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Hong Kong construction leaders frustrated by procurement, says survey

Hong Kong's construction sector is frustrated by slow public procurement processes and 'filibustering' in the legislative council to delay projects, according to a recent survey by Pinsent Masons, the law firm behind Out-Law.com.10 Mar 2016

The survey of 150 senior contractors, designers and other industry executives found that 41% see filibustering, where members of parliament extend debates to prevent legislation being passed, as the biggest threat to the infrastructure sector.

LegCo, Hong Kong's legislative council, has recently been affected by a coalition of pan- democrats who have been holding up decision-making on some legislation, said Hong Kong-based construction law expert Vincent Connor of Pinsent Masons, the law firm behind Out-Law.com.

Slow public procurement was cited by 31% as the biggest threat, while 13% are struggling with a shortage of labour. The economic slowdown in China concerns 8% of respondents, while 7% say that the "heavy" regulatory regime in Hong Kong is the greatest threat to their business.

When asked what the greatest challenge is for the government in avoiding continued delays and cost overruns on large scale infrastructure projects, 65% said "starting projects with a realistic budget and programme". Existing procurement methods are the main issue for 12%, while 9% chose "enabling the engineer to administer contracts effectively".

The survey also asked what Hong Kong contractors need to do to take advantage of China's One Belt One Road initiative. Almost one third, 31%, said it is important to team up with other China-based businesses, while 20% would look to improve relationships with government. There may be greater opportunities in providing consultancy than actually being involved in construction, according to 18% of respondents.

Connor said: "These results demonstrate the acute frustration in the Hong Kong construction industry about the way that major projects are procured. A large majority of senior industry leaders do not think that projects are started with a realistic budget and programme, and this should give owners, developers and investors serious cause for concern."

"Our research also shows the alarm in the industry at the slowing pace of public procurement. This is an issue that needs to be addressed now, before the Chinese economy slows further, or there is a risk that the two could come together in a perfect storm for the industry in Hong Kong," Connor said.

"It is time for Hong Kong do 'de-politicise' the development of long-term infrastructure strategy and planning by launching a National Infrastructure Commission, separate from government and LegCo. At the same time, more consistent adoption of contracts which incentivise innovation, improve cash-flow and which address the problems of certification of entitlement are long overdue," he said.

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