Author: Li, Hung Lam Beatrice
Title: The application of the NEC3 contract in Hong Kong construction industry
Degree: M.Sc.
Year: 2017
Subject: NEC Contracts
Hong Kong Polytechnic University -- Dissertations
Construction contracts -- China -- Hong Kong
Civil engineering contracts -- China -- Hong Kong
Department: Faculty of Construction and Environment
Pages: xiv, 181 pages : color illustrations
Language: English
Abstract: Hong Kong has been ranked as the world's freest economy in terms of trade, investment, finance and property rights. As an international financial centre, Hong Kong is a territory that has benefitted from globalisation and is the main linkage with rapidly growing China through the World Trade Organization (WTO) (Leung 2007). The construction industry is one of the main pillars of Hong Kong's economy, and around 8% of the total workforce is employed in construction. This figure will increase as more public and private housing development and infrastructure projects are undertaken, such as 'Hong Kong 2030'. Unforeseen risks such as political or public opposition or unforeseeable underground conditions could lead to an increase in problems for the construction workforce. Real estate markets are slowly moving towards globalisation by removing barriers to entry, adopting global real estate standards and developing the required legal and professional infrastructure. Over the past few decades, standard forms of contract have been commonly and widely adopted by all parties in the Hong Kong construction industry, including clients, consultants and contractors. However, developers and architects often make modifications for their own interests to the terms of standard forms of contract. They rarely address their responsibilities and duties in the contracts, and less protection and equity are given to the contractors under the contract conditions. Therefore, an adversarial working relationship between contracting parties often arises, resulting in non-cooperation, a lack of trust and ineffective communication.
The Hong Kong construction industry is also rather conservative and traditional, and not particularly innovative. Construction projects are usually understood as complicated in nature and the related processes involve various stages with their own characteristics, requirements, personnel experience, skills and technologies. Numerous contracting parties are involved, such as employers and clients, experts in a specific field, professional consultants, main contractors and sub-contractors. Each party is responsible for its own area of interest, and thus they seldom assist third parties under the standard forms of contract. The construction industry has recently become more aware of the procurement process, which is important in the professional practice of a project. This process has implications for the timing, quality and profitability performance of a project, and also influences the collaborative relationship. The overall public perception of the Hong Kong construction industry is generally one of dissatisfaction with the traditional operational characteristics, and fragmentation and an adversarial culture among different project participants have been recognised. The first application in the relational contracting of the partnering concept - the New Engineering Contracts (NEC) - was issued in 1993. As a directive for suitable professional practices, it focuses on improving management principles to avoid potential disputes. Through a spirit of mutual trust and co-operation, it is the basis of a new joint management processes strategy. This research project investigates the application of the NEC3 contract, and evaluates its implementation effectiveness in the Hong Kong construction industry through case studies. Through a literature review, the development of the NEC3 contract is evaluated to determine its characteristics. The aim of the latter part of the project is to identify the benefits, drawbacks and problems of NEC3 application in Hong Kong. Case studies were conducted to identify how the NEC3 is actually applied in the Hong Kong construction industry. A comparison of the general performance outcomes of three partnering projects (NEC contracts) and one non-partnering project (traditional contract) is also provided.
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