For discussion PWSC(96-97)112
on 5 March 1997

ITEM FOR PUBLIC WORKS SUBCOMMITTEE
OF FINANCE COMMITTEE

HEAD 703 - BUILDINGS
Food Supply - Abattoirs, wholesale markets and other territory-wide food supply facilities
37FS - Cheung Sha Wan wholesale market complex - phase 2

Members are invited to recommend to Finance Committee the upgrading of 37FS to Category A at an estimated cost of $2,055 million in money-of-the-day prices for the provision of wholesale marketing facilities at Cheung Sha Wan.

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PROBLEM
PROPOSAL
PROJECT SCOPE AND NATURE
JUSTIFICATION
FINANCIAL IMPLICATIONS
PUBLIC CONSULTATION
ENVIRONMENTAL IMPLICATIONS
LAND ACQUISITION
BACKGROUND INFORMATION

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PROBLEM

The existing wholesale marketing facilities for fruit and poultry at Yau Ma Tei Fruit Market and Cheung Sha Wan Temporary Wholesale Poultry Market are unable to cope with the current volume of trade and are causing serious environmental nuisance in their vicinity.

PROPOSAL

2. The Director of Architectural Services (D Arch S), with the support of the Secretary for Economic Services, proposes to upgrade 37FS to Category A at an estimated cost of $2,055 million in money-of-the-day (MOD) prices for the provision of wholesale marketing facilities at Cheung Sha Wan.

PROJECT SCOPE AND NATURE

3. This project will form part of the second phase of the Cheung Sha Wan Wholesale Market Complex and upon completion, will provide wholesale marketing facilities handling local and imported produce, serving primarily Kowloon and the New Territories. The facilities include -

1. a wholesale fruit market providing 332 stalls on the first floor; and
2. a wholesale poultry market providing 95 stalls on the second floor for trading of both live and chilled poultry.

We plan to include the project as part of a private development on the site to be disposed of through open tendering. We will require the developer to construct two floors¹ of wholesale markets under phase 2 of Cheung Sha Wan Wholesale Market Complex in accordance with the requirements specified by the Government and to make necessary modifications to the already completed markets under phase 1² of the Complex so as to ensure that the phase 2 wholesale market facilities can function effectively.

4. The modification works to phase 1 (which have to be completed before commissioning of phase 2) include installing pumps, laying signal and electricity cables and installing control room equipment. We will know the details of the modifications when the construction plan for phase 2 has been submitted. We will require tenderers to submit an interfacing programme showing in detail how they intend to minimise any disruption to the operation of the phase 1 markets.

JUSTIFICATION

5. Consumption of fresh fruit and poultry has increased significantly over the past decade, as indicated by the following data -

Demand for fresh fruit is high and is likely to increase in line with growing population and income. Demand for poultry products may also be expected to grow in line with population. Demand for chilled poultry products is expected to continue gradually to replace the demand for live poultry. New and expanded market facilities will therefore be necessary to meet the anticipated growth in demand.

6. The noise, traffic congestion and environmental hygiene problems generated by Yau Ma Tei Fruit Market and Cheung Sha Wan Temporary Wholesale Poultry Market have been the source of complaints from nearby residents. To address these problems, the Government plans to relocate both markets to the site reserved for phase 2 of the Cheung Sha Wan Wholesale Market Complex. Relocation of the markets will significantly improve the living environment for the residents concerned. The new markets will be able to cope with the increased volume of trade and enable better management and efficiency of operation.

7. The Government’s original intention was to build the two markets as a stand-alone public works project. However, in order to maximise the site on which the markets are to be located, we have adopted a proposal from the Port Development Board to develop the phase 2 site to accommodate mid-stream container-handling facilities in addition to the two wholesale markets. In April 1994, we invited expressions of interest from the private sector in building a combined-user development. We received four detailed expressions of interest. After careful assessment, we have decided to tender out the phase 2 site for private development, comprising mid-stream container handling facilities, wholesale markets for fruit and poultry and industrial-office accommodation, with the Government paying the developer for the cost of the wholesale market component. The Government will also be responsible for the furniture and equipment required to fit out the markets. The developer will be responsible for the costs of the detailed design and construction and, upon completion, the management of all components of the complex, other than the two wholesale markets.

