For discussion
EC(97-98)7
on 14 May 1997

ITEM FOR ESTABLISHMENT SUBCOMMITTEE OF FINANCE COMMITTEE

HEAD 60 - HIGHWAYS DEPARTMENT

Subhead 001 Salaries

Members are invited to recommend to Finance Committee the retention of the following supernumerary post in the Highways Department up to 31 March 1998 -

    1 Government Engineer
    (D2)($102,900 - $109,250)

PROBLEM

Highways Department (Hy D) needs continued directorate support to handle claims, disputes and contract finalisation for the Route 3 (R3) and the North Lantau Expressway (NLE) projects. The present supernumerary post of Government Engineer (GE)/R3 & NLE which is charged with these duties in the Airport and Port Access Project Management Office of the HyD will lapse on
30 September 1997.

PROPOSAL

2. We propose to retain the GE/R3 & NLE post for a further period of six months up to 31 March 1998.

JUSTIFICATION

3. The GE/R3 & NLE post is responsible for the overall management of the following contracts in respect of the NLE and the Kwai Chung and Tsing Yi Sections of R3 of the Airport Core Programme (ACP) -

Tai Ho Section )
Yam O Section ) NLE
Tung Chung Section )
Cheung Ching Tunnel and associated roadworks )
Rambler Channel Bridge and associated roadworks ) R3
Kwai Chung Viaduct )
Cheung Ching Tunnel electrical and mechanical works )

4. With the exception of the Yam O Section, which is forecast to complete in August 1997, the construction works for the above contracts were substantially completed in late 1996 and early 1997. GE/R3 & NLE is now supervising the remaining works and managing claims resolution and contract finalisation.

5. Over the past year, we have experienced a substantial increase in the number of contract claims under the NLE projects. Although we adopted fixed-price lump sum arrangements for the ACP contracts, claims are permissible under unforeseen circumstances or justified contract variations. There are some 330 outstanding claims mostly due to the contractors disagreeing with Government’s valuations of variations or refusing to accept Government’s deliberations on the claims. They have a total unresolved claim amount in the order of $1.2 billion. The number, magnitude and complexity of these claims are much higher than what we envisaged when we reviewed the need to retain this supernumerary post last March. The contractors’ disagreements have given rise to many formal disputes which may lead to formal arbitration if mediations fail. Disputes of such a nature and magnitude usually take years to resolve. Notwithstanding, we are committed to early resolution of all claims and contract matters associated with the ACP projects. The programme for claims resolution and accounts finalisation for the NLE contracts is at Enclosure 1. We hope to resolve the majority of the claims by March 1998.

6. Given the tight schedule and the need to protect Government’s financial interests, we require the expertise and authority of a GE to guide and manage the negotiation and arbitration processes, which involve assessing the validity and reasonableness of contractors’ claims, analysing consultants’ submissions, formulating negotiation strategies, instigating and monitoring the negotiation and resolution processes. GE/R3 & NLE will directly handle complicated cases which will account for about 75% of the outstanding claims by value. He will also supervise the Chief Engineer/NLE, who will absorb the residual duties of the Chief Engineer/R3 when this post lapses on 1 October 1997, in dealing with less complicated claims and disputes on the NLE projects, and in handling the landscaping contract scheduled to commence in November 1997 and complete in December 1998. GE/R3 & NLE assumes a key role in the processing of claims and the carrying out of mediations, ensuring among other things that Government’s stringent scrutiny procedures have been followed before setting negotiation ceilings and recommending approval of deals. Mediations and, to a greater extent, arbitration involve much time and effort, including going through voluminous submissions and documents. As all parties would wish to settle the accounts before the expiry of the defects liability period, the GE/R3 & NLE and CE/NLE will have a very heavy workload from April 1997 to March 1998 and may need to handle several mediation or arbitration cases concurrently.

7. The Director of Highways has considered the alternative of assigning GE/R3 & NLE’s work to the other directorate officers, but has concluded that this is not viable, as they are already fully engaged in managing other development projects. For instance, the GE for the Western Harbour Link and Route 3 Country Park Section needs to supervise the construction of the Country Park Section of Route 3 (scheduled for opening in July 1998). He will also be fully engaged in dealing with claims, disputes and arbitration as may arise from the build, operate and transfer agreement between the Government and the Western Harbour Crossing private franchisee, and claims, arbitration and contract finalisation in respect of the Western Kowloon Expressway after their physical completion in April/May 1997. To ensure satisfactory resolution of the NLE claims, we propose to retain the GE/R3 & NLE post for six more months until 31 March 1998.

