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Passengers were left in the dark due, in part, to the MTR's culture of 'discouraging elevation of bad news', an expert panel found. Photo: Sam Tsang

Hong Kong's HK$71.5b express rail debacle down to poor supervision and execution: experts

Poor supervision and execution led to delays and higher costs on HK$71.5b project: expert panel

The Highways Department and railway powerhouse the MTR Corporation have respectively failed in their roles to supervise and execute a HK$71.5 billion high-speed link to Guangzhou that is now plagued by delays and a budget overrun, an independent expert panel says.

Completion of the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link has been pushed back by two years to 2017, and its budget has snowballed to about HK$71.5 billion from HK$65 billion.

And the MTR Corp's corporate culture of "discouraging elevation of bad news without solutions" was partly to blame, the three-member panel said.

Also at fault was the MTR project team's "over-optimism" about the completion date and overreliance on measures it believed, without verifying their effectiveness, would minimise delays, according to the panel's 187-page report, unveiled yesterday.

On the part of the department, it failed to supervise the project's progress and lacked a master mechanism to define overall delivery strategies, roles and obligations between the MTR, the government - its controlling shareholder - and other parties involved, the report said.

In July 2013, the department's consultant, Jacobs China, estimated a potential delay of almost 11 months to July 2016, but the department did not ask the MTR to review in depth the works progress, the report noted.

"The panel is of the view that the Highways Department/[its unit] Railway Development Office was not well prepared for its role of monitoring and verification of the entrustment agreements for the [project]," the report said.

The expert panel of Mr Justice Michael Hartmann and two engineering experts, Dr Peter Hansford and Professor Andrew Whittle, was appointed by the government last year following a public outcry over the two-year delay.

In their report, the trio did not name or blame any individual. MTR chief executive Jay Walder and project director Chew Tai-chong stepped down last year following the company's internal inquiry that criticised Walder for "poor judgment" but put most of the blame on Chew.

The trio also spared the Transport and Housing Bureau from criticism, saying it was "kept in the dark" on the potential budget overrun before March.

Secretary for Transport and Housing Professor Anthony Cheung Bing-leung, who in May promised to resign immediately if found to be at fault, would only say yesterday that the government would pursue the report's recommendations.

Legislator Michael Tien Puk-sun said the MTR - rather than the government - should shoulder the responsibility. "The government might have supervised the project unprofessionally, but it is not a fault," he said.

The high-speed rail link is the first project the government has entrusted to the MTR, which means it is funded by public money, built by the MTR and owned by the government.

The lack of critical judgment could originate from an intrinsic flaw in the entrustment agreement between the MTR and the government, the experts said.

That deal did not provide any metrics to measure the MTR's performance in delivering the goods, they said. Nor did it stipulate a mechanism for the department to intervene even when the railway giant performed poorly.

The report noted that according to the agreement, the government shall bear the costs of the project, including any overruns - but that the MTR is duty-bound to predict any changes in costs. It said the MTR lacked the essential risk management to evaluate the budget impact of delays.

"MTR was advised [by consultants] that the schedule was extremely tight but achievable," it said. "No studies were carried out at the time to estimate the probability that the project could be completed by the specified date."

The panel suggested the MTR develop an integrated master programme against which it should compare with the project's actual progress.

The MTR said it would seek advice from two independent consultants on the findings and recommendations while pursuing delivery of the project.

 

What the panel says

On the MTR’s corporate culture: It “apparently discouraged the elevation of bad news without solutions” and there was “unfounded optimism within the project team”.

On communication of the project’s status: Communication “highly” relied on MTR’s written reports, submitted to stakeholders such as the Highways Department and not verified independently; the reports did not forecast project completion dates or quantify overall project delays. The reports “rarely offered any conclusions.”

On the MTR’s handling of project delays: The MTR relied on recovery measures to mitigate delays, and gave “false confidence” to stakeholders such as the Highways Department.

On the Highways Department: In July 2013, its independent consultant, Jacobs China, estimated a potential delay of almost 11 months, pushing the completion date to July 2016, but the department did not request an in-depth review of the project’s progress from the MTR.

On the Transport and Housing Bureau: It intervened when it saw press reports on project delays and cost overruns in May 2013. But at that time, the MTR assured the bureau the completion date would not be affected by delays in cross-boundary tunnelling work.

On the high-speed rail project: It lacks a mechanism to define overall delivery strategies, roles, duties and obligations among the parties including the MTR and the government.

This article appeared in the South China Morning Post print edition as: MTR, Highways department 'failed on high-speed rail'
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