For discussion PWSC(95-96)103
on 15 March 1996

ITEM FOR PUBLIC WORKS SUBCOMMITTEE
OF FINANCE COMMITTEE

HEAD 705 - CIVIL ENGINEERING
Environmental Protection - Refuse disposal
60DR - Island West Refuse Transfer Station

Members are invited to recommend to Finance Committee an extension of the scope of 60DR to provide additional office accommodation for government users at the Island West Refuse Transfer Station.

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PROBLEM
PROPOSAL
PROJECT SCOPE AND NATURE
JUSTIFICATION
FINANCIAL IMPLICATIONS
PUBLIC CONSULTATION
ENVIRONMENTAL IMPLICATIONS
LAND ACQUISITION
BACKGROUND INFORMATION
60DR - Island West Refuse Transfer Station
60 DR - Island West Refuse Transfer Station Conversion of APE and RPE to Dec 94 price
60 DR - Island West Refuse Transfer Station
CHECKLIST FOR PWSC SUBMISSION

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PROBLEM

The Director of Environmental Protection (DEP) considers that there is potential to maximize the use of the Island West Refuse Transfer Station (IWRTS) site to provide additional office space to meet the accommodation needs of the Environmental Protection Department (EPD) and possibly other government users.

PROPOSAL

2. DEP, with the support of the Secretary for Planning, Environment and Lands and the Government Property Administrator, proposes to extend the scope of 60DR to include the provision of additional office accommodation at the IWRTS.

PROJECT SCOPE AND NATURE

3. The revised scope of works comprises the addition of new item (d) to the existing items as follows -

1. the excavation of a cavern for the refuse transfer station together with site formation and two access tunnels;
2. the construction of two access roads;
3. buildings works (comprising all the refuse transfer station structures, offices, control rooms, pumprooms and other necessary facilities inside the cavern);
4. office space, the associated fitting-out and furniture and equipment at the IWRTS to accommodate government staff;
5. the purchase and installation of electrical and mechanical equipment (comprising basic equipment required for supporting the operation of the refuse transfer station such as lighting, ventilation systems and fire fighting equipment);
6. the purchase and installation of waste management machinery and purpose-built marine vessels;
7. a wastewater treatment facility;
8. the construction of a barging point;
9. the construction of a reception area at the West New Territories (WENT) Landfill; and
10. the temporary relocation of an existing Urban Services Department refuse collection vehicle depot at Sai Ning Street, Kennedy Town, to Quarry Bay to make way for the project.

JUSTIFICATION

4. In line with the policy to maximize land utilisation of government sites and to reduce leased office accommodation and hence the associated rental expenses, we have explored the feasibility of incorporating additional office space into the waste management projects managed by EPD.

5. We have identified the IWRTS in the Western District as an appropriate project that can provide additional office space. In August 1995, a preliminary assessment by EPD and the contractor of the IWRTS, indicated that it was feasible to incorporate three floors of office space totally 2 600 m², on top of the contractor’s office in the IWRTS building. This is the optimum additional space that we can achieve under the land use conditions on height limit and site area, and without causing major alteration to the project design or adverse effect on the station operation. We estimate that the capital cost for the provision of the additional office space to be $47.44 million at December 1994 prices.

6. When Members approved the project 60DR, we estimated the cost to be $957 million at March 1993 prices giving an approved project estimate of $1,311.2 million in money-of-the-day (MOD) prices. The tendered sum for the main works was $637.2 million in MOD prices, which is far lower than we originally estimated. This is the result of the successful tenderer using an innovative cavern design to accommodate all the refuse transfer facilities and equipment.

7. We now propose to use part of the real savings achieved to fund the cost of the building of additional office space at IWRTS to accommodate government staff so as to further maximize the development potential of the site. Subject to Members agreeing to this additional work, we will then reduce the approved project estimate to reflect the lower estimated total cost of the project.¹

8. We have identified potential user of the proposed new office. We propose to use the new office in IWRTS to house staff of EPD. At present, EPD occupies a total office area of 23 500m² of which 8 100m² is in leased premises. Its headquarters groups are accommodated at Southorn Centre, Revenue Tower and in leased offices (occupying 4 200 m²) in Kowloon Bay and Quarry Bay. There will be a projected shortfall of 1 100 m² for its headquarters in 1996/97. Since we are unable to allocate more office space in the Southorn Centre and Revenue Tower to EPD, the additional office space at IWRTS will meet the accommodation needs of the department’s headquarters and will also allow us to release part of the existing leased premises. We will consider users from other departments if there is surplus space available.

