For discussion PWSC(95-96)91
on 7 February 1996

ITEM FOR PUBLIC WORKS SUBCOMMITTEE
OF FINANCE COMMITTEE

CAPITAL WORKS RESERVE FUND
HEAD 706 - HIGHWAYS
Block allocations

Members are invited to recommend to the Finance Committee to approve the allocation of $632.65 million for block allocations under Head 706 for 1996-97 together with the creation of a new block allocation Subhead 6100TX, and to delegate to the Financial Secretary the power to authorise expenditure from the new block allocation.

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PROBLEM
PROPOSAL
JUSTIFICATION
FINANCIAL IMPLICATIONS
BACKGROUND
Block allocations under Head 706 Key expenditure items in 1996-97
Ambits of the current block allocations for 1995 - 96

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PROBLEM

Various block allocations under Head 706 need funding in 1996-97 for existing and new projects to proceed on schedule. The present system of block allocations is administratively cumbersome and leads to underspending.

PROPOSAL

2. We propose a single block allocation, 6100TX, Highway works, studies and investigations for items selected in Category D of the Public Works Programme with a total allocation of $632.65 million for 1996-97 under Head 706. The new subhead, which replaces existing block allocation subheads 6001TX to 6010TX, is for expenditure on highway, footpath, public transport and railway works of a capital expenditure nature, subject to a maximum ceiling of expenditure of not more than $15 million per Category D item. These would include but not be restricted to works covering highways, railways and railway development, bridges, subways and other structures, footways, vehicle parking, street lighting, roadside slopes, road resurfacing (including joint replacement), road reconstruction and rehabilitation, traffic engineering, as well as feasibility studies and site investigations in respect of highway projects. Items may also be included in Category D to cover the costs of preliminary feasibility studies and investigations to enable highway projects to be included in Category C of the Public Works Programme, and consultants’ fees and charges for feasibility investigations and design (including preparation of tender documents) of highway projects in Category B or (subject to the Secretary for the Treasury’s approval) Category C of the Public Works Programme. Urgent payments in respect of minor outstanding works to a value not exceeding $100,000 on any highway projects that have been substantially completed and for which there is no subhead in the Fund estimates may also be charged to this subhead. Approval will be sought from the Financial Secretary to reinstate such projects in the Fund estimates during the year and, once this approval has been obtained, expenditure will be transferred to the original project.

3. Enclosure 1 sets out the allocation for each existing block allocation in 1995-96 as compared to the amount proposed under the new block allocation for 1996-97. As with other block allocations under the Capital Works Reserve Fund (CWRF), we also propose that the Finance Committee delegate to the Financial Secretary the power to authorise expenditure under the new subhead¹ .

JUSTIFICATION

4. The Finance Committee approves expenditure under block allocations on the basis of the forecast of total expenditure required for the next financial year, not the total estimated cost of the works to be carried out, the implementation of which can extend beyond the financial year in question. It is necessary for the Finance Committee to approve funds for each of the block allocations under Head 706 for 1996-97 in order to enable the government to undertake various highways works in the next financial year, including meeting payments carried forward from the present and earlier financial years².

5. The proposed total allocation for the new Head 706 block allocation for 1996-97 is about 4% less than the allocation for the existing subheads in 1995-96. We have drawn up the allocation proposed for 1996-97 on the basis of expenditure patterns, existing commitments and projects expected to be undertaken in the coming financial year. Enclosure 2 sets out the key expenditure items in 1996-97.

6. We have also taken the opportunity in this year's block allocation exercise to reduce the number of block allocations under Head 706. The creation of new block allocation has usually taken place on an ad hoc basis in response to a particular need at the time. Underspending is a problem because the procedures governing expenditure under the CWRF prevent us from automatically transferring readily available funds under one block allocation to another block allocation where additional funds are urgently required and then, if necessary, subsequently seeking additional funds from the Finance Committee via PWSC should total expenditure for the financial year in respect of all block allocations look likely to be exceeded. Total expenditure on block allocations under Head 706, since 1992-93, is shown below -

Total expenditure on Head 706 block allocations

# Forecast outturn for 1995-96

7. We usually find ourselves only being able to apply to the Finance Committee via the PWSC to increase the permitted level of expenditure under the block allocation requiring the additional funds, leaving the amounts available under other block allocations unchanged. This is particularly true in the early part of the financial year when we are still uncertain of the likely total year expenditure under each block allocation. By combining the block allocations into one, we can overcome these problems.

8. In addition, the present variety of financial controls on maximum levels of expenditure on any single item depend on the individual scopes of each block allocation. This is confusing. We propose to introduce only one limit for the new block allocation, that being a maximum expenditure ceiling of not more than $15 million per item³. Above that ceiling we will seek the specific approval of the Finance Committee via the PWSC in the form of a separate project for upgrading to Category A in the Public Works Programme. We will also place all items funded under the new block allocation in Category D of the Public Works Programme so as to be able to impose uniform administrative procedures.

