Rail cost blowout sparks call for review of projects

A sweeping overhaul of all government works contracts has been urged by the Democrats to avoid a repeat of 'blunders' on the KCRC's West Rail project.

The party warned that the $1.53 billion in overpayments could be the tip of the iceberg and demanded officials immediately examine other works contracts.

The Kowloon-Canton Railway Corporation has also revealed it paid communications company Siemens an extra $100 million to avoid a possible 13-week delay on contract work.

Siemens issued a statement yesterday saying the $100 million only covered part of the additional costs arising from 'settlement of claims and other variations'.

It said it had absorbed the cost of commissioning new sub-contractors.

'Siemens takes full responsibility for its original tender price and has absorbed the financial consequences of its tender,' it said.

After a briefing by KCRC and Transport Bureau officials, Democrat legislator Albert Chan Wai-yip criticised the KCRC's decision to pay the extra money to finish the project on time.

He warned that other contractors would take advantage of tight schedules.

'If the principle is to accept paying more to avoid slippage, then the contract itself is meaningless. The whole public works tender mechanism will collapse,' he said.

According to Mr Chan, the KCRC can only claim back from Siemens 10 per cent of the total contract value if the firm fails to honour its obligations.

No additional monitoring or penalty provisions have been added, although the $287 million tender bid by Siemens was 35 per cent lower than its major rival.

Mr Chan said: 'KCRC has a very low sensitivity to the risks involved. Siemens had little to lose if it didn't finish the contract.'

He said he would press officials to examine if existing public works contracts were at risk from weak penalties and low compensation for contract failures.

James Blake, KCRC's senior director of capital projects, would not be drawn on whether he should resign.