Speech by SDEV at HKCA International Conference on "Lean Construction" (English only) (with photo)
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Allan (President of the Hong Kong Construction Association, Mr Allan Chan), distinguished speakers, government colleagues, ladies and gentlemen,
Good morning. It is my privilege to address you at the International Conference on "Lean Construction" organised by the Hong Kong Construction Association (HKCA).
Importance of Construction Industry in Hong Kong
I am particularly attracted by the theme of the conference today, "Lean Construction". I am confident to say that no one here would dispute that the construction sector of Hong Kong is hardly a "lean" industry, in terms of the number of employees, output and contribution to the economy. As the Secretary for Development, I am overseeing a major sector of the Hong Kong economy having over 400 000 employees, turning more than $200 billion a year in output and contributing some 5 per cent to our GDP. The construction industry plays a vital role in improving the quality of life of our community, enhancing our competitiveness and sustaining the long-term development of Hong Kong. According to the Global Competitiveness Report just released by the World Economic Forum three weeks ago, Hong Kong is ranked number one again in infrastructure, now for seven years consecutively. This is a remarkable achievement of each and every one of you who has been making a valuable contribution to the construction industry and hence the Hong Kong community at large.
Objectives of "Lean Construction" for Managing Construction Projects in Hong Kong
Coming back to the subject of "Lean Construction" today, I am aware of the application of "lean production" principles to manufacturing processes, which can make significant improvements in quality and productivity, while reducing costs and production time. I therefore appreciate the advocacy of applying the lean approach to the construction industry. As the one responsible for managing a large portfolio of public works projects in Hong Kong, I do share the objectives of "Lean Construction" to maximise the value and output of construction services and at the same time minimise wastage.
As I have already said, the portfolio of public and private projects in Hong Kong has been generating construction expenditure of more than $200 billion per annum in recent years. It is very likely that in the coming decade, this will remain at a high level. According to a forecast of the Construction Industry Council (CIC), the annual construction output in the next 10 years will range between $210 to $280 billion. On the public works side, to respond to the community's aspirations, the Government has a host of projects in the pipeline, which include the housing supply target of 460 000 units in the next 10 years, development of Lantau Island, railway development for Hong Kong into the year 2030+, the 10-year Hospital Development Plan, New Development Areas, the New Town Extension and the Central Kowloon Route, and others. For private projects, residential and commercial buildings are also in dire need. With such great demand for construction services, we will have no hesitation but shoulder the responsibility of meeting the public's expectation.
"It is the best of times, it is the worst of times." Despite the tremendous demand and hence opportunities for the construction sector, we are facing the challenges of high construction costs and declining productivity, as reflected in the increased manpower input per unit of construction. The decline in productivity is attributable to a number of factors including rising aspirations for better construction quality, enhanced occupational safety and health requirements, environmental protection requirements, as well as our ageing workforce. Our ability to deliver the foregoing projects and provide better living quality to our people is somehow constrained. I share the vision of "Lean Construction", so as to enable our construction projects to proceed in a sustainable manner.
Challenge - High Construction Costs
High construction costs also affect the Government's financial sustainability to deliver public works projects. The public also has rightly questioned whether the Government's investment in public works projects is worthwhile. Delays and cost overruns which happened recently in a few mega projects have aroused public concern and drew scepticism from the Legislative Council. Some infrastructure projects are even satirised as "white elephants". This really hurts all of us here who are making efforts wholeheartedly for the benefit of Hong Kong.
It has therefore been announced in the Policy Address and the Budget earlier this year that we are resolute in taking measures to tackle the high construction costs and strengthen cost management of public works projects to ensure that public funds are well spent. We are determined to get this on track.
We set up the Project Cost Management Office (PCMO) in the Development Bureau to strengthen cost management of public works projects through "system re-engineering" and "design optimisation". Since its establishment in June this year, the PCMO has commenced the review of works requirements and policies in consultation with stakeholders. I note that the HKCA has also offered many constructive comments to my colleagues. There are common observations that some outdated or overlapping requirements in our public works system have added to the construction costs and have to be rationalised. While we are taking steps to rejuvenate the requirements and policy initiatives in our public works system so as to create better synergy, please be assured once again that safety, functionality and quality of works would not be compromised in any way.
The PCMO is also tasked to collaborate with the project offices in works departments to contain the risk of cost overrun and ensure the cost-effectiveness of the projects. It has already completed the scrutiny of the cost estimates of around 50 large-scale projects at the design stage. Some early success in optimising the design and containing costs has already been achieved. In the process, we have been upholding the guiding principles of "fitness for purpose" and "no-frills design".
Challenge - Declining Productivity
As regards manpower supply, our existing pool has over 400 000 registered construction workers and about 310 000 of them are currently engaged in construction works. Although the CIC has been working very hard in recent years to train up skilled labour and attract new recruits, the shortfall of skilled workers will still persist for some time. In view of the pressing need for stronger delivery capacity, we have to explore further importation of labour to increase our overall delivery capacity. With due regard to the principle of not affecting the employment nor lowering the wages of local workers, importing labour on a needs basis to deal with the imminent surge of workload is an important stop-gap measure to augment the local supply. We will have to work together to explain to the public the reason for such a need.
In addition to increasing manpower supply, we have all along been promoting construction methods with reduced manpower requirements, for example, pre-fabrication, mechanicalisation and the "three-S" concept in design, namely standardisation, simplification and integrated single element.
Technology Application and Innovation
No one would dispute that we are in the digital era which is characterised by the convergence of digital, physical and biological technologies impacting all disciplines, economies and industries. All sectors of the economy have been taking the advantages of the rapid advancement in technology applications to enhance their competitiveness. Other economies like Singapore or many Mainland cities have already made use of digital applications like Building Information Modelling (BIM) to help the construction industry solve many operational problems and enhance its productivity. Experience has told us that BIM can provide much better design analysis, allow better visibility across different disciplines, and reduce waste. This would in turn increase productivity and reduce the overall project life cycle cost. The Government will accelerate the use of BIM in more public works contracts and strengthen related training for our staff. The CIC has also led the industry to set the standards of BIM, and enhance related training and promotion. If the private sector could also take a great step forward to adopt more BIM applications in their projects, enormous synergy can be expected to uplift the productivity of the industry.
I have observed with great interest the use of robotics and exoskeletons in construction works in overseas countries. Robotics can enhance the accuracy in assembling fine parts at construction sites. It can also improve the working environment at work sites, safeguard workers' safety, enhance project quality and productivity, and consequently would attract more young talents to join the industry.
The World Economic Forum has ranked the innovation capacity of Hong Kong in 27th place this year. This is far behind the world's innovation powerhouses and our neighbouring competitors. It is really high time to step up the collaborative efforts of the Government and private sectors in adopting more advanced technological applications so that the industry as a whole can fully reap the benefits of the new technologies.
Concluding Remarks
Ladies and gentlemen, our initiatives in managing project costs and uplifting productivity are only small steps in "Lean Construction". I am sure that as industry leaders, you would have more and better ideas to help Hong Kong tackle the challenges faced by the construction industry. I hope you will be generous in sharing your valuable expertise and experience in "Lean Construction" with us and I look forward to receiving your innovative ideas on how our industry can upgrade our services to the community to propel the continuous development of Hong Kong in a sustainable manner.
Once again I am most delighted to be with you this morning and may I wish you all a very fruitful conference today. Thank you.
Ends/Monday, October 17, 2016
Issued at HKT 12:49
Issued at HKT 12:49
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