For discussion PWSC(96-97)52
on 10 July 1996

ITEM FOR PUBLIC WORKS SUBCOMMITTEE
OF FINANCE COMMITTEE

HEAD 707 - NEW TOWNS AND URBAN AREA DEVELOPMENT
Hong Kong Island and Islands Development
(Civil Engineering - Land development)
451CL - North Lantau phase IIA development in Tung Chung, reclamation works

Members are invited to recommend to Finance Committee an increase in the approved project estimate of 451CL from $530 million by $46 million to $576 million in money-of-the-day prices.

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PROBLEM
PROPOSAL
PROJECT SCOPE AND NATURE
JUSTIFICATION
FINANCIAL IMPLICATIONS
PUBLIC CONSULTATION
ENVIRONMENTAL IMPLICATIONS
LAND ACQUISITION
BACKGROUND INFORMATION
451CL - North Lantau phase IIA development in Tung Chung reclamation works

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PROBLEM

The approved project estimate of 451CL is insufficient for the works under the project.

PROPOSAL

2. The Director of Territory Development (DTD), with the support of the Secretary for Planning, Environment and Lands, proposes to increase the approved project estimate of 451CL from $530 million by $46 million to $576 million in money-of-the-day (MOD) prices.

PROJECT SCOPE AND NATURE

3. The scope of the project comprises -

1. reclamation of about 35 hectares of land in Tung Chung;
2. construction of associated seawall and drainage culverts; and
3. dredging of a navigation channel.

JUSTIFICATION

4. During the implementation of the project, we found a thicker clay layer at the sea-bed than we originally envisaged. We had to dredge deeper by about two metres past the clay layer to reach suitable founding materials for the seawall, the culverts and the Lantau line of the Airport Railway. As a result of the deeper dredging, we required extra filling to replace the additional unsuitable materials dredged away. These additional dredging and filling works account for the bulk of the increase in the cost of the project.

5. Following a review of the financial position of the project, DTD considers it necessary to increase the approved project estimate of 451CL from $530 million by $46 million to $576 million in MOD prices (see paragraph 6 below) in order to complete the remaining works. A summary of the reasons for the proposed increase of $46 million is as follows -

A comparison of the cost breakdowns of the approved and revised project estimates in MOD prices is at the Enclosure.

FINANCIAL IMPLICATIONS

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

7. The proposed increase in the approved project estimate will not give rise to additional recurrent expenditure.

PUBLIC CONSULTATION

8. As there is no change in the approved project scope, we consider public consultation unnecessary.

ENVIRONMENTAL IMPLICATIONS

9. MTRC (to whom the reclamation works have been entrusted) has included clauses in the contract requiring contractors to implement appropriate dust, noise, water and waste mitigation measures and pollution controls. The Director of Environmental Protection advises that impacts due to the additional works can be kept within the established standards. The MTRC’s monitoring results have demonstrated that, so far, the environmental impacts caused by the reclamation works in this area are within established standards and guidelines and MTRC will continue to control the environmental impacts during construction through the implementation of mitigation measures in the contract.

LAND ACQUISITION

10. The proposed increase in the approved project estimate does not require land acquisition.

Background INFORMATION

11. In January 1995, Finance Committee approved the upgrading of part of 426CL to Category A, entitled “North Lantau phase IIA development in Tung Chung, reclamation works”, as 451CL at an estimated cost of $530 million in MOD prices.

12. To avoid any complicated interfacing problems on site, we have entrusted the reclamation works to MTRC for incorporation in its Tung Chung Station and Tunnels works.

13. MTRC commenced construction of the reclamation works in November 1994 in conjunction with their works in Tung Chung. The reclamation works are scheduled for completion in December 1996.

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Enclosure to PWSC(96-97)52

451CL - North Lantau phase IIA development in Tung Chung reclamation works

2. As regards (a) (dredging and reclamation), (b) (seawall) and (c) (drainage culverts), of the total increase of $79 million -

1. $69.8 million is due to an increase in the quantities of dredging and filling works. We found a thicker clay layer at the sea-bed than we originally envisaged on the basis of the results of marine investigations carried out during the course of design. The depth of dredging had to be increased by about two metres on average to pass the clay layer and reach suitable founding materials for the seawall, culverts and the Lantau line of the Airport Railway. The quantities of dredging and filling works are about 20% and 14% respectively higher than our original estimates; and
2. $9.2 million is to cover an upward adjustment in the tender price. The tender validity period for the MTRC Tung Chung Station and Tunnels Contract (which incorporated the reclamation works) expired on 12 April 1994. Due to difficulties over the Airport Railway funding, MTRC only awarded the contract on 21 November 1994. Before the award of the contract, MTRC had agreed with the contractor that in the event that the award of the contract was later than 12 April 1994, the tender price would be adjusted to reflect the fluctuations in the prices of labour and materials from 12 April 1994 to the date of award of the contract¹ . In March 1995, MTRC agreed with the contractor, on the basis of actual trend labour and construction prices, a 1.862% uplift in the tender price to cover the increase in costs of construction due to the late award of the contract.

3. As regards (d) (project management and design services during construction), the increase of $2.4 million is in line with the increase in the cost of the works.

4. As regards (f) (contingencies), we retain $12.6 million as contingencies for the remaining works.

1 -- When we last prepared the cost estimate in the paper PWSC 1994/94 for the meeting on 14 December 1994, the information on price fluctuations was still not fully available. We intened to fund the price fluctuations from the contingencies. However it now turns out that the amount of contingencies is not adequate to cover the increase in the project costs arising from the late award of the contract and unforeseen factors.

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