For discussion
on 2 December 1998
PWSC(98-99)47
ITEM FOR PUBLIC WORKS SUBCOMMITTEE OF FINANCE COMMITTEE
HEAD 709 - WATERWORKS
Water Supplies - Combined fresh/salt water supplies
62WC - Water supply to West Kowloon reclamation - stage 1
Members are invited to recommend to Finance Committee an increase in the approved project estimate of 62WC from $237.5 million by 34.1 million to $271.6 million in money-of-the-day prices.
PROBLEM
The approved project estimate of 62WC is insufficient to meet the costs under the project.
PROPOSAL
2. The Director of Water Supplies (DWS), with the support of the Secretary for Works, proposes to increase the approved project estimate of 62WC from $237.5 million by $34.1 million to $271.6 million in money-of-the-day (MOD) prices.
PROJECT SCOPE AND NATURE
3. The approved scope of works under 62WC comprises -
- construction of a fresh water service reservoir with a capacity of 40 000 cubic metres at Shek Kip Mei;
- conversion of the Yau Ma Tei service reservoir from a fresh water service reservoir to a salt water service reservoir with a capacity of 23 800 cubic meters;
- laying of 44 kilometres of fresh water and salt water mains with diameters ranging from 100 to 1 200 millimetres; and
- construction of 500 metres of pipe subways of size 2.8 metres by 3.8 metres in the form of a rectangular concrete culvert.
4. We have completed most of the works under this project except the construction of the fresh water service reservoir (paragraph 3(a) above) and its associated mainlaying work, which will be completed in February 1999.
JUSTIFICATION
5. The approved project estimate of 62WC is $237.5 million at the October 1992 constant price level. Construction of the fresh water service reservoir mentioned in paragraph 3(a) above and some sections of mainlaying works mentioned in paragraph 3(c) above were carried out by Water Supplies Department (WSD) under a standard remeasurement contract with provision for inflation adjustments because the exact quantities of mainlaying works would vary with the actual ground conditions. This contract included a provision for inflation adjustments as the contract period exceeded 12 months. Conversion of the Yau Ma Tei service reservoir mentioned in paragraph 3(b) above was carried out by WSD under a standard remeasurement contract without provision for inflation adjustments as the contract period did not exceed 12 months.
6. In order to minimise traffic disruption and to avoid interface problems arising from different contractors working on the same site, we have entrusted most of the mainlaying works and construction of pipe subways described in paragraphs 3(c) and 3(d) above to the Territory Development Department (TDD) and the Highways Department (HyD) under five separate contracts. All the entrusted contracts were also awarded on a standard remeasurement basis but with no provision for adjustments due to inflation.
7. To tie in with the roadworks construction programme in the West Kowloon reclamation areas, we awarded all the works contracts in the period between April 1993 and July 1995. Due to inflation during the pre-tender stage1 , the total tender prices for modifications to the Yau Ma Tei salt water reservoir, the mainlaying works and the construction of the pipe subways was $11.39 million over the original estimates. Nevertheless, the project contingency ($21.6 million) within the original APE was sufficient to meet this increase at the time of the tender awards.
8. During construction, DWS found that there was a need to change the alignment and the depth of watermains to suit unexpected site conditions and existing underground utilities. This resulted in unexpected increases in the quantities of works and the construction costs. DWS reviewed the financial position of the project in June 1998 and concluded that the total funding available under the APE would be exhausted by December 1998 and additional funding would be necessary to complete the project. Hence, DWS proposes to increase the APE of 62WC from $237.5 million by $34.1 million to $271.6 million. A summary of the proposed increase is as follows -
| Factor | Amount
($ million) | %
|
|---|
| (a) Fresh water supply system | | 19.30 | 56.6
|
|
9. A comparison of the cost breakdown of the original approved project estimate and the revised project estimate is at the
Enclosure.
FINANCIAL IMPLICATIONS
10. Subject to approval, we will phase the remaining expenditure of the project as follows -
| Year | $ million
(Dec 1997) | Price
adjustment
factor | $ million
(MOD)
|
|---|
| up to 31.3.1998 | 230.160 | - | 230.160
|
| 1998 - 99 | 22.334 | 1.06000 | 23.674
|
| 1999 - 2000 | 10.756 | 1.12890 | 12.142
|
| 2000 - 01 | 4.700 | 1.19663 | 5.624
|
| ________ | | ________
|
| 267.950 | | 271.600
|
| ________ | | ________
|
11. We derived the MOD estimates on the basis of Government's latest forecast of trend labour and construction prices for the period between 1998 and 2001.
12. The proposed increase in the approved project estimate will not give rise to additional annually recurrent expenditure.
13. The proposed increase of $34.1 million in the project estimate by itself would lead to an increase in water charges by 0.01%
2 in real terms by 2001.
