On 5 October 2021, the Development Bureau (DevB) published the Technical Circular (Works) No.6/2021 for the implementation of security of payment provisions in public work contracts (Circular).
The Circular promulgates a contractual regime to implement “the spirit of the Security of Payment Legislation” in public works construction contracts and sub-contracts (the SOP regime). For affected contracts, the Circular (i) regulates payment application and certification processes, and (ii) enshrines adjudication as an interim dispute resolution mechanism.
The SOP regime will take effect in two stages. For Group B or Group C contractors listed in DevB’s “List of Approved Contactors for Public Works”, the SOP regime will apply to tender invitations issued on or after 31 December 2021. For tenders invited from listed contractors which fall outside of Groups B or C, the SOP regime will apply to tender invitations issued on or after 1 April 2022. 1 April 2022 will also be the date from which the SOP regime applies to suppliers and contractors listed in DevB’s “List of Approved Suppliers of Materials and Specialist Contractors for Public Works”.
Key elements of the regime include:
The contractual SOP regime is intended to be a pre-cursor to a later statutory regime and has been designed to allow Government and industry participants to acclimatise to operating in an SOP environment, and to identify potential issues before legislation is introduced.
In our article titled “Security of Payment in Hong Kong - pilot programme for public works contracts”, we looked at an earlier draft of the Circular and discussed important features of the SOP regime.
DevB’s Circular as issued includes changes and clarifications to that earlier draft. Some of the key changes and clarifications cover:
The issue of the Circular intensifies the need to prepare for the implementation of the SOP regime. It is therefore worth taking a deeper look at the issues and challenges the SOP regime presents, some of which we will discuss in our next article.