9. The extension of the scope of the project will provide savings in rental as a result of deleasing some of the existing office premises. For comparison purposes, the annual rental expenses of leasing an office of similar size in Quarry Bay and Kowloon Bay are $14 million and $9 million respectively.

FINANCIAL IMPLICATIONS

10. We estimate the capital cost of the IWRTS including the additional government office floors to be $789.42 million in MOD prices (see paragraph 11 below), made up as follows -

11. Subject to approval, we will phase expenditure as follows -

12. We derive the MOD estimate on the basis of the Government’s forecasts of trend labour and construction prices over the period between 1995 and 2000. The contract for the construction of the IWRTS, inclusive of the three floors of office accommodation, is a fixed price lump-sum contract.

13. With the proposed extension of the project scope, we estimate that the annual charges payable to the IWRTS contractor for the maintenance of the additional office space will be about $2 million which includes building services maintenance, plus security and cleaning. This will increase the total annual operating and maintenance charges of the IWRTS from $56 million (at December 1994 prices) to $58 million (at December 1994 prices) which is less than the original estimate of $97.3 million. The lower contract price offered by the successful tenderer is the result of the substantially reduced maintenance requirement of a much smaller cavern. Since the contractor of the IWRTS will take up the office maintenance, the proposed extension of the project scope will not give rise to further additional staff and maintenance costs by the Government.

14. In order to compare the real costs of works, that is, to remove the distorted effect of allowance made for inflation to produce MOD prices, we adjust all prices to a common December 1994 price level at Enclosure II. The December 1994 price level was the price basis used by the Government in the 1995 Resource Allocation Exercise. A comparison of the APE and the revised project estimate at December 1994 prices is at Enclosure III.

PUBLIC CONSULTATION

15. The proposal is to build additional office accommodation and will not change the actual operation of the IWRTS. As all the operational and environmental standards are unaffected, we consider public consultation unnecessary.

ENVIRONMENTAL IMPLICATIONS

16. In November 1995, DEP conducted an Environmental Review on the proposed additional office accommodation and concluded that EIA was unnecessary. We will provide central air-conditioning to alleviate the noise impact arising from the IWRTS operation and will incorporate appropriate odour control measures in the design. No additional measure for the odour control system is required for the office building.

LAND ACQUISITION

17. As the proposed additional office floors will be located directly on top of the IWRTS building, we do not require land acquisition. We have obtained the Town Planning Board’s approval to modify the land use condition to accommodate extension of the scope of the project as required under section 16 of the Town Planning Ordinance.

BACKGROUND INFORMATION

18. Members upgraded 60DR to Category A in March 1994 to provide a refuse transfer station inside a man-made cavern under Mount Davis at Kennedy Town on Hong Kong Island at an MOD price of $1,311.2 million.

19. The IWRTS forms part of the Territory’s waste disposal strategy as set out in the White Paper “Pollution in Hong Kong - a time to act” as well as in the Waste Disposal Plan. Refuse collected both publicly and privately from the Central, Western and parts of the Southern districts of Hong Kong Island will be compacted and containerised at the IWRTS and then transferred to the WENT landfill by purpose-built marine vessels for final disposal.

20. In April 1995, we awarded the IWRTS contract at $637.2 million (MOD) following approval of the tender by the Central Tender Board. The successful tenderer proposed an innovative cavern design using a number of smaller inter-connected caverns instead of a single large cavern. This reduces by over 70% the volume of rock excavation and results in a corresponding reduced requirement for ventilation and odour treatment capacity. These factors account for the major savings in capital costs. Other tenderers put in designs similar to the conceptual design prepared by EPD’s consultants. Their tendered prices ranged from $1,050 million to $1,120 million which were close to the original project estimate.

21. Design and construction work of the IWRTS is on-going. As we intend to construct the proposed additional office floors concurrently with IWRTS, we must have a decision by April 1996 to match with the construction works programme of the IWRTS. Subject to Members approving the proposed change of scope, we expect the office to be ready for occupation in late 1997.

