Supporting Information to the Independent Expert Panel on the
1. Overview of Roles – MTRCL, Highways Department and Transport and Housing
1.3. Overview of Roles and Responsibilities
1.3.3. Monitoring and Verification Consultant
39. An agreement between the M&V Consultant and the Government was signed on 19 August 2010 (the ‘M&V Agreement’), whereby the Principal Government Engineer of the Railway Development Office signed for and on behalf of the Government.
31 The other railway projects include the West Island Line (WIL), the South Island Line East (SILE), the Kwun Tong Line Extension (KTE), and the Shatin to Central Link (SCL).
32 The other three offices under the Highways Department are: 1) the Headquarters and two Regional Offices, namely Urban and the New Territories Regions; 2) Major Works Project Management Office; and 3) HK-Zhuhai-Macao Bridge HK Project Management Office.
33 Role of HyD and M&V Consultant in the XRL project, pg. 1, 28 July 2014
40. The purpose of the M&V Consultant is to provide Government with the assurance that MTRCL’s obligations under the Entrustment Agreements have been properly fulfilled. 34
41. The scope of work of the M&V Consultant comprises monitoring and verification of the works carried out by MTRCL during the construction, testing and commissioning phases, including E&M systems (including the submissions by its consultants, agents or contractors). 35
42. Specifically, the M&V Consultant is required to appraise, monitor and audit the activities / processes of the MTRCL, verify these activities / processes are carried out in accordance with the MTRCL’s management and control procedures and in compliance with the design or construction phase EA, and that value-for-money is achieved through setting and complying with procedures. 36 It is also required to identify any major risks to the cost, programme, safety and quality of the XRL Project.
Contractual arrangement and fees / risks
43. The M&V Consultant was to be paid a fixed lump sum fee of HK$ 83.8 million according to a payment schedule based on key project milestones (i.e. contract signing, submission of Interim Report, submission of monthly progress report, etc.). 37
44. In the event of delays, additional payments were to be determined by negotiation. 38
45. In order to conduct its work and fulfil its roles, the M&V Consultant was invited to attend the Contract Review Meeting where progress of each contract and areas of concerns of the key contracts are communicated by MTRCL to the Railway Development Office and M&V Consultant. The M&V Consultant is not required / invited to attend the Project Supervision Committee's monthly XRL Project Meeting chaired by the Director of Highways, nor is it required / invited to attend the Project Control Group Meetings chaired by the Projects Director or the General Manager Cost Control Meetings. Further details of the communication channels and meetings between the parties will be covered under Section 3: Project Governance, Reporting and Communications.
Monitoring role
46. The M&V Consultant is responsible for assembling a comprehensive Monitoring Plan that should entail document review, site inspections and other necessary processes throughout the construction, testing and commissioning phases of the Project. 39 This Monitoring Plan should be updated from time to time to ensure the objective of the M&V assignment is satisfactorily met.
47. As part of its monitoring role, the M&V Consultant is required to review a list of key project documents 40 in relation to the XRL Project 41 and submit a report on the review findings which
34 M&V Agreement , Clause 3.1 and 6.1.9, 19 August 2010
35 M&V Agreement, Clause 4, 19 August 2010
36 M&V Agreement, Clause 6.1.7, 19 August 2010
37 M&V Agreement, Schedule of Fees, 19 August 2010
38 M&V Agreement, Clause 7, 19 August 2010
39 M&V Agreement, Clause 6.3.1, 19 August 2010
40 M&V Agreement, Clause 4.1, 19 August 2010: Documents include: post contract award design changes; detailed designs of the permanent works under design and built contracts forms; construction programmes; testing,
would include any major observations or comments; identify any major risks to the cost, programme, safety and quality of the Project; and include recommendations on the course of action to be taken to minimise the risk or address the issues. 42
48. The approach required under the agreement by the M&V Consultant is risk-based with focus on cost, programme, safety and quality aspects. 43 Specific processes or areas that the M&V Consultant monitors are:
• Progress of works against the progress reports and project programmes, and advising the Government of any slippages and other implications;
• Expenditures and cost related processes which include payments, claims, variation orders and commercial settlements and identifying any significant changes of costing which would affect the Total Project Cost estimate; 44
• Major changes of Engineer’s design, contractors’ alternative designs, major temporary works, waste management, environmental, blasting and spoil disposal plans;
• Method statements, proposals and any relevant documents that are of project wide significance or are of significant public concern;
• Quality of works – including the quality of materials and workmanship against standards;
• The set up and records of site monitoring regime including existing ground movements, buildings, water levels, etc.;
• Building submissions and their compliance with the building safety standards of the project;
• Site progress by taking regular and professional photographs of the site;
• Public opinion on the XRL and submission of a bi-weekly report on these comments (from social networking websites, microblogs, etc.); and
• Documentation in relation to Project handover process.
