PWSC(1999-2000)15
For discussion
on 26 May 1999
ITEM FOR PUBLIC WORKS SUBCOMMITTEE
OF FINANCE COMMITTEE
HEAD 704 - DRAINAGE
Environmental Protection - Sewerage and sewage treatment
| 312DS | - | Strategic Sewage Disposal Scheme Stage I:
construction supervision of the main works |
Members are invited to recommend to Finance Committee an increase in the approved project estimate of 312DS from $118.2 1million by $98.8 million to $217.0 million in money-of-the-day prices.
PROBLEM
The approved project estimate (APE) of 312DS is insufficient to cover the costs of construction supervision of the main works of the Strategic Sewage Disposal Scheme (SSDS) Stage I.
PROPOSAL
2. The Director of Drainage Services (DDS), with the support of the Secretary for Planning, Environment and Lands, proposes to increase the APE of 312DS from $118.2 million by $98.8 million to $217.0 million in money-of-the-day (MOD) prices. The proposed increase of $98.8 million represents an increase of about 16% over the original estimated cost of $610.0 million for construction supervision of the main works of the SSDS Stage I.
PROJECT SCOPE AND NATURE
3. 312DS covers the expenditure on the construction supervision of 12 project items created under the Capital Works Reserve Fund (CWRF) for the outstanding main works of the SSDS Stage I (except the eastern tunnels) after the closure of the Sewage Services Trading Fund (SSTF) on 31 March 1998. These items and their respective APEs are listed at Enclosure 1.
JUSTIFICATIONS
4. The construction supervision of the main works of SSDS Stage I was originally funded by the SSTF under 018SS with an APE of $610.0 million in MOD prices. As preparation was made to wind up the SSTF, we estimated that up to 31 March 1998, $491.8 million would have been spent. On the basis of this estimate, Finance Committee on 27 February 1998 approved the inclusion of 312DS in Category A under the CWRF with an APE of $118.2 million in MOD prices to fund the costs of the construction supervision of the outstanding main works of SSDS Stage I, with the exception of the supervision of two contracts for the four eastern tunnels, which is covered by project item 286DS.
5. DDS prepared the current project estimate of 312DS in late 1997 based on the forecast completion dates of the works available at that time. These indicated that the main works covered by the project item would be completed by August 1999. This was before the problems with the mucking system left by the first contractor and the extent of poor ground conditions in the Tsing Yi to Stonecutters tunnel route were known. We now envisage that the whole of the main works covered by 312DS will be substantially completed in November 2000. It is therefore necessary to retain some resident site staff to supervise the works over the longer construction period. In addition, the consultants fee for the construction stage of the contracts will be increased as a result of the extended period of supervision of the contracts.
6. The main reasons for the extensions and delays in completion of the works involved are :
- the completion works for the two western tunnels has been delayed by the need to replace the faulty mucking system left behind by the default contractor and by poor ground conditions;
- the forfeiture of the two tunnel contracts in December 1996 has caused knock-on disruptions on the completion and commissioning of other main works contracts. The completion dates for six contracts need to be extended to various degrees. The details of the impacts on each of the contracts are summarized at Enclosure 2; and
- the completion of the works related to SSDS Stage I chemical dosing facilities, including works essential for the testing and commissioning of the facilities, has been delayed due to poor performance of the contractor.
The original and revised completion dates of the works are listed at Enclosure 2 with brief reasons for the extensions and delays.
7. Following a review of the financial position of 312DS and the construction supervision necessary for the completion of the main works, we consider it necessary to increase the APE from $118.2 million by $98.8 million to $217.0 million in MOD prices (see paragraph 10 below) to cover the total cost of the construction supervision under the project item. A summary breakdown of the proposed increase of $98.8 million is as follows:-
| Factor | Amount of
Increase/
(Decrease)
($ million) | Amount of
Increase/
(Decrease)
in MOD prices
($ million)
| % Increase/
(Decrease)
|
|---|
(a) consultants fees
for construction supervision in
relation to:
| 12.0
| 12.0
| 12.1
|
|
|
The contingencies amount allowed in the original project estimate has been reviewed and reduced in view of the higher degree of estimation certainty at the current stage. The proposed net increase of $98.8 million in MOD prices represents an increase of about 16% over the original APE of $610.0 million under 018SS. A comparison of the cost breakdowns of the APE and the revised project estimate for 312DS, together with the breakdown of the additional costs attributable to the extensions and delays explained in paragraph 6 above, is at Enclosure 3 for reference. In addition, a breakdown of the estimates for consultants' fees is also at Enclosure 4.
