Achieving Partnering Success through an Incentive Agreement: Lessons Learned from an Underground Railway Extension Project in Hong Kong

Abstract

Over the years, it has been observed that partnering has been ineffectively implemented in the public sector of Hong Kong. Contributing factors to this lack of success are nature and large size of bureaucratic organizations and commercial pressure compromising the partnering attitude. The Mass Transit Railway Corporation Limited (MTRCL), one of the prominent pioneers in adopting project partnering in the infrastructure sector of Hong Kong since 1999, however, implemented the partnering principle with significant success. This paper, based on a recently completed research project funded by the Construction Industry Institute-Hong Kong (CII-HK) in late 2004 and a follow-up in-depth interview meeting with senior executives of MTRCL in early June 2005, analyzes the rationale behind the successful development of partnering culture in the infrastructure sector of Hong Kong through a case study -the Tseung Kwan O Railway Extension (TKE) Contract 654 -Platform Screen Doors. The project comprises the supply and installation of platform screen doors along the whole MTRCL's TKE with five stations. This project was analyzed by means of the project documentation and face-to-face interviews with the project representatives, comparisons with another five partnering case studies, and a follow-up in-depth interview meeting with another two senior executives of MTRCL. After the analysis, it was found that the implementation of partnering together with an Incentive Agreement (IA), a kind of Target Cost (TC) contracts, underpinned the partnering success of this project. Therefore, it is recommended that partnering together with TC contracts such as IA greatly assists in the achievement of construction excellence, and can provide a workable model for enhancing overall project performance in electrical and mechanical projects.

Preferred risk allocation in target cost contracts in construction

“…Given the fact that TCC/GMP schemes are extensively applied in infrastructure projects worldwide including Hong Kong (Walker et al, 2002;Rojas and Kell, 2008;Chan et al, 2008;Bogus et al, 2010;Chan et al, 2010a), the findings of this study should be relevant and essential to both construction academics and industrial practitioners in the field of infrastructure development and management. The research study has engendered some research evidence to capture the lessons learned from previous TCC/GMP construction projects for generating best practice guidelines for equitable (preferred) risk allocation in future target cost-based projects especially in those infrastructure developments often associated with high risks, both locally and overseas.…”

“…Furthermore, Chan et al (2008) also evaluated the effectiveness of partnering on an underground railway extension project with TCC arrangement in Hong Kong via another study, recommending both partnering and TCC to be the essential ingredients of project success. Kaplanogu and Arditi (2009) explored the practice of pre-project peer reviews in construction companies of the United States, suggesting that this kind of review was critical in reducing the risk of a proposed new GMP project.…”

“…According to Turner (2004), a contracting strategy should not only provide an incentive to deal with potential risks, but also should be flexible to accommodate contingencies such as late design changes and design variations. In most real-life cases of TCC/GMP, the contractor is entitled to have compensation for the occurrence of such risk factors (Fan and Greenwood, 2004;Chan et al, 2008).…”

Pragmatic framework of programme organizational capability for delivering megaprojects at design and construction phases: a Chinese client perspective

“…Partnership with key stakeholders refers to the establishment of a strong relationship with key stakeholders involved in a programme (Chan et al, 2008). These stakeholders include designers, contractors and suppliers involved in a construction megaproject.…”

A Comparative Study of the Benefits of Applying Target Cost Contracts between South Australia and Hong Kong

“…A case study of a GMP project launched by Rose and Manley (2007) in Australia revealed that one of the negative drivers of implementing the financial incentive mechanism was inequitable risk allocation, based on their interview data and opinions. On the other hand, the case studies conducted by both Chan et al (2008a) and Chan et al (2010b) demonstrated that the projects with the GMP and TCC forms of arrangement were completed within budget and ahead of schedule. These previous successes should reinforce the confidence in procuring GMP/TCC contracts by the Hong Kong respondents.…”