1 -- Finance Committee has previously delegated to the Secretary for the Treasury the authority to approve reductions in aproved project estimates where no change of scope is involved.
2 -- Breakdown of the estimate for consultants' fees for construction stage is given at Enclosure I.
3 -- This is the actual expenditure incurred on the project up to 31 March 1995.

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Enclosure I to PWSC(95-96)103

60DR - Island West Refuse Transfer Station

Breakdown of the estimate for consultants’ fees for construction stage

Notes

1. The average estimated cost per professional man month is about equivalent to an Engineer on MPS 36.
2. The average estimated cost per technical man month is about equivalent to a Works Supervisor on MPS 13.
3. The figures given above are based on the actual remuneration package of the site staff employed through the consultants.

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Enclosure II to PWSC(95-96)103

60 DR - Island West Refuse Transfer Station Conversion of APE and RPE to Dec 94 price

The approved project estimate (APE) and the revised project estimate (RPE) (before incorporating the proposed office accommodation) are converted to Dec 94 price for comparison as follows -

1 We convert the APE (Mar 93) to APE (Dec 94) by using the inflation adjustment factor of 1.15775 based on the Government’s trend labour and construction indexes for the year 93 and 94.
2 We awarded the IWRTS contract at $637.2 million which included works items (a) to (d).
3The deflation adjustment factor is 1.30675.
4 These are the expenditure to be incurred for consultants’ supervision and relocation of refuse collection vehicle depot.
5 The contingency sum at Dec 94 price level is deflated from the estimated expenditure to be phased from 97/98 to 99/00 with an adjustment factor of 1.46573.

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Enclosure III to PWSC(95-96)103

60 DR - Island West Refuse Transfer Station

A comparison of the approved and revised project estimate is as follows -

2. As regards (a) to (c) (civil engineering works, plant and equipment and construction of a reception area at WENT Landfill), the total decrease of $506.69 million is due to lower contract sum resulting from the contractor’s innovative and more compact design. The cost of cavern excavation, ventilation, lighting and fire services provisions are substantially lower.

3. As regards item (d) (marine transport vessels), the increase of $11.41 million is due to the actual contract sum for the vessels. There has been no change of scope.

4. As regards item (e) (consultants’ supervision), the increase of $0.92 million is due to actual remuneration package of the site staff employed.

5. As regards item (f) (relocation of a refuse collection vehicle depot), the decrease of $7.16 million is due to the actual contract sum for the works. There has been no change of scope.

6. As regards item (g) (proposed additional government office floors), the $47.44 million is the cost of the extension of the project to provide additional office accommodation at the IWRTS.

7. As regards item (h) (contingency), we retain $44.79 million for the remaining works of the project to cover any possible as yet unforeseen items of expenditure.

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CHECKLIST FOR PWSC SUBMISSION

60DR - Island West Refuse Transfer Station

(a) Necessity to go to the PWSC

We need to seek the PWSC/FC’s approval for extending the scope of the project.

(b) Authority

Finance Committee approved the upgrading of the project to Category A in March 1994 at the MOD price of $1,311.20 million. The Government Property Administrator and the Secretary for Planning, Environment and Lands have given their support to the extension of the project scope to include three floors to provide office accommodation for government users.

(c) Funding

The total cost for the project including the additional office accommodation is $789.42 million which can be met from the approved project estimate of $1311.20 million.

(d) Political assessment

The proposed change in project scope is not a politically contentious issue.

(e) Lobbying requirement

PELB considers lobbying unnecessary.

(f) Fallback option

If we encounter difficulties at the meeting, we prefer to withdraw the paper, make suitable amendments and re-submit it at a subsequent meeting.

(g) Attendance at PWSC meeting

Secretary for Planning, Environment and Lands (Mr Bowen Leung), Director of Environmental Protection (Dr S B Reed) and Principal Environmental Protection Officer (Mr Benny Y K Wong) will attend the meeting.

(h) Special consideration

If we do not put the paper to the PWSC meeting scheduled for March 1996, we will likely miss the opportunity to construct the proposed additional office floors concurrently with the Island West Refuse Transfer Station (IWRTS) project which is on-going. As a result, additional cost would be incurred in constructing the additional floors and expensive abortive work of the IWRTS project would be involved.

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