​Following is a question by the Hon Chan Siu-hung and a written reply by the Secretary for Development, Ms Bernadette Linn, in the Legislative Council today (July 2):

Question:

     It is learnt that public works expenditures involving infrastructure, healthcare, education, housing, and so on account for a substantial proportion of government spending. However, there are views pointing out that the model of division of labour in which policy bureaux or government departments, as "users", only need to specify the requirements and functions during the planning stage of a project, leaving the subsequent processes such as design and construction to be spearheaded by technical departments like the Civil Engineering and Development Department or the Architectural Services Department, is prone to result in user departments lacking awareness of project budget control and losing sight of cost-effectiveness, whereas the technical departments may need to adopt more costly building designs, methods, or materials, among others, in a bid to meet the individual requirements of user departments, hence driving up the cost of works even at the inception stage (i.e. the "upstream stage") of the project. Therefore, various government departments should shift their mindset towards upholding an "awareness of being property owners" to take the lead in formulating a reasonable budget right at the early stage of project planning and strictly monitor its implementation. In this connection, will the Government inform this Council:

(1) whether it will consider strengthening various government departments' awareness of being property owners, with a view to exercising stringent control over the estimates of expenditure at the upstream stage of public works projects; if so, of the details; if not, the reasons for that;

(2) of the strategies and specific measures implemented by the Project Strategy and Governance Office under the Development Bureau at various stages (including upstream, midstream and downstream) of public works to reduce project cost; whether an assessment has been conducted on the respective effectiveness of these strategies and measures; and

(3) whether it has drawn on the cost control measures adopted by the Mainland and various places in the world at the upstream stage of public works; if not, of the reasons for that; if so, the details, including whether such measures encompass a concept similar to the awareness of being property owners?

Reply:

President,

     The Development Bureau (DEVB) established the Project Cost Management Office in 2016 and upgraded it to become the Project Strategy and Governance Office (PSGO) in April 2019 for formulating and implementing strategic initiatives and enhancing capabilities in cost surveillance and project governance to public works projects. On monitoring project estimates of public works, there is a set of stringent vetting mechanisms in place. While not compromising the functionality, quality and safety of works, the PSGO, as an independent third party, participates in project cost vetting from project inception stage in accordance with the "fitness-for-purpose and no frills" principle, and will follow up on project development and design optimisation and continuously monitor the performance of the projects during construction stage, and implement suitable measures for cost saving.

     Our responses to the three parts of the question are as follows:

(1) At different project implementation stages, the works departments have been maintaining communication with the project proponent policy bureaux, providing advice to the project proponent policy bureaux on project planning and design, cost estimation, progress, etc. In addition, senior management of project proponent policy bureaux participated in the project management and leadership development programme under the Centre of Excellence for Major Project Leaders under​ the DEVB to reinforce and strengthen their understanding of project cost management and ensure that public funds are used properly. To further enhance capabilities in cost surveillance and project governance, the DEVB is working with the Financial Services and the Treasury Bureau to study on optimising the preparatory and conceptual work before project inception, with emphasis on strengthening the review of site selection, usage mix, scale, design, implementation programme, etc, by the project proponent policy bureaux and user departments. This will help the project proponent policy bureaux and user departments to comprehensively evaluate the cost-effectiveness of different implementation proposals with the "ownership" mindset, so as to formulate practical and cost-effective proposals. By planning ahead the overall estimates before project inception, the project cost-effectiveness can be further enhanced. We are currently formulating relevant details and guidelines, with the relevant measures planned to be implemented within this year.

(2) The PSGO vigorously scrutinises cost estimates of public works projects. During the project inception stage, we also examine the technical feasibility statement submitted by the works departments to establish the technical feasibility of the project and review the preliminary cost estimate and cash flow requirements.

     During the design stage, we liaise with project proponent policy bureaux and user departments to enhance project cost-effectiveness, reduce cost and minimise risk of cost overrun through design optimisation by means of exploring different design options, construction methods and procurement models. We also carry out benchmarking with costs of other similar projects and make reference to the prevailing market situation, to ensure that the project estimates are reasonable. Furthermore, the Government adopts parallel tendering before submitting funding application of the projects to the Legislative Council so as to accurately reflect the tender prices in the approved project estimate for better financial management of the projects to reduce the risk of cost overrun.

     During the construction stage, the DEVB regularly conducts high-level meetings with works departments, complemented with the established Integrated Capital Works Platform, enabling management of different departments to grasp the real-time performance of each project, closely monitor the implementation programme of projects and provide timely intervention so as to mitigate the risks of project cost overrun and delays. At the same time, the PSGO also examines major variations in projects during the construction period and provides independent advice to works departments to ensure the cost-effectiveness of the major variations.

     Since its establishment, the PSGO has scrutinised more than 540 capital works projects, and successfully saved about $190 billion (about 16 per cent) in construction cost out of the original estimate of about $1,200 billion proposed by the project proponent policy bureaux.

     In addition, the overall cost management performance of the Capital Works Programme has all along been well performed. In the past ten years, there were 575 Category A projects approved by the Finance Committee of the Legislative Council, and so far only 15 projects required budget increase. Besides, in the past ten years, the total expenditure of the 510 Category A projects with their final accounts settled (including expenditure of the additional funding) was about 90 per cent of the total original approved project estimates.

     The DEVB has completed the strategic study on relatively high construction costs in Hong Kong. We will progressively launch the relevant cost control measures along the following four directions, which includes (i) optimising the project procurement model, (ii) reviewing the design standards and requirements, (iii) applying advanced technologies and construction methods, and (iv) streamlining the approval process, once they are ready so as to reduce the construction costs.

(3) The Government has been liaising and actively exchanging project management experience with other authorities, including the Mainland, Singapore and the United Kingdom, to enhance the project delivery capabilities and performance. For example, the DEVB signed the Letter of Intent on Strengthening Guangdong-Hong Kong Cooperation in Construction and Related Engineering Sectors with the Department of Housing and Urban-Rural Development of Guangdong Province to deepen the co-operation in construction and engineering sectors between Guangdong and Hong Kong. We also signed a Memorandum of Understanding each with the Centre for Public Project Management of the Ministry of Finance of Singapore and the Infrastructure and Projects Authority, part of the Cabinet Office and HM Treasury of the United Kingdom, in December 2022 and February 2023 respectively. The DEVB also organised the Project Cost Management Forum to allow local and overseas industry leaders to exchange views and share experiences regarding project cost control. Among them, we make reference to the process and experience of implementing projects in the Mainland, as well as their practices for optimising construction programme. In addition, we understand that the Singapore government is involved in the upstream process of project planning to review the scope, design and cost reasonableness of the projects, and enhance the cost-effectiveness of the projects by revising the scope of the projects or optimising the design. We will continue to make reference to the experience of project cost control in different places and formulate comprehensive and systematic measures to manage project costs.

Ends/Wednesday, July 2, 2025
Issued at HKT 19:26

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