Press Statement from the West Kowloon Cultural District Authority

The West Kowloon Cultural District Authority recently received media enquiries regarding the M+ project and wishes to make the following statement:
 

The West Kowloon Cultural District Authority (WKCDA or the Authority) closely monitors the performance of all of our contractors, including Hsin Chong Construction Company Limited (HCC).  Our objective has been to ensure that the construction of the arts and cultural facilities at the West Kowloon Cultural District (WKCD) is carried out in accordance with the agreed programme, to be completed by the agreed target dates and to the approved budget. 
 

The Authority has been aware of the difficult financial position facing HCC and its parent company, Hsin Chong Group (HSG) since late 2016.  The trading in the ordinary shares and debt securities of the latter was suspended on 3 April 2017.  As such, particular attention has been paid to the M+ project.  While construction works at the M+ project has continued and steady progress has been evident, WKCDA has been aware of the risks that the M+ project has been exposed to the financial uncertainty surrounding both HCG and HCC.   
 

In view of the situation and to ensure the continuity of the construction of the M+ project, WKCDA has developed a positive risk mitigation plan.  The Management liaises with HCC frequently.  This has allowed the Board to be kept fully informed of the situation of HCC throughout.  The Board has approved all of the steps the Authority has taken to minimise and mitigate any potential risks.  One of the measures taken with approval from the Board has been an arrangement to pay key subcontractors directly to ensure that they received payment for certified work done.  The arrangement has been successful in moving the M+ project forward.  It has also ensured stable employment and payment of wages for over 1,600 workers currently on the site as well as giving all those involved in the project confidence that they will receive payments for certified work done in accordance with the terms of the contracts.  The amount of money to be paid to key subcontractors each month is determined based on a detailed submission prepared by HCC, which has to be vetted and approved by the third-party Contract Administrator (CA). The monies paid are deducted from the contract sum payable to HCC by WKCDA.
 

WKCDA sees that implementing the payment arrangement to sustain steady progress with the construction is of paramount importance.  The project is a complex piece of engineering works.  The M+ building is built above the tunnels for the MTR Airport Express and Tung Chung line.  As such, the construction has stringent technical compliance requirements, including the installation of five mega trusses to distribute the weight of the M+ building safely over the tunnels.  Managed by the current team of contractors who possess experience and knowledge of the construction and site requirements, many engineering and technical challenges have been overcome for the M+ project to reach to the current advanced stage.  Work progress and the quality of the project are key to the project success.  There are resident site staff and representatives of the architectural design team stationed on site to ensure not only the progress but also the quality of the project. 
 

The Authority requires the use of Building Information Modelling (BIM) systems to identify clashes between facilities within a highly complex project such as this throughout the design process.  BIM is a tool that is particularly helpful in the detailed design stage to ensure a full and accurate assessment can be made of all electrical, mechanical and building services installations so that pipes, ducts and other necessary installations do not conflict with each other.  This helps minimise problems when it comes to the construction, avoids expensive remedial works on site for physical mistakes, and enhances the safety of the project and the workers.
 

All payments have been made in accordance with an agreed schedule of payments under the contract and against certificates of work carried out by the subcontractors concerned, all of which have been checked by the CA.  In compliance with the terms of the contract and with the agreement of HCC, payments have been made to subcontractors directly to ensure that they and their employees received payment for work done.  The payment arrangements were explained in the Legislative Council (LegCo) Finance Committee meetings in December 2017 and again in January 2018 in response to Members’ concerns about payments to workers on the project.  Such arrangements are unusual but not exceptional.  Similar arrangements have been used on projects both in Hong Kong.
 

Since late 2016, the Authority has been continuing to monitor progress on the M+ project very closely.  Regular updates on the progress of the M+ project have been made to the Board and publicly through the open sessions of the Board meetings.  Indeed, the Authority’s concerns over the progress on the project have been voiced publicly on a number of occasions: most recently by the Chief Executive Officer as part of his report made in the open session of the Board meeting held on 28 June.
 

All claims for extension of time must be submitted to the CA, who will assess them before making any decision.  It is normal on a project of this size for claims for extension of time to be submitted to allow for delays caused by weather disruption or other causes.  Not all claims are accepted. 
 

The foundations were installed by a separate contractor under a different contract. As the work had to be undertaken adjacent to the MTRCL underground railway lines, there were additional requirements and very close monitoring throughout by both the MTRCL and the Government.  The foundation works were carried out fully in line with the contract and they have been certified by relevant authorities. 
 

Regarding the final cost for this project, this will be determined when construction is completed.  There are provisions in the contract for liquidated damages and retention of monies and contingencies.  The contract also provides processes for the resolution of differences over the cost of the project.  There is no intention to seek any further funding from the Government.  Indeed, following the announcement of the Enhanced Financial Agreement in January 2017, with the ongoing exception of funding for the Public Infrastructure Works (PIW), it is now a matter for the Authority to fund the project.
 

Though the progress of the M+ construction has not been in accordance with the agreed programme, it is clearly evident from the site that significant construction has been taking place throughout. Under the current rate of progress, the building will top-out later this year. 
 

WKCDA has contingency plans in place and will respond proactively should further action be needed.  The current schedule calls for the construction of the M+ project to be completed in 2019. The opening of M+ is expected to take place a year later to allow for internal fit-out works and removal of dust and contaminants from inside the building.  This must be done to assure the condition of the art works that will be displayed in the museum.  This timetable remains unchanged and was reported to the LegCo Joint Subcommittee to Monitor the Implementation of the WKCD Project in February 2018.
 

WKCDA is fully committed to finishing the M+ project, a world-class museum in WKCD for Hong Kong people.  The Authority has been working conscientiously to deliver the M+ building for the past few years.  The practical preparations necessary for the opening of M+ have not been affected by the situation facing the project and are still underway. This includes the essential staff recruitment, acquisitions and cataloguing of art works, and the preparation of the opening exhibitions.