8. Up to end March 1999, the total expenditure on the SSDS Stage I was $5.4 billion, of which $4.4 billion was spent under the SSTF before its closure. At the time the related SSTF projects were transferred to CWRF, we forecast that We estimate that the whole SSDS Stage I, comprising 19 project items including 312DS, would be completed within anthe original overall estimate of $8.2 billion. According to current forecasts, if the proposed increase in the APE for 312DS is approved, the overall estimate of $8.2 billion for the completion of SSDS Stage I by late 2000 will not be exceeded. Offsetting savings of up to $135.22 million can be identified from the unspent contingencies of other items. Details of the forecast are shown at Enclosure 5. The final costs of these seven projects have now become more certain as the works involved are nearing completion. While the project estimate for 312DS will need to be increased, we anticipate corresponding reductions in the final costs of other related projects under the SSDS Stage I programme.
9. The establishment of resident site staff has been kept under close review to ensure that staffing levels are commensurate with workload. Whenever a substantial part of the construction works is completed, the strength of the resident site staff is reduced and different teams are combined to achieve best utilization of staff resources. The details of the resident site staffing level for the main works of the SSDS Stage I in the previous 18 months and coming years until completion are listed at Enclosure 65.
FINANCIAL IMPLICATIONS
10. Subject to approval, we will phase the expenditure as follows -
| Year | $ million
(Dec 1998)
| Price
adjustment
factor
| $ million
(MOD)
|
|---|
| Up to 31 March 1999
| 89.82 | 1.00000 | 89.8
|
| 1999 - 2000 | 69.4 | 1.02625 | 71.2
|
| 2000 - 2001 | 34.8 | 1.06217 | 37.0
|
| 2001-2002 | 17.3 | 1.09934 | 19.0
|
| ______ | | ______
|
| 211.3 | | 217.0
|
11. We have derived the MOD estimates on the basis of the Government's latest forecast of trend labour and construction prices for the period 1999 to 2002.
12. The proposed increase in the APE will not give rise to additional recurrent expenditure.
PUBLIC CONSULTATION
13. We consulted the public on SSDS Stage I before the commencement of works in 1994. We briefed the Legislative Council Panel on Environmental Affairs (EA Panel) and Planning, Lands and Works (PLW Panel) on the progress of the Stage I works on 5 February and 4 May 1999. Also, we have provided quarterly progress reports on Stage I tunnelling works to the Advisory Council on the Environment since January 1999. We consulted the EA Panel and the PLW Panel on the proposed increase in the APE for this project item on 4 May 1999. Members were content that the proposal to increase the APE for 312DS be put to PWSC.
ENVIRONMENTAL IMPLICATIONS
14. The proposed increase in the APE does not have any adverse environmental implications.
LAND ACQUISITION
15. The project item does not require land acquisition.
BACKGROUND INFORMATION
16. The SSDS Stage I works comprise upgrading of existing preliminary treatment works; construction of a series of deep sewage collection tunnels to collect sewage from the urban Kowloon and north east Hong Kong Island; and building a new centralized sewage treatment works at Stonecutters Island to treat the sewage. The treated effluent is to be discharged via an interim outfall to the more open waters west of Victoria Harbour.
17. In view of the size and complexity of the civil, electrical and mechanical works involved, the SSDS Stage I was implemented under 15 construction contracts comprising four advance works contracts and 11 main works contracts. These contracts commenced in stages in 1994 and 1995 respectively.
18. The construction of the sewage tunnel transfer system was included in two of the 11 main works contracts. Owing to the unilateral suspension of works in all six sewage tunnels by the first contractor, the two tunnel contracts were forfeited in December 1996. Subsequently, the tunnel completion works were re-let in three separate contracts (two tunnels in each contract) in July 1997 and January 1998. Among these tunnel completion contracts, 018SS covers the construction supervision of the tunnel completion contract for the western tunnels funded under 320DS. The construction supervision of the other two tunnel completion contracts is funded under 286DS.
19. The Finance Committee approved the creation and direct inclusion of 312DS in Category A on 27 February 1998 to cover the outstanding commitments and obligations under 018SS upon the closure of the SSTF on 31 March 1998.
20. As part of the additional construction supervision cost arises from the forfeiture of the two tunnel contracts, we intended to pursue a claim for losses arising from re-entry of the two tunnel contracts through arbitration. We will ascertain these losses after completion of the tunnelling works.
