Report No. 32, March 1999

Chapter 2

The construction of the Kwai Chung Viaduct

Summary and key findings

A. Introduction. The Kwai Chung Viaduct (KCV) is a major section of Route 3 which forms an integral part of the Airport Core Programme (ACP) projects. In April 1993, the Highways Department (HyD) awarded a lump sum fixed-price contract, the KCV Contract, in the sum of $2,268 million for the construction of the KCV on the basis of an alternative design submitted by the contractor. The KCV Contract included the design and construction of the Airport Railway works, which were entrusted by the Mass Transit Railway Corporation (MTRC) to the Government. The KCV Contract was scheduled for completion in September 1996. During the construction of the KCV, the works were disrupted and the KCV Contractor submitted more than 300 claims for extensions of time and additional costs. The claims were settled by mediation and the Government had to pay a sum of $365 million to the KCV Contractor. As a number of claims settled by mediation were related to the MTRC Airport Railway works, about $234 million was recovered from the MTRC. In February 1997, the works of the KCV Contract were substantially completed. As the KCV connects the Rambler Channel Bridge (RCB) in the north, the disruption to the works of the KCV Contract also delayed the handover of two works areas to the RCB Contractor. The Government had to pay $22 million to settle the RCB Contractor claim in respect of the delay in the possession of the works areas. Liquidated damages of $2.5 million were deducted from the payments to the KCV Contractor (paras. 1 to 7). B. Audit review. Audit recently conducted a review to examine the circumstances leading to the claims and to ascertain whether there is room for improvement in project planning and contract management. The audit findings are summarised in paragraphs C to G below. C. Award of the KCV Contract before completion of the detailed design. Audit noted that the checking of the design of the KCV for both the non-Airport Railway works and the Airport Railway works was completed after the date of invitation to tenders. This delay in checking the design, coupled with the late provision of loading information and design changes to the Airport Railway, affected the KCV Contractor progress of works. The KCV Contractor claimed for extensions of time and additional costs. In Audit view, the Government should have taken early action to minimise as far as possible its exposure to significant risks of contractual claims. The HyD should have completed the detailed design prior to tendering. In September 1993, when funding approval was sought from the Finance Committee (FC) of the Legislative Council to adjust the scope of the KCV Contract to include the Airport Railway works, the FC was not informed that the detailed design of the Airport Railway works had not yet been completed prior to tendering, and that the design changes requested by the MTRC after the commencement of the KCV Contract were not yet finalised. Audit considers it unsatisfactory that the FC was not given all relevant information to facilitate the FC to make the appropriate funding decision (paras. 15 to 21). D. Provision of loading information to the KCV Contractor. Audit noted that there was a difference of views between the KCV Contractor and the Engineer for the KCV Contract (the KCV Engineer) concerning the provision of loading information of structures designed by the KCV Engineer. While the necessary loading information was subsequently given to the KCV Contractor, some of the loading information was not provided on a timely basis. As a result, the KCV Contractor claimed for an extension of time. Audit also noted that the contract documents did not mention whether the KCV Engineer would provide the loading information of the structures designed by him to the KCV Contractor. In Audit view, the arrangements for the provision of loading information should have been clearly and explicitly stated in the KCV Contract (paras. 33 and 34). E. Design changes of the Airport Railway. After the commencement of the KCV Contract, design changes in the track form and the bridges of the Airport Railway were requested by the MTRC. Discrepancies in the alignment of the Airport Railway were also found by the KCV Contractor. As a result, some of the KCV Contractor alternative design work was rendered abortive and a redesign of the foundations was necessary. Audit considers that it is undesirable to make significant design changes after the commencement of works as the changes are bound to have time and cost implications. Audit also considers that when making design changes which have an impact on a contractor work, it is essential that the contractor should be informed of the changes as soon as practicable (para. 45). F. Arrangements for interface works. Clause 37 of the General Conditions of Contract (GCC) for the ACP contracts, which provided for the KCV Contractor general obligations to coordinate his works with other contractors, was included in the KCV Contract. However, the KCV Contract did not include a specific provision to pinpoint the responsibilities of the KCV Contractor for handling interface works. Audit noted that when interface problems occurred, both the KCV Contractor and the RCB Contractor considered that they had no specific obligations to amend their designs to accommodate the design of the other party. Audit considers that sole reliance on the contractor general obligations under GCC clause 37 is an inadequate assurance that specific interface problems can be resolved promptly. Audit also noted that the interface problems were further complicated by the multiple handovers of the same works areas between the contractors. Audit considers that complicated interface arrangements would expose the Government to the risk of delay in the completion of works (paras. 65 and 66). G. Erection of the precast concrete units over live traffic. Audit noted that the KCV Contract did not contain explicit provisions prohibiting the erection of the precast concrete units over live traffic. However, during the construction of the KCV, in order to be absolutely certain of safety, the HyD decided to prohibit the erection of the precast concrete units over live traffic. As a result, the KCV Contractor had to erect the precast concrete units at night between certain restricted hours and the works were delayed. Audit considers that an explicit provision should have been included in the contract documents to prohibit the carrying out of hazardous works over live traffic (para. 77). H. Audit recommendations. Audit has made the following major recommendations: (a) in future capital works projects, the Director of Highways should ensure that the detailed design of the contract works is complete before tenders are invited as required by Works Bureau Technical Circular No. 6/91 even though there may be urgency to complete the contract (para. 22); (b) the Administration should ensure that the FC is provided with all relevant information, particularly information concerning any unusual arrangements, when funding approval of the FC is sought for a works project (para. 22); (c) for a works contract awarded on the basis of a contractor alternative design, the Director of Highways should state clearly in the contract documents the responsibility and obligations of the parties concerned, and the arrangements for the provision of critical design information (para. 35); (d) the Director of Highways should, as far as possible, avoid significant design changes after the commencement of a works contract (first inset of para. 46); (e) if design changes having an impact on a contractor work are required, the Director of Highways should inform the contractor of the design changes as soon as practicable (second inset of para. 46); (f) for a works contract which has interface works with other contracts, the Director of Highways should set out clearly in the contract the specific obligations of the contractor, requiring him to liaise and coordinate with other parties concerned (first inset of para. 67); (g) the Director of Highways should take more proactive action to resolve interface problems promptly in case the contractors cannot properly liaise and coordinate with each other (third inset of para. 67); (h) the Director of Highways should ensure that explicit provisions are incorporated into works contracts to ensure maximum safety during construction (para. 78); and (i) the Secretary for Works should consider informing all works departments of the audit recommendations and take appropriate action to obviate the occurrence of similar cases in future (para. 79). I. Response from the Administration. The Director of Highways has, in general, agreed with the audit recommendations (para. 80). The Secretary for Works has agreed to convey the audit recommendations to the works departments (para. 81). The Secretary for the Treasury has said that it is always the Administration intention and practice to furnish the FC with all relevant information in any funding deliberations so that the FC will be able to make an informed and appropriate decision (para. 82).