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THERE are fresh fears that contractors on the territory's public works programmes - some of which straddle the change of sovereignty - could lose billions of dollars unless agreement on contract payments can be reached with China.

  Within the year, the Government will tell the Joint Liaison Group (JLG) how much money is outstanding on airport core programme (ACP) contracts.

  And firms are worried the Government will cap the level of payments, making it impossible for them to be paid for additional work after June 1996.

  Several construction groups with ACP contracts are already pursuing claims for more than $500 million, a result of extra work caused by design changes or poor ground conditions.

  Tough contract conditions mean the Government is strenuously contesting the claims, but contractors warned the number of claims is tiny now compared with next summer when construction will peak.

  'It is a very real worry. The Government is expected to tell China what the final bill for the ACP work will be 12 months before construction finishes. This is an impossible task,' said one contractor.

    The New Airport Projects Co-ordination Office, which oversees airport-related projects, confirmed a financial review would take place. 'But it is too early to speculate on what the detailed arrangements for the review might be,' said a spokesman.

  Lawyers and builders are more concerned about the lack of guarantees for payments on non-airport related construction which would fall outside a deal with the JLG.

  'If the JLG can agree figures on the ACP work, at least it will offer some certainty of being paid. But there is no protection on normal public works projects,' he added.

  He said one solution would be for Britain and China to set up a contingency fund using arbitration to settle outstanding payments.

  A partner in leading construction law firm, Bateson Starr, David Bateson, said uncertainties over payment would affect contracts which finished before or straddled the handover date.

  These cover more than $20 billion worth of projects announced during the recent Budget and include advance work for the Lantau port development, additional port facilities at Tseung Kwan O and six road projects worth more than $3 billion.

  'At this stage, most contractors seem to be pushing on regardless of the legal standpoint.

  'It is possible a lot of those contractors who will be affected have not considered the point at this stage or, alternatively, are being lulled into a false sense of security,' he said.

  Many contractors believe they are protected by Clause 160 in the Joint Declaration which says the Hong Kong Special Administrative Region government will honour contracts after the handover.

  But Mr Bateson said this was too optimistic because the National People's Congress had the power to overturn these deals if it ruled they were in breach of the Basic Law.

  The problem was recognised by Sino-British negotiators when they drew up the Memorandum of Understanding for the ACP contracts. He believed it was too late for the JLG to create a similar agreement to protect all other contracts.



Firms fear 1997 will cost billions