In 2012, the Hong Kong SAR Government proposed to construct a new 12-storey, circa 59,000 m2 hospital in Tin Shui Wai to meet a growing demand for health services.
The hospital was a complex project owing to the relatively tight timeframe, and modifications that evolved from the specialised user requirements.
The hospital has circa 300 in-patient and day beds and provides 24-hour emergency, in-patient, specialist out-patient, ambulatory, allied health, and community care services, and serves as the general hospital in the New Territories Western Cluster.
Under its standard procurement models, the Hong Kong SAR Government was required to procure and deliver the project under a traditional design-build contract.
Such a traditional contractual structure would be written in complex language, be highly prescriptive, and induce a hierarchical organisational structure to deliver a complex and specialised project in a tight timeframe.
The Hong Kong SAR Government elected to procure the design-build contract using the New Engineering Contract (NEC) 3 Engineering and Construction Contract (ECC) structure. The NEC contracts are developed by the UK Institution of Civil Engineers as an alternative to the traditional engineering and construction contract and are written in ‘plain English’. They aim to improve the management of project risks and encourage issues to be addressed in a collaborative manner by providing flexibility in how ‘compensation events’ are addressed.
Use of the NEC contract structure in Hong Kong originated from a review into the construction industry conducted by the Hong Kong SAR Government in 2000–2001. The review recommended a ‘wider adoption of partnering approach to construction projects, and the integration of partnering approach into contractual relationships’. This led to the government piloting NEC contracts from 2009 with the Fuk Man Road Nullah Improvement project as a means of promoting a partnering approach at the contractual level.
The objective of adoption of the NEC3 contract structure was to develop a contractual partnership approach between the employer and contractor, promote more equitable risk allocation between parties, and manage risks and issues in a more proactive and collaborative manner.
Hong Kong SAR Government
Contractors – Leighton-Able Joint Venture.
2012 – Project proposed
February 2013 – Construction commencement
July 2016 – Construction completion
January 2017 – Hospital opening.
Results / impact
The more collaborative client / contractor working environment that was promoted from the contractual level within the NEC3 contracts helped fast-track design development and improved flexibility in catering for modifications evolving from the specialist users’ requirements by encouraging parties to address ‘compensation events’ in a timely and collaborative manner.
The Hong Kong SAR Government has since required the use of NEC3 contracts in all projects tendered from 2015. As of December 2017, the Hong Kong SAR Government had issued 93 NEC Works contracts and 13 NEC Consultancy Agreements worth a total of over HKD26 billion (USD3.35 billion).
Key lessons learnt
The NEC contract structure can help improve the performance of works contracts with respect to time, cost, and risk management in large complex projects by promoting improved collaboration between the client and contractor.
The NEC contract structure has helped the Hong Kong SAR Government and contractors move away from the traditional ‘zero-sum’ transactional relationships, in favour of a collaborative painshare / gainshare partnership.