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KCRC contract strategy could be improved

CONSTRUCTION MANAGERS at Hong Kong's Kowloon-Canton Railway Corporation (KCRC) should communicate more with their board when agreeing extra payments to contractors, an independent accountant's probe have said.

But the probe by Ernst & Young found that KCRC was right to adopt a partnering approach with its contractors working on the HK$46.4bn (US$60bn) West Rail project.

The findings follow a two month investigation into KCRC's contract strategy after it was revealed that the rail company had paid an extra ú144M in claims to contractors working on 18 contracts (NCE 7 March).

Ernst & Young's 320 page report concluded that KCRC's partnering approach was commercially prudent.

'We believe KCRC's proactive resolution of delay and claims issues was in the best interests of KCRC, ' says the report.

But it added that there was room for improvement after it investigated three West Rail contracts.

These were AMEC-Hong Kong Construction's USú176M for the construction of Tuen Mun station; Kier-Zen Pacific's US$161Mei Foo station contract and a US$37M telecommunications contract to Siemens of Germany.

Problems on the Amec and Kier contracts were largely due to unforeseen and poor ground conditions.

At one stage the Amec group was nine months late within 15 months of work starting, mainly due to piling problems.

Similarly, Kier Hong Kong was 16 weeks late on its Mei Foo station contract - again mainly because of piling difficulties.

In response, KCRC instituted a delay recovery programme, negotiating with the contractors to agree claims for the extra work and acceleration payments. While Ernst & Young supported this approach, it said KCRC management should have kept the board properly informed. The board only became aware of the seriousness of the delays after management sought the board's approval to make the claims payments.

Keith Wallis in Hong Kong INFOPLUS www. nceplus. co. uk/magazine

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