Government reaches settlement arrangement with MTRCL on Hong Kong Section of Guangzhou-Shenzhen-Hong Kong Express Rail Link project and Shatin to Central Link project
The Government today (October 2) reached a settlement arrangement with the MTR Corporation Limited (MTRCL) on the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (XRL) project and the Shatin to Central Link (SCL) project.
MTR, Photo source: reference image
The XRL and SCL are railway projects implemented by the MTRCL under entrustment from the Government. Following the dispute resolution approach specified under the entrustment agreements for the two projects, the Government and the MTRCL conducted multiple rounds of negotiations, and reached a settlement arrangement today. In relation to the programme delay in the construction of the XRL project, the MTRCL will pay HK$2.25 billion to the Government. On the other hand, in respect of disputes relating to the SCL project, the MTRCL has in the past proactively shouldered the additional project management cost (PMC) for the whole project and additional costs arising from the quality incident of the Hung Hom Station Extension (HUH Incident), totalling approximately HK$2.8 billion. Both parties have agreed not to pursue any claims against each other for the delay of the SCL project. The settlement arrangement has fully taken into account the responsibilities of the MTRCL on the programme delays of the two projects.
A spokesman for the Transport and Logistics Bureau said, "The Government has been following up in a serious, rigorous and professional manner with the MTRCL on its responsibilities as the project manager in respect of programme delays in the construction of the XRL and SCL projects, in order to safeguard the legitimate interests of the Government and the public. Under the mutually agreed dispute resolution approach, personnel from both the Government and the MTRCL organised and analysed a substantial volume of materials, and fully consulted independent and professional engineering and legal advice in the process to clarify the liability issues involved. The two sides engaged in multiple rounds of discussions, working proactively to resolve the disputes and successfully reaching a consensus in the end.
"Following the programme delays of the XRL and SCL projects, the Government and the MTRCL have thoroughly reflected on the experiences, and put in place a series of enhancements to strengthen the governance, monitoring and cost management mechanisms of railway projects over the past few years, with a view to further improving the oversight of project management and process at the institutional level. The Government and the MTRCL have also implemented the enhanced mechanisms in railway projects currently under way, including Kwu Tung Station, Tung Chung Line Extension, Oyster Bay Station, Tuen Mun South Extension, Hung Shui Kiu Station and the Northern Link Project. The Government will continue to closely monitor the progress and delivery performance of railway projects, and urge the MTRCL to implement new railway projects on schedule and within budget. At the same time, in accordance with the project agreements for the aforementioned new railway projects, the MTRCL is required to bear all construction and operational risks associated with the new railway projects, including the risk of project cost overruns," the spokesman added.
The Transport and Logistics Bureau, Photo source: reference image
The XRL and the SCL are railways funded and owned by the Government, which has entrusted the MTRCL with the design, construction, testing and commissioning of the projects. Construction of the XRL commenced in 2010, and was originally scheduled for commissioning in August 2015. Due to programme delay and cost overruns, the Government and the MTRCL signed a definitive agreement in 2015, agreeing to extend the Programme to Complete to the third quarter of 2018, and increase the estimated Cost to Complete (CTC) by HK$19.42 billion from HK$65 billion to HK$84.42 billion, which is then capped at this level. In November 2015, prior to the Government's application to the Legislative Council (LegCo) for additional funding, the MTRCL announced the distribution of a special dividend to its shareholders. The Government, as the MTRCL's major shareholder, received a total amount of HK$19.51 billion in special dividend. The XRL formally commenced operation in September 2018.
High Speed Rail West Kowloon Station, Photo source: reference image
Construction of the SCL commenced in 2012. The Tai Wai to HungHom Section (linking the MaOnShan Line and the West Rail Line to form the TuenMa Line) was originally scheduled for commissioning in December 2018, while the Cross-harbour Extension (extending from HungHom to the WanChai Exhibition Centre and Admiralty) was originally scheduled for commissioning in December2020. Due to a series of events, including the archaeological discoveries at Sung Wong Toi Station, wartime bombs uncovered at the Exhibition Centre Station site, unforeseen ground conditions, and the HUH Incident, the TuenMa Line was eventually fully commissioned in June2021, while the Cross-harbour Extension commenced operation in May2022. The estimated CTC also increased from HK$79.82billion to HK$90.73billion (the additional funding of HK$10.91billion sought from the LegCo at that time did not include the additional PMC for the whole project and additional costs arising from the HUH Incident totalling approximately HK$2.8 billion, which the MTRCL proactively shouldered).