PUBLIC CONSULTATION
14. We do not consider it necessary to carry out public consultation on the proposed increase in the approved project estimate.
ENVIRONMENTAL IMPLICATIONS
15. We have completed most of the works under this project and there are no additional environmental implications involved. For the remaining works, we will continue to control dust, noise and site run-off nuisances during construction to comply with established standards and guidelines by implementing mitigation measures in relevant works contracts.
LAND ACQUISITION
16. Completion of the project works will not involve any additional land acquisition.
BACKGROUND INFORMATION
17. On 16 April 1993, Finance Committee approved the upgrading of part of
58WC to Category A as
62WC at an estimated cost of $237.5 million at October 1992 prices for constructing a new fresh water and salt water supply system to meet the water demand generated by the proposed developments on the West Kowloon reclamation by 2001. We commenced the works in January 1994 for completion in February 1999.
--------------------------------------
Works Bureau
November 1998
(PWSC0039/WIN2)
Enclosure to PWSC(98-99)47
62WC - Water Supply to West Kowloon reclamation - stage 1
A comparison of the original approved project estimate at October 92 prices and the revised project estimate in MOD prices is as follows -
| Approved
Estimate
(Oct 92
prices) | Revised
Estimate
(MODprices) | Increase in
Project
Estimate
(MOD prices)
|
|---|
| $ million | $ million | $ million
|
|---|
| (a) Fresh water supply system
|
|
2. As regards (a)(ii) (Mainlaying for the fresh water supply system), of the increase of $26.49 million -
- $6.79 million is due to an increase in the tender prices over the original estimate (at October 1992 prices) in construction costs for the fresh water mainlaying works under the various works contracts. These contracts were awarded at different times between April 1993 and July 1995. As a reference, the increase in the CEWI between October 1992, time of the original cost estimate, and April 1993 and July 1995 were 4.7% and 18.5% respectively;
- $1.57 million is for price fluctuation payments paid under a WSD contract for the fresh water mainlaying works completed during the period between February 1995 and December 1997. As a reference, the CEWI increased by 24.3% during the period; and
- $18.13 million is due to the increase in quantities of works arising from a change in alignment and depth of the fresh water mains to suit unexpected site conditions and the corresponding increase in pipe fittings and bend blocks.
3.
As regards (b)(i) (Salt water supply system - modification of Yau Ma Tei salt water service reservoir), the increase of $0.46 million is due to an increase in the tender prices over the original estimate (at October 1992 prices) for the construction costs of the modifications to the Yau Ma Tei salt water service reservoir.
4.
As regards (b)(ii) (Salt water supply system - mainlaying), of the increase of $10.16 million -
- $3.68 million is due to an increase in the tender prices over the original estimate (at October 1992 prices) for the salt water mainlaying works under various works contracts; and
- $6.48 million is to cover the increase in cost of the laying of salt water mains entrusted to TDD due to the increase in quantities of works arising from changes in the alignment and depth of the salt water mains to suit unexpected site conditions and the corresponding increase in pipe fittings and bend blocks.
5.
As regards (c) (Construction of pipe subways), of the increase of $12.47 million -
- $0.46 million is to cover an increase in the tender price over the original estimate for the construction of pipe subways entrusted to Highways Department. As a reference, the CEWI increased by 4.7% between October 1992, when we prepared the original estimate, and April 1993, when we awarded the contracts; and
- $12.01 million is to cover the increase in cost for the construction of five additional pipe subways under the West Kowloon Expressway and the increase in the quantities of works arising from a change in alignment of the pipe subways to suit unexpected site conditions.
6.
As regards (d) (Consultant fees and expenses), of the increase of $9.31 million -
- $3.38 million is due to an increase in consultants' fees as a result of the increase in construction costs; and
- $5.93 million is to cover the increase in cost related to the resident site supervisory staff charges due to the extended construction period.
7.
As regards (e) (Contingency), of the decrease of $17.6 million --
- $11.39 million is to cover the increase in tendered prices of various contracts over the original estimate due to inflation as mentioned in paragraphs 2(a), 3(a) and 4(a) above; and
- $6.21 million is to cover part of the increase in construction costs due to increase in quantities of works arising from a change in alignment and depth of water mains to suit unexpected site conditions.
(PWSC0039/WIN2)
1 As a reference to the magnitude of the pre-tender inflation, the Civil Engineering Works Index(CEWI) increased by 4.9% between October 1992 and April 1993, and by 18.5% between October 1992 and July 1995. The CEWI is a quarterly index compiled by the Civil Engineering Department as a means of relating the costs of civil engineering works at current prices to those at 1980. The CEWI is based on the labour and various material costs indices published monthly by the Census & Statistics Department.
2 The increase in water charges is calculated on the assumption that the demand remains static during the period from 1998 to 2001 and the amount of Government subsidy to the Waterworks operations is to be contained at the present level.
