For discussion PWSC(96-97)86
on 8 January 1997

ITEM FOR PUBLIC WORKS SUBCOMMITTEE
OF FINANCE COMMITTEE

HEAD 704 - DRAINAGE
Environmental Protection - Sewerage and sewage treatment
100DS - Hong Kong Island South sewerage improvements and sewage treatment and disposal facilities

Members are invited to recommend to Finance Committee an increase in the approved project estimate of 100DS from $663.5 million by $172 million to $835.5 million in money-of-the-day prices.

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PROBLEM
PROPOSAL
PROJECT SCOPE AND NATURE
JUSTIFICATION
FINANCIAL IMPLICATIONS
PUBLIC CONSULTATION
LAND ACQUISITION
BACKGROUND INFORMATION
100DS - Hong Kong Island South sewerage improvements and sewage treatment and disposal facilities

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PROBLEM

The approved project estimate of 100DS is insufficient for the works under the project.

PROPOSAL

2. The Director of Drainage Services (DDS), with the support of the Secretary for Planning, Environment and Lands, proposes to increase the approved project estimate of 100DS from $663.5 million by $172 million to $835.5 million in money-of-the-day (MOD) prices.

PROJECT SCOPE AND NATURE

3. The project involves provision of sewerage improvements and sewage treatment and disposal facilities to the Shouson Hill, Deep Water Bay, Repulse Bay, Middle Bay, South Bay, Chung Hom Kok, Ma Hang, Tai Tam, Red Hill, Stanley and Shek O areas. The scope of the project comprises the construction of -

1. a sewage pumping station at Repulse Bay and rising mains to Aberdeen;
2. a sewage treatment works, outfall and intermediate pumping station at Stanley;
3. a sewage screening plant, outfall and intermediate pumping stations at Shek O;
4. public sewerage reticulation at Deep Water Bay, Repulse Bay, Middle Bay, South Bay, Chung Hom Kok, Stanley, Tai Tam and Shek O; and
5. property connections resulting from the sewerage reticulation works.

JUSTIFICATION

4. Following a review of the financial position of the project, DDS considers it necessary to increase the approved project estimate of 100DS from $663.5 million by $172 million to $835.5 million in MOD prices (see paragraph 10 below) in order to complete the works.

5. The approved project estimate of $663.5 million was in December 1991 prices and the original target completion date of the project was June 1994. However, it is now estimated that the project will only complete by December 1998. The increase in the project estimate we now seek is mainly a result of inflation in construction cost and associated supervision cost since December 1991 and an allowance for inflation for the period up to December 1998.

6. The reasons for the belated completion of the project are -

1. we have spent about two years from January 1992 to January 1994 to resolve unexpected objections raised by local residents on the Shek O sewerage scheme which was gazetted under the Roads Ordinance and the Foreshore and Sea-bed (Reclamations) Ordinance; and
2. we also spent about two and a half years from July 1993 to January 1996 to carry out planning and design work to determine the exact connection points for the property connection works which are required under the Water Pollution Control (Sewerage) Regulations enacted in June 1994.

7. We had completed most of the sewerage improvement works except the property connections by end 1996. In accordance with the contract conditions, we have paid the contractors based on the construction labour and material index for the years between 1992 and 1996.

8. A summary of the proposed increase in the project estimate is as follows -

9. A comparison of the cost breakdowns of the approved project estimate (at December 1991 prices) and the revised project estimate (at December 1995 prices) is at the Enclosure.

FINANCIAL IMPLICATIONS

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

11. We have derived the MOD estimate on the basis of the Government’s forecasts of trend labour and construction prices for the period 1996 to 2000.

12. The proposed increase in the approved project estimate will not give rise to additional recurrent expenditure and will have no impact on sewage charges.

PUBLIC CONSULTATION

13. As there is no change in the approved project scope, we consider that it is not necessary to carry out any further public consultation.

ENVIRONMENTAL IMPLICATIONS

14. We completed the Environmental Impact Assessments for the project in 1992 and confirmed that environmental impacts arising from the project can be controlled to within established standards/guidelines. We have incorporated the recommended mitigation measures and monitoring programme in the contract documents to mitigate noise, air and water quality impacts during the construction and operational stages. There will be no additional impact as a result of this proposed increase in the approved project estimate.