FINANCIAL IMPLICATIONS

8. We estimate the cost of the wholesale market component of the combined-user development to be similar to the estimated capital cost of a stand-alone wholesale market designed and constructed by Government, which is $2,055 million in MOD prices, made up as follows -

9. We will require tenderers to submit one sum for the land premium and a separate figure, with supporting cost data, for the construction cost of the phase 2 markets. We will then evaluate the tenders received having regard to the merits of the development proposals and the net revenue to the Government - that is, the land premium for the phase 2 site less the construction cost of the markets. D Arch S will examine the figure quoted for the construction cost of the phase 2 to satisfy himself that it is both reasonable and well supported. This arrangement will ensure that the developer has an incentive to quote a realistic and competitive figure for the cost of constructing the markets and that the Government pays a fair price for the construction of the markets. Given the high value of the works and taking into account concerns expressed by Members on similar entrustment proposals on earlier occasions, we think that the arrangement now proposed is more appropriate than the alternative approach under which we entrust the government works to a private developer at a pre-determined project cost.

10. Having regard to the large sum involved, we will pay the successful tenderer in stages upon completion of specified construction "milestones" ³ of the project. Taking this into account, we expect to phase the expenditure as follows -

11. We estimate the additional annually recurrent expenditure for the project to be $23.509 million.

PUBLIC CONSULTATION

12. We consulted the Sham Shui Po and Yau Tsim Mong District Boards on the combined-user development proposal in October 1995. The Sham Shui Po District Board supported the proposal in principle. The Yau Tsim Mong District Board also supported the proposal and urged early completion of the project so as to allow earlier relocation of the Yau Ma Tei Fruit Market. We also consulted wholesale market users and the Marketing Sub-committee of the Advisory Committee on Agriculture and Fisheries on the proposal in November 1995 and January 1996 respectively. They raised no objection to the proposal, but expressed concern that potential problems arising from the elevated market design and disruption to the markets in phase 1 from modification works should be adequately addressed. We issued an information paper on the proposed development to the Legislative Council Economic Services Panel in February 1996. We have not received any comment from Panel Members.

ENVIRONMENTAL IMPLICATIONS

13. Consultants engaged by the Director of Territory Development have conducted an Environmental Impact Assessment for various developments in the West Kowloon Reclamation under the "West Kowloon Reclamation, Comprehensive Traffic Analysis Review and Environmental Impact Assessment Study" which included the proposed combined-user development. The findings indicated that noise, odour and liquid waste disposal would be the major environmental concerns arising from the development.

14. The Director of Lands will include in the Technical Schedule of the Tender Document all the environmental mitigation measures recommended by the Consultant hired by the Territory Development Department. We will ensure that the successful tenderer will implement all these measures to comply with relevant regulations, standards and guidelines. The developer is also bound by the lease to comply with existing pollution control ordinances. As regards short term impacts during construction, we will ensure that the developer will control noise, dust and site run-off nuisances to comply with the established standards and guidelines through the implementation of appropriate mitigation measures in the relevant contracts.

LAND ACQUISITION

15. The project does not require land acquisition. A site next to the existing Cheung Sha Wan Wholesale Market phase 1 has been reserved for this purpose.

BACKGROUND INFORMATION

16. We upgraded 37FS to Category B in August 1991. On 22 November 1991, Finance Committee approved upgrading part of 37FS to Category A, re-titled 38FS "Cheung Sha Wan Wholesale Market Complex - phase 1", at an estimated cost of $969 million as an Airport Core Programme⁴ .

17. We completed the construction of 38FS in September 1993. It provides wholesale market facilities for vegetables, fresh water fish and eggs as well as a market for the Fish Marketing Organization.

18. We intend to invite private developers in mid 1997 to tender for the construction and implementation of the whole development for phase 2. We expect the successful bidder to start the construction works in late 1998 with the wholesale market component of the project being completed by the end of the year 2000.

(HH437)

1 -- The total area of these two floors will be about 121400 square meters. Based on the estimated total project cost of $2,055 million, the unit cost per square metre is about $16,930.
2 -- Please see paragraphs 16 and 17 for details of Phase 1.
3 -- Milestones are points at which an agreed amount of work has been satisfactorily completed.
4 -- We reduced the approved project estimate of 38FS from $969 million to $559 million with 17 other public works projects under the Airport Core Programme in April 1994. We issued an information note (PWSC(I)1994/1) in April 1994 to inform Members of this change.

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