Why a Single Contract?
It was the original intention of the Airport Authority to go to tender in the traditional manner for the building services contracts, letting the air conditioning, electrical, fire protection systems and hydraulic services for the new Passenger Terminal Building as four separate contracts. And at that stage, Hong Kong based Hsin Chong Aster Building Services Ltd., a local joint venture between Hsin Chong Construction Group and Aster SpA of Italy was planning to bid for part of the work.
But in May 1994, the Airport Authority took the decision to tender one 'super' M&E package to include all four elements of the M&E installation. This was an unusual step for Hong Kong, because, despite this approach having been widely and successfully used on major infrastructure projects it had seldom been applied to a building project.
An exhaustive pre-qualification exercise was carried out to identify suitable companies or joint ventures with the technical, management and financial resources to undertake a contract with a projected value of almost HK$2 billion (US$260 million) with an overall programme of less than 30 months, of which only 21 months were allocated to installation and commissioning.
Five consortia/joint ventures were selected to participate in the stage 1 tender process, which entailed preparation of a full technical and management proposal to address a very comprehensive 'Instructions to Tenderers' document prepared by the Airport Authority and its design team. Three joint ventures successfully passed through stage 1 and were invited to proceed with the preparation of the full pricing document
An M&E Joint Venture
Faced with a massive, HK$1.88 billion package of works, it soon became apparent that no single contractor would have the expertise, the financial strength or the resources to undertake the huge project. The solution was to establish an international joint venture to pre-qualify for a place on the tender list.
Hsin Chong Aster Building Services Ltd. decided to involve its European associates, thus forming the AEH Joint Venture with Aster SpA and Ellis Mechanical Services Ltd. As Ellis is a wholly owned subsidiary of Aster, the JV effectively involved two partners, Aster and Hsin Chong. It contained a blend of international expertise and local experience built up over many years. An additional benefit was that the separate elements of the JV all had prior experience of working together.
Aster, based in Milan, is a major international contractor in the M&E field, with over 40 years' experience and vast in-house expertise. Likewise, London- based Ellis is an M&E contractor with over 100 years' experience in the UK and around the World. Hsin Chong Aster is one of the leading M&E contractors in Hong Kong, with a number of major projects to its credit.
From its inception it was decided that the JV would be a fully integrated operation, rather than an umbrella organization under which individual members concentrated on their own specializations. As a result, AEH JV is structured as a stand-alone company, in which the partners each have a shareholding. The total responsibility of the project rests with the JV, and the partners share the risks and rewards of the project in proportion to their involvement as laid out in the JV agreement.
Once the decision to adopt an integrated approach was taken, specialists from the three partners were seconded to Hong Kong to prepare the tender. The mix of local knowledge and European expertise gave the team an early advantage in fixing competitive prices and negotiating delivery dates with the mainly European equipment suppliers, and in sourcing and securing local suppliers, subcontractors and labour.
Prior to submitting its tender, the JV had realized that it would need technical support to aid its bid. It therefore signed pre-bid agreements with leading organizations which would become its key, first tier subcontractors. These included Thorn Security, Carrier and Rotary International.
The Winning Team - Contract 320
Following completion of the stringent, two-stage tender process, AEH JV was appointed Main M&E contractor in January 1995.
Once appointed, the JV began drawing in staff from the three partners and from around the world to form its highly effective project team as well as members from the UK, Italy and Hong Kong. The team included personnel from Canada, Australia, New Zealand and the Philippines. This mixture of cultures and personalities peaked at 150 staff, aided by over 200 personnel from the first tier sub-contractors, managing a workforce which reached 1,800 workers at the peak of operations.
Initially, the contract value was HK$ 1.88 billion, but taking into account agreed variations and the Supplemental Agreement signed with the Airport Authority in September 1996, the value finally rose to in excess of HK$2.5 billion by completion.
Indeed, because of the huge sums involved, the JV performed more like a good-size company which from a standing start at contract award saw its annual turnover peak at HK$1 billion during the contract duration.
From the beginning of the contract, the in-depth experience of the JV partners was crucial to its success, providing management with the confidence to take fundamental decisions which influenced the course of the project. An example of this was the early decision to invest HK$10 million in an on-site ductwork factory, rather than rely on outside suppliers.
It soon became apparent that imported labour would be required to achieve the project objectives. International M&E contractor, Voltas International Ltd, was therefore brought in as a first tier sub-contractor, to provide the management, supervision and provision of labour for the installation phase of the air conditioning services.
However, because of the extremely fast mobilization on site at the start of the programme, AEH JV was forced to appoint two local sub-contractors to begin installation on the baggage hall, the first area of the building to become available. With the JV's programme position secured, Voltas was able to take over once its preparations had been completed.
One physical representation of the integrated nature of the AEH JV was the decision to concentrate all operations in a single project office. The 1900 sq m office complex was intended to engender a 'team spirit' among the JV partners and their sub-contractors, an arrangement which proved highly successful.
Throughout the contract the JV continued to draw on the partner's individual strengths. Liaison with local statutory authorities was greatly helped by the input of Hsin Chong Aster, while factory inspections and progress monitoring of major equipment suppliers was mainly the responsibility of the European offices of Aster and Ellis.