8. The organisation chart of HyD is at Enclosure 2. The existing job description for the post is at Enclosure 3. The proposed job description is at Enclosure 4. (D Hy to strengthen the revised job description as far as possible)

FINANCIAL IMPLICATIONS

9.The additional notional annual salary cost of this proposal at mid-point is $1,273,200. The full annual average staff cost of the proposal, including salaries and staff on-cost, is $2,155,092. We have included sufficient provision in the 1997-98 Estimates to meet the cost of this proposal. There are no other staffing or financial implications.

BACKGROUND INFORMATION

10. The NLE is a 12.5-kilometre dual three-lane highway along the northern coastline of Lantau, providing road access to the new airport and Tung Chung New Town. The approved project cost is $6,562 million.

11. The Kwai Chung and Tsing Yi Sections of Route 3, encompassing the Kwai Chung Viaduct, the Rambler Channel Bridge and the Cheung Ching Tunnel, also provide a vital link to the new airport. The approved project cost is $4,991 million.

12. On 8 March 1996, the Finance Committee approved the retention of the supernumerary GE/R3 & NLE post up to 30.9.1997 for the overall management of the Kwai Chung and Tsing Yi Sections of Route 3 and NLE projects including the management of claims.

CIVIL SERVICE BRANCH COMMENTS

13. The Civil Service Branch recognises the need to retain the post to resolve all outstanding claims as soon as practicable, and considers the ranking, grading and duration of the post to be appropraite, having regard to the responsibilities and professional input required.

ADVICE OF THE STANDING COMMITTEE ON DIRECTORATE SALARIES AND CONDITIONS OF SERVICE

14. As the post is proposed on a supernumerary basis, its retention, if approved, will be reported to the Standing Committee on Directorate Salaries and Conditions of Service in accordance with the agreed procedure.

Works Branch
May 1997
(E5836/WIN105)

Enclosure 3 to EC(97-98)7

Existing Job Description for Government Engineer/Route 3 & North Lantau Expressway Highways Department

Rank : Government Engineer (D2)

Main duties and responsibilities

Responsible to the Project Manager/Airport & Port Access for -

  1. managing and coordinating the work of the Kwai Chung and Tsing Yi Sections of Route 3 Division and the North Lantau Expressway Division;

  2. controlling the budgets, estimates, resource scheduling and financial expenditures of the two projects and of works carried out by the consultants;

  3. evaluating and advising on the approval of the detailed designs of the project undertaken by the consultants to ensure that standards and specifications meet with Government’s approval;

  4. providing guidance in scrutinising the implementation programme and progress of the consultants to enable the timely completion of Government activities essential for the work, and in particular the clearance and acquisition of land;

  5. overseeing progress of project construction to ensure compliance with approved schedules and the protection of Government and private interests;

  6. liaising at the appropriate level with Policy Branches, Government Departments, the New Airport Works Project Management Consultants and the private and public sectors, concerning the planning and implementation of the projects;

  7. attending various standing conferences, committees and high level coordination meetings to ensure effective and efficient implementation of the project; and

  8. leading and managing the claims and disputes resolution processes for the contracts.

Enclosure 4 to EC(97-98)7

Proposed Job Description for Government Engineer/Route 3 & North Lantau Expressway Highways Department

Rank : Government Engineer (D2)

Main duties and responsibilities

Responsible to the Project Manager/Airport & Port Access for -

  1. managing and co-ordinating the handing over of works of the Kwai Chung and Tsing Yi Sections of Route 3 Division and the North Lantau Expressway Division to relevant departments and parties;

  2. controlling the budgets, estimates, resource scheduling and financial expenditures of the two projects and of works carried out by the consultants;

  3. liaising at the appropriate level with Policy Branches, Government Departments, the New Airport Work Project Management Consultants and the private and public sectors, concerning the planning, implementation and finalisation of the projects;

  4. attending various standing conferences, committees and high level co-ordination meetings to ensure effective and efficient implementation and finalisation of the project;

  5. acting as the leader of the Government’s negotiation team and/or arbitration team, seeking approval for major claims and dispute resolution processes and managing their implementation;

  6. supervising CE/NLE in handling relatively less complicated contract dispute cases; and replacing CE/NLE as the team leader in resolving some of the cases if major difficulties arise; and

  7. planning, managing and facilitating actions with a view to concluding all the contracts’ final accounts under an expedited time frame.

Last Updated on 12 August 1999