FINANCIAL IMPLICATIONS

9. The total proposed allocation for the new block allocation for 1996-97 under Head 706 is $632.65 million. There are no additional annually recurrent expenditure implications arising from the proposals.

BACKGROUND

10. The CWRF finances eleven different heads of expenditure covering the Public Works Programme, the acquisition of land, capital subventions and major systems and equipment, and computerisation. The block allocations under Head 706 provide for expenditure on minor highways, railways, bridge and traffic engineering works, including roadside slope works and consultants’ design fees and charges, including site investigations and consultancy fees for larger projects in the capital works programme. The ambits of the current block allocations for 1995-96 are set out in Enclosure 3. We allow for a certain level of over-commitment on the sums approved by the Finance Committee in order to cater for expenditure on items which can only start towards the end of the financial year and part of the expenditure must carry forward to the next financial year or for items where we forecast the full amount of expenditure to be spread over several financial years.

1 -- As provided for under the Resolution establishing the CWRF, the Financial Secretary may delegate his power of administration to other officers.
2 -- Even relatively small projects can take more than one year to complete. Most works contracts for example require a one year's maintenance period on completed works. Only after the maintenance period is completed do we release the final amount of money due to the contractor.
3 -- We do not allow larger projects, costing more than $15 million each, to be broken down into phases or stages so as to circumvent the need to seek Finance Committee's approval. Finance Committee has previously delegated to the Secretary for the Treasury the power to authorize expenditure on Category D items up to a maximum ceiling of $15 million per item.

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Enclosure 1

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Enclosure 2 to PWSC(95-96)91

Block allocations under Head 706 Key expenditure items in 1996-97

Project Description	Estimate 1996-97 $'000
Junction improvements at Des Voeux Road West/Western Street	8,000
Directional signing for Western Harbour Crossing in the territory	7,200
Bus only lane on southbound approach to Tate's Cairn Tunnel toll booth	7,900
Proposed footbridge along Choy Yee Bridge, Tuen Mun	5,000
Skid resistance improvement at J/o Fung Mo Street/Tung Tau Tsuen Road	600
Expressway boundary fences for Routes 1 and 2	1,923
Improvement to J/o Ma Tong Road/Sai Yu Street, Yuen Long	680
Reconstruction of Pak Fuk Road between House No. 1 and Healthy Street Central	1,200
Reconstruction of Ferry Street between Jordan Road and Pak Hoi Street	2,040
Reconstruction of Wing Hong Street between Tung Chau West Street and Yee Kuk Street	700
Flyover at J/o Pok Fu Lam Road and Sassoon Road - investigation and detailed design	6,000
Resurfacing of Tai Po Road between Nam Cheong Street and Poplar Street	500

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Enclosure 3 to PWSC(95-96)91

Ambits of the current block allocations for 1995 - 96

Block allocation Subhead	Title	Ambit
6001TX	Minor investigations for highways projects	For site investigation works costing $400,000 or less in respect of each site.
6002TX	Minor outstanding highway projects	An arbitrary amount which may be used initially for urgent payments in respect of minor outstanding works to a value not exceeding $100,000 on any highway project which has been substantially completed and for which there is no subhead shown in the Fund estimates. Approval will be sought from the Financial Secretary under delegated power to reinstate such projects in the Fund estimates during the year and, once this approval has been obtained, expenditure will be transferred to the original project.
6003TX	Minor highways engineering works selected from items in Category D of the Public Works Programme	For minor highways works selected from Category D of the Public Works Programme, including improvements to existing facilities throughout the territory.
6004TX	Minor roads and bridges	For minor reconstruction, improvements (street widening, provision of carparks, lay-bys, bus bays and traffic islands and application of anti-skid surfacing to existing roads) and construction of footpaths throughout the territory.
6005TX	Traffic engineering works	For installation of and improvements to street lighting on existing roads, footbridges, pedestrian tunnels, covered walkways, bus termini and public transport interchanges and in villages and squatter areas in the New Territories; purchase and installation of parking meters and pedestrian and vehicular aids, and Mass Transit Railway traffic management and associated works.
6006TX	Works contingent on development	For roadworks, including ancillary minor drainage works, to be carried out in conjunction with roadworks contingent on development.
6007TX	Road reconstruction and rehabilitation	For reconstruction and rehabilitation of existing roads, highways, bridges and structures.
6008TX	Consultants' design fees and charges and major in-house investigations for highways projects	For consultants' fees and charges for feasibility investigations and design, including site investigations and preparation of tender documents, and major in-house site investigations costing more than $400,000 in respect of each site for highways projects in Category B or (subject to the Secretary for the Treasury's approval) Category C of the Public Works Programme.
6009TX	Project feasibility studies and minor investigations for highways projects	For preliminary feasibility studies and minor investigations to enable highways projects to be included in Category C of the Public Works Programme.
6010TX	Roads resurfacing, joint replacement and roadside slope works	For major road resurfacing, road joint replacement and improvements/stabilisation works to roadside slopes throughout the territory.

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Last Udpated on 8 December 1998