contractor; (v) how to select a capable contractor to carry out the works; etc. I do not intend to describe in detail here what the project team has done to manage the risks as what they did may not be the only absolute solution. In this project, the employer decided to take up quite a substantial part of the aforementioned risks. Temporary and permanent structural steelworks to strengthen the retained facade/verandah during construction stage and after completion of works respectively were designed by the employers engineers. Construction sequence for works critical to the structural stability of the facade/verandah was pre-determined and specified in the contract. Construction works were closely monitored by the site supervision team so that remedial actions could be taken promptly if anything went unexpected. Although the employer had decided to take up most of the risk, the remaining risk of construction and workmanship was still considered significant. The project team adopted a one-single-contract approach to reduce the risk of possible avoidance of liabilities by the contractor and considered that prequalification of tenderers was necessary. The contractor selected from the list of prequalified tenderers was proved to be competent and completed the works on time to the satisfaction of the architect.

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Throughout the whole process of project development, it was observed that the existence of a collaborative team was one of the key success factors to manage the risks and achieve the successful completion of this project. The risks of this project could not be handled properly without both the exercising of expertise and professional judgment by individual team members and the co-operation among them. It is considered that partnering mentality of team members is the backbone of all teamwork. The essential elements of a partnering mentality include (i) a focus on the procurement and delivery of the project instead of on ones own need, (ii) a concern about what other members may require and (iii) trust in other members. These depend a lot on the personalities of individuals and with an organization structure supportive to team spirit. Needless to say, the contractor is an important member of the project team, after all he is the one who

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carries out the construction works. However the traditional adversarial relationship between the employer and the contractor would not contribute to good team spirit. Furthermore, the current competitive bidding environment does not foster a partnering relationship between these two parties. The NEC Engineering and Construction Contract (ECC) developed at the end of the last decade attempts to provide a solution but the effectiveness of this contract approach is still being tested. Nowadays, although the hardware (i.e. contract form and arrangement) for a partnering relationship between the employer and the contractor is still not well in place, the existing mechanism available can still be used for the development of the software aspect of partnering. For the success of the partnering approach, the following contract arrangements and good practices should be adopted from the early stage of the contract, (i) clear contract requirements, (ii) contract design or employers requirements are fully developed at design stage to avoid numerous post-contract variations and clarifications, (iii) good communication with clients to prevent unnecessary and late changes, and, (iv) reasonable allocation of risks, etc. These are very useful in avoiding non-constructive arguments, which are detrimental to any possible partnering relationship between the employer and the contractor. This is true even if the ECC is used. In the High Street Project, the design team and the contractor were able to maintain a good working relationship throughout the whole contract period. This could not be possible if there were no good contract arrangement and administration. In recognition of the high quality standard of the project, the Architectural Services Department was awarded the Certificate of Merit, Quality Building Award 2004. The award was also perceived as recognition of the collaborative team spirit of all those involved in the project, which we all treasured.

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n ledgeme Acknow

The Editorial Board wishes to express its appreciation to the following persons who have made contributions to the successful publication of this book:
Berry, Peter Chan, Fat-yau Chan, Joseph Chan, Roy Chan, Stephen Chan, Wai-hung Cheung, Sara Chow, Jessica Fan, Wing-kwong Fok, Man-kwong Fung, Apple Ho, Chung-kin Ip, Chuen-ching Ko, Man-fai Kwok, Gilbert Kwok, Wai-ching Lai, Charles Law, Po-shing Law, Wai-hung Lee, Fu-sang Lee, Kenny

Editorial Board:
Chan, Rimmy Ng, Alvin Wong, Chi-lok Wu, Vincent Yau, Jeff

Lee, Yuk-shing Leung, Francis Leung, Hing-fung Leung, Ian Leung, Katherine Leung, Sheron Shum, Kung-sher Tam, Kin-shung Tang, Amy Tinsley, Norman Tong, Joseph Tsui, Diana Wong, Ben Wong, Keith Wong, Mickey Wong, Tammy Wong, Wingo Yim, Tommy Yu, Rachel
Design and production

China Trend Building Press Ltd. Felix and Simon of China Trend Building Press Ltd.
Published December 2006

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