--------------------------------------------
Planning, Environment and Lands Bureau
Works Bureau
May 1999
(PWSC0131/WIN5)
Enclosure 1 to PWSC(1999-2000)15
312DS - Strategic Sewage Disposal Scheme Stage I:
construction supervision of the main works
A list of outstanding SSDS Stage I works of which the construction supervision are covered by 312DS is as follows -
| Item No. | Title | Expenditure
up to 31.3.98
under SSTF
($ million)
| Approved
Project
Estimate
under CWRF
($ million)
|
|---|
| 288DS | SSDS Stage I: chemical dosing facilities
| 104.1 | 39.2
|
| 304DS | SSDS Stage I: sewer tunnel system from Chai Wan and Tseung Kwan O to Kwun Tong | 306.1 | 36.3
|
| 305DS | SSDS Stage I: SCISTW* sludge treatment facilities | 231.3 | 43.7
|
| 306DS | SSDS Stage I: SCISTW* - sedimentation tanks (civil works)
| 347.6 | 24.5
|
| 307DS | SSDS Stage I: pumping stations electrical and mechanical equipment
| 223.1
| 214.3
|
| 308DS | SSDS Stage I: SCISTW* - pumping stations, buildings and site development
| 299.8
| 97.3
|
| 309DS | SSDS Stage I: upgrading existing preliminary treatment works
| 607.6
| 234.1
|
| 310DS | SSDS Stage I: sedimentation tanks electrical and mechanical equipment
| 276.4
| 125.1
|
| 311DS | SSDS Stage I: sewer tunnel system from Kwun Tong and Kwai Chung to Stonecutters Island
| 389.7
| 39.4
|
| 315DS | SSDS Stage I outfall
| 445.1
| 117.6
|
| 316DS | SSDS stage I: construction of sludge transfer facilities and supply of sludge containers
| 28.8 | 23.7
|
| 320DS | SSDS stage I: completion of sewer tunnel system from Kwai Chung to Stonecutters Island
| 51.5 | 487.6
|
| Total | 3,311.1 | 1,482.8
|
* SCISTW = Stonecutters Island Sewage Treatment Works
Notes :
(1) SCISTW denotes Stonecutters Island Sewage Treatment Works.
(21) 304DS and 311DS are project items covering the works under the original tunnel contracts. After their forfeiture in December 1996, these project items provide funds for the tunnel maintenance contract for maintaining the unfinished tunnels and taking security of all the tunnel sites before commencement of the completion works. With the completion of the tunnel maintenance contract in January 1998, the works under these project items are substantially completed.
(32) The construction supervision of the completion of the four eastern tunnels is funded by 286DS entitled "SSDS stage I: completion of sewage tunnel system from Chai Wan and Tseung Kwan O to Kwun Tong and from Kwun Tong to Stonecutters Island".
Enclosure 2 to PWSC(1999-2000)15
312DS - Strategic Sewage Disposal Scheme Stage I:
construction supervision of the main works
Forecast completion dates of projects which construction supervision are covered by 312DS -
| Item No. | Title | Completion
Date
Anticipated
in the Last PWSC
Submission | Actual
Completion
Date/Latest
Forecast
Completion
Date | Brief Reasons
For Delay & Extension
|
|---|
| 288DS | SSDS Stage I: chemical dosing facilities
| Jan 1998 | Jan 1999 | Owing to financial problems, the contractor has difficulties in mobilizing sufficient resources to complete the works as scheduled. The persistent poor performance of the contractor caused significant delay to the completion of the contract.
|
| 304DS | SSDS Stage I: sewer tunnel system from Chai Wan and Tseung Kwan O to Kwun Tong | Jul 2000 | | Tunnel maintenance work substantially completed in January 1998 (see note (1) of Enclosure 1).
|
| 305DS | SSDS Stage I: SCISTW sludge treatment facilities | Oct 1997 | Sep 1997
|
| 306DS | SSDS Stage I: SCISTW -sedimentation tanks (civil works) | Jun 1997 | Jun 1997
|
| 307DS | SSDS Stage I: pumping stations electrical and mechanical equipment | May 1998 | Jun 1999 | As the result of the delay in completion of tunnel transfer system, significant portion of the sewage from SSDS Stage I catchment cannot be made available for testing and commissioning of the pumping facilities as originally planned. Alternative arrangements have to be worked out and agreed with the contractor hence causing delays to the completion of the contract.
|
| 308DS | SSDS Stage I: SCISTW -pumping stations, building and site development | Mar 1998 | Mar 1999 | The delay in completion of the E & M works at SCISTW caused knock-on delays in handing over the associated works areas for the completion of outstanding works under the contract hence causing delay to its completion.
|
| 309DS | SSDS Stage I: upgrading existing preliminary treatment works | