CE voices concern over rail link and fears rise over possible contractor walkout

Projects, Slider 24 Sep 2015
CE voices concern over rail link and fears rise over possible contractor walkout

Chief Executive CY Leung says the Government is highly concerned about the Guangzhou-Shenzhen-Hong Kong Express Rail Link project’s cost overruns and construction delays, and lawmaker raises fears over possible contractor walkout.

Chief Executive Leung Chun-ying reiterated government concern over delays and rising costs of the project speaking to reporters ahead of an Executive Council meeting yesterday morning, Mr Leung noted that as the Mass Transit Railway Corporation is the project manager, it is responsible for cost control and for completing the rail link as soon as possible.

Adding to these concerns is lawmaker Michael Tien Puk-sun, chairman of the Legislative Council’s transport panel, who has raised fears over a possible walkout by several contractors that could be planning to walk away from the Guangzhou- Shenzhen-Hong Kong Express Rail Link if funding dries up early next year.

According to Mr Tien some contractors are “doing calculations” to see if they should drop out. Tien said MTR Corp Limited has been using contingency funding to settle contracted projects, but he expects cash flow to become very restricted at the beginning of 2016.

“Unfinished contracts are worth HK$6.5 billion, but only about HK$3 billion remains in the MTRCL reserve,” he told a radio program yesterday.

Expenditure on the construction of railway tunnels should be HK$22.4 billion, according to contracts. But MTRCL has already spent HK$25.7 billion after dipping into its reserves.

Lawmaker Michael Tien Puk-sun has raised concerns over possible contractor walkout

Lawmaker Michael Tien Puk-sun has raised concerns over a possible contractor walkout. Photo Credit: chinadailyasia

If ongoing tunnel projects, the West Kowloon terminal and electronic and mechanical works are all totaled  up, MTRCL must pay HK$6.5 billion to settle the outstanding sum and take over the rail. But with the reduced reserve, all the money would be spent in just a few months.

According to contracts signed between MTRCL and contractors, the railway operator may ask construction companies to suspend works for a certain period of time if it does not have sufficient money to pay by that time although there is a cap to the period and, after the deadline passes, contractors could opt to terminate contracts and demand compensation.

Many contractors are making calculations to see if it would be better for them to call it quits and then pursue the outstanding amount, or to let the project drag on until it is finished,” Tien stated.

“They seem to think it likely that Legco will delay approving the increased budget. It is a dangerous thought.”

Tien urged incoming MTRCL chairman Frederick Ma Si-hang, who will take over next year, to talk to small shareholders as soon as possible.

MTRCL’s most recent project cost estimate is HK$85.3 billion, around HK$20.3 billion more than its previous forecast.

 

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