Cheung Chau submarine pipeline, Hong Kong

The HK$182 million (£16.5 million) pipeline is replacing an existing smaller pipeline which has now exceeded its original 50-year design life. Together with an existing 500 mm diameter pipeline, it will significantly improve the reliability of the fresh water supply from Lantau to the growing population of Cheung Chau, which currently requires 9500 m³/day.

However, the Adamasta Channel between the islands is one of the busiest navigation channels in Hong Kong, with up to 60 fast-ferry movements per hour, as well as being an economically important fishing ground. The north-east headworks are also within the environmentally sensitive Lantau South Country Park.

Water Supplies Department of the Hong Kong Special Administrative Region thus opted for horizontal directional drilling under the seabed to ensure the least environmental and economic impact. However, the scale of the project and uncertainty of ground conditions meant this was still a high-risk option.

With previous successful use of NEC3 suite of contracts in managing high-risk projects, the designer Black & Veatch offered Water Supplies Department with the trial use of the NEC3 Engineering and Construction Contract (ECC) option C (target contract with activity schedule) to ensure effective risk management and maximum collaboration within the project team.

Black and Veatch Hong Kong Limited was then appointed as supervisor and China Road–China Pipeline Joint Venture was appointed as contractor. Works started in October 2013 and is due to be completed in October 2016.

NEC Contract Strategy 

Historically the Water Supplies Department procured construction works using the Hong Kong government’s General Conditions of Contract (GCC). However, since the government is now actively promoting the use of the NEC3 suite of contracts, the department was given the option of using this new contract strategy for the Cheung Chau project.

ECC option C was suitable for Cheung Chau because the target-cost approach offered scope for financial saving. Through instilling an early warning system in the contract, engaging an experienced drilling operator and using suitable drilling equipment, the underground risk could be managed and costs driven down. The pain–gain share mechanism also helped incentivise the parties to derive cost-effective solutions, potentially resulting in time and cost benefits to the project.

Also, since the project had definite start and end points, the risk of a substantial variation in alignments leading to changes in quantities would be low, unless the design was changed in the construction stage. Therefore, the option C activity schedule pricing mechanism would reduce the employer’s risk on quantities and would not cause undue stress to the contractor’s pricing strategy. Nevertheless, a proper change mechanism was also available in case ground conditions were beyond what could have been reasonably foreseen, leading to substantial changes in alignment or quantities.

Benefits of Using NEC3 

• NEC3 ECC option C brought enhanced value to the project through facilitating alternative design, promoting efficient risk reduction actions, improving the clarity of financial accounting and incentivising input of construction expertise from the contractor.
• The NEC3 principle of mutual trust and cooperation meant additional ground investigation work, alternative design and the need for additional borehole cleaning were dealt with in a coordinated and quick manner, avoiding additional cost and time due to delay in handling unfavourable ground conditions.
• ECC delivered this major submarine pipeline in challenging ground conditions to the required quality, time and budget and with no adverse economic or environmental impact.
• ECC option C has proven to be a highly effective tool for project risk management.