Description of the event
On May 20, 2024, the Hong Kong Development Council and the Construction Industry Association jointly launched the (“4S”, Smart Site Safety System) labeling scheme and a series of related measures to improve the level of safety management at construction sites. Construction sites that have applied the 4S system can apply for labels, and labels can be placed outside the construction site after review and evaluation. The Buildings Department will introduce mandatory measures on July 1. All construction contracts with budgeted costs exceeding HK$30 million and construction works involving the use of mobile machinery and tower cranes must use the 4S system. Meanwhile, the Buildings Department is expected to issue labels for 100 construction sites in July, and plans to complete about 500 construction sites to participate in the labeling scheme during the year.
Incident comments
The proportion of applications of the 4S system at private construction sites is low, and the government introduced mandatory measures. Thanks to the Hong Kong Government's efforts to accelerate the safety and intelligence of construction sites in recent years, all government projects costing over HK$30 million have adopted the 4S system, and the Government has also used the 4S system through the Construction Industry Innovation and Technology Fund (CITF) to fund private engineering projects. Starting from April 1, 2023, the CITF Fund, managed by Parliament on behalf of the Government, has increased the total funding limit for each applicant from HK$6 million to HK$7.5 million. Of this, HK$1.5 million must be used to purchase or lease 4S systems to promote adoption by the industry. In terms of funding ratios, the purchase of locally developed innovative equipment can receive 80% funding, and leasing can also receive 50% funding. However, the extent to which private projects use the 4S system is still low, so the government has introduced mandatory measures to further promote the application of the system and improve construction safety.
Referring to the CITF standardized package pricing, Hong Kong's smart construction site space is approximately HK$600 million per year. Refer to the 4S standard package provided by CITF, which includes 10 major products: central management platform, digital tracking system, digital work permit system, electronic lock system, unsafe behavior in hazardous areas of mobile machinery operation, unsafe behavior in balance areas, artificial intelligence safety monitoring systems, confined space monitoring systems, and virtual reality safety training. Depending on the scale of the project itself and factors such as workers and construction periods, CITF provides a variety of pre-set products, with 7 product combinations ranging from 15,000 to 96,000 hkd/month. As of the end of 2023, there were 845 public construction sites and 771 private construction sites in Hong Kong. Most of these sites cost more than HK$30 million. A rough estimate is that the median price of the CITF preset product is 50,000 HKD/month, and 1,000 construction sites using the 4S system are required, the corresponding industry space is 600 million HKD/year.
China Construction International's products have advantages, and subsequent expansion in the mainland is worth looking forward to. On the CITF pre-approval list, there are 48 4S system vendors that can provide a single function, some functions, or all of the features, and purchases can be subsidized by the government. Among them, Haihong Technology Co., Ltd., a subsidiary of China Construction International, is an industry leader. The R&D system is not only more than 1 year before the government implemented the 4S system, but after more than 4 years of continuous refinement and iteration, the self-developed C-SMART system has been upgraded from 1.0 to version 4.0 to achieve SaaS architecture and master key codes. The company has two advantages: ① the price is superior to the CITF package price of 10% to 20%; ② As a technology company under the jurisdiction of a construction company, the product will be more suitable for the actual scenario, in line with user habits, and superior to pure technology companies. Looking at the current time, although the smart construction site market space in the Hong Kong market is small, looking ahead to the mainland market, the housing and construction departments of Guangdong, Jiangsu, Fujian and other provinces have successively issued notices to promote smart construction site construction in recent years. The company is expected to introduce Hong Kong's mature smart construction site experience into the country and open up the blue ocean market in the future.
Risk warning
1. The smart construction site policy fell short of expectations; 2. The progress of urban projects in northern Hong Kong fell short of expectations; 3. Prices of raw materials fluctuated greatly.