LAND ACQUISITION

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

BACKGROUND INFORMATION

16. On 13 July 1990, we upgraded 100DS to Category A at an estimated cost of $467.5 million for the implementation of long term improvement measures for the coastal waters south of Hong Kong Island. On 21 February 1992, the Finance Committee approved an increase in the approved project estimate from $467.5 million by $196 million to $663.5 million to account for increases in labour and material costs for the period between July 1990 and December 1991 and to meet the cost of additional works to suit site conditions and additional reclamation at Stanley.

17. We started the works in February 1991. Up to July 1996, we had completed the majority of the works in Deep Water Bay, Repulse Bay, Middle Bay, South Bay, Chung Hom Kok, Stanley, Tai Tam and Shek O. The outstanding works under the project comprise the property connections to individual developments. We plan to complete these by December 1998.

(JJ151)

1 -- This is the actual expenditure incurred on the project up to 31 March 1996.

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Enclosure to PWSC(96-97)86

100DS - Hong Kong Island South sewerage improvements and sewage treatment and disposal facilities

A comparison of the approved project estimate at December 1991 prices and the revised project estimate at December 1995 prices is as follows -

2. As regards (a) (sewage pumping station at Repulse Bay and rising mains to Aberdeen), (b) (sewage treatment works and outfall at Stanley and intermediate pumping station at Stanley Market), (c) (sewage screening plant and intermediate pumping stations at Shek O), (d) (public sewerage reticulation at Deep Water Bay, Repulse Bay, Middle Bay, South Bay, Chung Hom Kok, Stanley, Tai Tam and Shek O) and (e) (property connections resulting from the sewerage reticulation works), the increases of $9.92 million, $46 million, $8.63 million, $26.88 million and $9.35 million are due to increased construction costs as a result of inflation over the years and the belated completion of the project. We had substantially completed items (a) to (d) in different stages between mid 1994 and end 1996. We commissioned the Stanley sewage treatment works and outfall in July 1995. We intend to commission the Shek O sewage screening plant in March 1997. for Shek O screening plant is due to objections raised by the Shek O residents on the screening plant site. If we exclude the inflation portion due to unforeseen delays caused by objections of Shek O residents and by unexpected large quantity of hard rock excavations for sewerage works at Deep Water Bay, Repulse Bay, Middle Bay and South Bay, the net increase of inflation for carrying out items (c) and (d) according to the original programme would be $3.63 million and $22.88 million respectively. We have started the property connections work since January 1996. We aim to complete the works by December 1998. As a reference, the Civil Engineering Works Index increased by 33.3% between December 1991 and December 1995.

3. As regards (f) (consulting engineers' fees (construction stage)), the increase of $1.8 million for payment to consultants on scale fees basis is in line with the increased costs of the works.

4. As regards (g) (resident site staff costs), of the total increase of $35.7 million -

1. $17.8 million is due to salary revisions of the resident site staff in line with the increases of civil service salaries between December 1991 and December 1995. As a reference, the salaries of civil servants in the middle band ($12,460 to $38,210 per month in 1995-96) increased by 49.5% between 1991-92 and 1995-96;
2. $2.3 million is due to the increase in the resident site staff cost as a result of extended time arising from the unexpected large quantity of hard rock encountered during trench excavations for the sewerage works at Deep Water Bay, Repulse Bay, Middle Bay and South Bay areas;
3. $9.4 million is due to the increase in the resident site staff cost as a result of the extra time needed to carry out planning and design work to determine the exact connection points for the property connection works required under the new Water Pollution Control (Sewerage) Regulation enacted in June 1994; and
4. $6.2 million is due to the higher than expected resident site staff cost.

5. As regards (h) (contingencies), of the retention of $60.8 million -

1. $50 million is allowed for the settlement of likely contractual claims and arbitration; and
2. $10.8 million is allowed as contingencies for the remaining works.

(JJ151)

1 -- This works have been completed.

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