Verification role
49. The M&V Consultant’s verification role entails process and technical compliance audits (verification audits) that aim to check the processes used by MTRCL comply with:
• MTRCL’s internal management control and procedures; and
commissioning and system acceptance plans; services standards and operation-related proposals; method statements and proposals bearing major implications and significance to the project in terms of cost, programme, safety and quality; issues arising from submissions for Station and Transport Integration Committee (STIC), Trackside Safety etc.;
other key documents relating to the XRL Project.
41 M&V Agreement, Clause 4.1, 19 August 2010
42 M&V Agreement, Clause 6.2.2, 19 August 2010
43 M&V Agreement, Clause 6.3.4, 19 August 2010
44 M&V Agreement, Clause 6.3.4(a) and 6.3.4(b), 19 August 2010
• The requirements and standards stipulated in the EAs’ design and construction phase.
50. The audits are to be selected and proposed by the M&V Consultant based on the assessment of risks in the areas of safety, quality of works, cost implications or programme delay. 45
51. Specifically, the M&V Consultant shall carry out verification by auditing each of the following financial processes:
• Payments to MTRCL’s consultants / contractors / agents under MTRCL’s contracts;
• Changes, modifications and variations with cost implication;
• Claims; and
• Commercial settlements.
52. If the Government, at any time, suspects the MTRCL is in material or persistent breach of any material obligations under EA2, the Government may ask the M&V Consultant to carry out a verification audit. The M&V Consultant would be required to propose the methodology and criteria for this verification audit work for Government’s approval.
Assessment of building submissions
53. The M&V Consultant is required to assess the building submissions submitted by the MTRCL and / or its consultants/ agents (which may include building plans and proposals, structural plans and proposals, method statements), and provide input on compliance with the building safety standards. 46
1.3.4. MTRCL
54. MTRCL was entrusted by the Government with the implementation and overall project management of the XRL Project based on its track record of delivering successful projects and its reputation in the industry as a leading railway organisation. It is also understood MTRCL is to be invited to participate in the operation of the XRL Project upon completion, under a concession arrangement.
55. Under EA2, MTRCL’s roles and obligations are broadly:
• Procurement and award of contracts – MTRCL will let all contracts with Third Parties in accordance with its management systems and procedures; 47
• Third party settlements – In reaching any settlements with Third Parties, MTRCL shall seek to ensure that such settlements are in the best interests of the XRL Project; 48
• Warranty on skill and care – In the provision of project management service, design services and construction activities, MTRCL shall carry out such services with the skill
45 M&V Agreement, Clause 6.4.5, 19 August 2010
46 M&V Agreement, Clause 6.6 and 6.6.3, 19 August 2010
47 EA2, Clause 4.6 (A) and (C), 26 January 2010
48 EA2, Clause 4.6 (B), 26 January 2010
and care reasonably to be expected of a professional and competent manager; a professional and competent design engineer; and a competent workmanlike construction contractor, respectively; 49 and
• Use of best endeavours – MTRCL shall use its best endeavours to complete the Entrustment Activities 50 in accordance with the Entrustment Programme. 51
56. MTRCL is also obliged to provide information concerning any matters relating to the XRL Project as requested by the Government. These include both regular reports as well as all matters that, in the opinion of MTRCL, are likely to have a material impact on the Scope of Railway Works, 52 the Entrustment Activities, and the Entrustment Programme, 53 which includes monthly progress reports 54 and cashflow forecasts. 55
49 EA2, Clause 5.1, 26 January 2010
50 EA2, Appendix B, 26 January 2010
51 EA2, Clause 16.4, 26 January 2010
52 EA2, Appendix B, 26 January 2010
53 EA2, Clause 17.1A, Appendices A, B and C, 26 January 2010
54 EA2, Clause 17.4, 26 January 2010
55 EA2, Clause 17.8, 26 January 2010