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Les responded succinctly with : "Humour and a message". Well, you've had the humour, now here comes dee message. Those of you who wish to doze through it, please make yourselves comfortable. I will wake you up in about ten minutes for the conclusion. In the meantime, I would be obliged if you would switch off your mobile phones and do your best not to snore.
Some of you who attended last month's "Quality Housing Partnering Symposium" will recall the anecdote about the redevelopment of Wembley Stadium. Apparently, following initial discussions, the entire British contracting industry boycotted the project, describing those on the other side of the table as "The client from hell". An Australian contractor then took the job. I start with this recollection simply to make the point right up front that "the client from hell" and "the contractor from hell" probably deserve each other. The problems which we face in the industry today are of our own making, client and contractor alike, and it will require collective effort to put things right. Until we do, the people who really suffer are the workforce and the end-users.
At another forum on public procurement, organised by CIRIA in London at the beginning of summer, an eminent academic regaled us with the parable of the glacier and the fruit fly. For those of you ignoramuses who don't know your DNA from your dip-sticks, the fruit-fly is Nature's evolutionary whizz-kid. It changes and adapts constantly, reinventing itself with each generation, and with each generation lasting a few days, that's a lot of change in a very short time. At the other end of the change scale is the serenely flowing glacier, not much movement year on year, little real change from your grandad's day to the present.
Against this convenient scale, our eminent academic plotted the propensity to change, to adapt, to re-invest and to innovate of all the world's key industrial sectors. At the fruit-fly end, he found the IT software geeks and related nerds. Next came IT hardware and that whole gaggle of instantly obsolescent, multi-media audio-visual electronic gyzmos. After them came pharmaceuticals, petro-chemicals, fertilizers and fuels. Quite a long way later he found the automobile industry still clinging to their one hundred and twenty-five year old pollution pump-engines. Even so they were closer to the fruit-fly end than the glacier. I will spare your blushes by not spelling out which industry was found down that chilly far end of the scale, and simply pose the question which he posed, and that is : why?
Now you would have to be a blindman not to realise that there has in fact been considerable progress. The Hong Kong of today is radically different from the Hong Kong of the sixties and seventies. There is a pair of models in the HA's exhibition centre which illustrates the point and which hit me right between the eyes when I first saw it four years ago. It is the "before" and "after" of the redevelopment of the Central Kowloon group of estates.
As District Officer (Wong Tai Sin) in the early seventies, I was very familiar with the "before". The "after" came as quite a surprise. While I was generally aware of the impact of progressive re-developments, the stark contrast of the models brought home just how enormous an improvement in basic living standards has been achieved over the last quarter century. And all of you know that a large part of that achievement is due to changes in technology and techniques and quality in the industry.
Ironically, there is an equally stark contrast between public praise for Hong Kong's increasingly dramatic sky-line and adventurous engineering achievements and the public perception of the industry which built them. The image of the industry remains backward, dirty and dangerous - let us be frank, the accident statistics are appalling - and the poor image is constantly sullied by scandal and dispute. Again the question: why?
I ask the questions with the deference of an outsider. The only directly relevant experience I can claim is working on primitive UK building sites between school and university. Instead, I come at these questions with the tool-bag of the generalist administrator: a bit of economics; a lot of behavioural experience. And it is the economist and ex-trade negotiator in me which puzzles over the way client and contractor constantly punish one another.
I was invited by the Association of Construction Lawyers to talk to them a few weeks ago. With my usual insensitivity, I expressed an economist's bewilderment at the huge frictional costs associated with prolonged settlements and endless arbitration and litigation, and a negotiator's puzzlement that on the various occasions when I had indicated a willingness to try for commercial settlement nobody seemed interested. The audience's body language as I blundered on was fabulous!! They all went like this in their chairs (cross arms).
But seriously, it does seem pretty daft to pay this sort of money to lawyers when we could take the same amount, split it down the middle and turn it into profits for you and savings for us. Of course there are issues of accountability for public sector organisations, but these should not stand in the way of what makes practical commercial sense. I would far rather defend a settlement, which resulted in real savings, in front of the Director of Audit, than have to say that we threw good money after bad to "win" a case, costs and an unenforceable award against a company which was to all intents and purposes already bankrupt.
What of the client? First, we're big and ugly. We're responsible for two out of every three new residential units built every year. That sort of size breeds unhealthy dependencies all through the supply chain. One out of every three new builds would be preferable - even then we'd be bigger than any other developer in Hong Kong! - but, given the dependencies, an adjustment on such a scale can only be accomplished very gradually.
Secondly, we have always been driven by numbers. We work to the relentless beat of a drummer somewhere between Lower and Upper Albert Roads: more, faster; more, faster. When things have come to a crunch, numbers have tended to prevail over quality, and contractors not being fools have exploited this. Convincing all involved that 31 March is no longer a magic date has proved an interesting experience.
Third, although we have driven a variety of improvements over the years - large panel formwork, off-site component production, modularization and mechanization - at root our procurement processes follow an old-fashioned public sector model. Traditionally, we have pre-qualified, but our lists are too long and sub-contracting too widespread to guarantee quality. We have tended to penalize poor performance rather than reward excellence. All other things being equal our tender board is more comfortable with accepting the lowest bid than justifying a higher one. Our contracts are input specific and have grown increasingly detailed and complex by accretion. Our Quality Assurance and Performance Assessment systems have aimed for greater consistency and objectivity, but have achieved it only at the expense of experienced professional judgement and discretion.
Put the best of our project management teams with a good contractor and things go pretty well. Put the worst with a bad one and it is a very different story. If there is one thing worse than a professional bureaucrat its a bureaucratic professional; especially if he has been given too much responsibility and too little authority.
As production was forced from an all time low to an unprecedented peak, there were bound to be strains in the system. The Asian financial crisis made it inevitable that the weaker links in the production chain would snap. With that great clarity of vision which comes with hindsight, we can put brackets round the problem cases. Tenders submitted into a rising market and projects commencing after the crash, when various companies' and individuals' unrelated investments disappeared overnight and lines of credit were squeezed tighter than anyone can remember. That is not to excuse them. Responsible contractors behaved as responsible partners should : they came and talked to us about their difficulties. Some did not. The rest is grief and history. As a partner, if you get into trouble, you owe it to us. Come and talk to us.
Since then we have published our views on what needs to be done. We have consulted widely. We have already implemented many reforms. Still others, including worker registration, direct employment, registration of specialist sub-contractors and so on, must wait the outcome of the Construction Industry Review Committee chaired by the Hon. Henry Tang. This is due to report in December. In the meantime, internally, with Mike Moir's help, we have agreed on reforms to both systems and organisation which will bring us much closer to best private sector project management practice. With production at a peak, these changes must obviously be phased in carefully. They will involve changes in attitude and work practice, and they will require the active involvement and assistance of all our partners in developing a more collaborative approach to design and construction.
However, the economist in me tells me that, necessary as they are, these reforms by themselves will not be sufficient. We must also address procurement practices.
We have done the easy bit: the reform of piling procurement. Over time the procurement process and contract structure had evolved in such a way that the HA seemed to be attempting to ensure against risk by placing the entire burden of risk on the contractor. LD on HOS contracts was such that a month's delay could bankrupt the contractor. That has already been changed and risks are now more equitably shared. As I said, we have done the easy bit, and we must now look to the infinitely more complex problems of how to secure quality and value for superstructures. It will take longer, nevertheless, to consider what we have done on piling as a down-payment on the procurement reforms to come.
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