The Year that was 2013

The Year that was 2013

Construction Post looks back at the main events of the year

For the construction industry, the year 2013 turned out to be as eventful as the mainstream current affairs topics that gripped the public during the year.

Probably the top item, at least in terms of the quantity of future work, was the final green light to start construction for the long-delayed West Kowloon Cultural District.

In September, French foundation contractor Bachy Soletanche kicked off construction of the first facility, the Xiqu Centre for Chinese opera.

However during the year, concerns mounted over the final bill for the project.

In July, the government revealed the latest “ballpark estimate” for the project was HK$47.1 billion, more than double the initial sum of HK$21.6 billion that was approved by the Legislative Council in 2008.

The month before saw the first major facility to be completed at the Kai Tak Development, a huge area left pretty much empty after the airport relocated to Chek Lap Kok in 1998.

The Kai Tak Cruise Terminal, built by Dragages Hong Kong, finally opened for business on 12 June, although heavy rain during a black rainstorm warning in May caused some water seepage, raising fears on whether the terminal would open on time.

Rising construction costs and claims for additional work continued to hit various public sector jobs.

A prime example was the controversy over Express Rail Link.

In May, local Chinese newspaper Apple Daily broke the story about the West Kowloon Terminus project being at least one year late and facing cost overruns of HK$4.4 billion.

The government and railway operator MTR Corporation (0066), which is managing the project, however continued to insist the project would be on time and within budget.

In October, the government reported to legislators that the project was facing 339 claims with a total value of HK$5.58 billion as of 30 June.

In November, the government submitted a proposal to increase the approved project estimate for the Central-Wanchai Bypass by 28 percent or HK$7.93 billion.

Work for the West Kowloon Cultural District finally started work in September with ground-breaking for the first facility, the Xiqu Centre   (Danny Chung)

Work for the West Kowloon Cultural District finally started work in September with ground-breaking for the first facility, the Xiqu Centre (Danny Chung)

There was further handwringing from legislators after being told by the government of the final (and seemingly extravagant) price tag of HK$6.05 billion for a new broadcasting complex for Radio Television Hong Kong.

While the government, contractors and developers continued to grapple with rising costs, at the other end of the industry spectrum, construction workers continued to enjoy better wages.

Unions continued to report increasing wages paid to workers, with some trades getting as much as 20 percent increases over the previous year.

According to a survey of pay increases in various sectors by the Hong Kong Institute of Human Resource Management, the construction industry came out top with average salary increases of 6.2 percent.

Over in Macau, there were serious concerns on the Macau government’s Light Rail Transit project.

In a press conference organized by the Macau Construction Association in August, various contractors complained of additional costs and delays which they attributed to the government.

One contractor said the project could be three years late.

On the casino side however, things were different, in terms of availability of work.

During the year, contractors such as China State, Leighton and Bouygues reported awards of new casino-related work worth tens of billions of Hong Kong dollars as the casino operators race against each other in the second wave of casino building.

Back in Hong Kong, the government continued to pile the pressure on the industry at least in terms of mentioning of future projects.

These include an ambition plan to build 470,000 residential units over the next 10 years and further updates on planning for new town extensions in the northern New Territories and in Tung Chung.

Lawyers continued to rake in their fees over construction disputes that went to court.

The main contractor for Container Terminal 9 managed to save itself HK$100 million after going all the way to the Court of Final Appeal over a dispute with its subcontractor over quantities of mud to be dumped at sea.

For the contractor who built Stonecutters Bridge, it was a different story as it failed to overturn an arbitrator’s decision over a dispute on quantities and BQ rates for an item of work, the precise details of which were redacted in a decision released on the Judiciary website.

Construction workers enjoyed healthy wage increases during 2013 as heavy demand for labour demand on public works and private sector projects drove up wages   (Danny Chung)

Construction workers enjoyed healthy wage increases during 2013 as heavy demand for labour demand on public works and private sector projects drove up wages (Danny Chung)

It was severe case of bad karma at the Goddess of Mercy statue project in Tai Po when the contractor Chun Wo Building Construction got fed up waiting to be paid for additional work and claims and decided to sue the project owner.

The project was managed by a subsidiary of leading developer Cheung Kong (Holdings) (0001).

Government auditors continued to blast the government over mishaps on certain government contracts such as the improvements to Tung Chung Road and the Central Government Complex and Legislative Council Complex at Tamar.

One long-delayed private sector project finally got off the drawing board when the Town Planning Board gave the green light in February to redevelop Yau Tong shipyards, of which the lead developer is Henderson Land (0012).

There were some mega projects awarded during the year, notably the Northern Connection contract of the Tuen Mun-Chek Lap Kok Link project, which is part of the associated infrastructure projects for the Hong Kong-Zhuhai-Macao Bridge.

At HK$18.2 billion, it was the single biggest award of recent years.

The lucky contractor was Dragages/Bouygues Joint Venture.

It was a severe case of misfortune for the contractor on a more modest project.

On being awarded a contract for an artificial beach at Lung Mei in Tai Po, Welcome Construction found that it could not do very much after environmental activists successfully applied for a judicial review over the government’s decision to proceed with the project.

In November, the government suspended all works five months into the project.

During the year, one contractor with a long history of work in Hong Kong completed its realignment into a new business as a Macau casino and hotel developer.

In keeping with its rebirth, the name of Paul Y Engineering (0577) disappeared to be replaced by the regal-sounding name of Louis XIII Holdings, although its construction arm will still continue to use the Paul Y brand name.

And last but not least, a huge precast unit, probably the largest ever built in Asia, sailed (mostly submerged) into Victoria Harbour in July to be installed near the Hong Kong Convention and Exhibition Centre as part of the work for the Central-Wan Chai Bypass.

Danny Chung

 

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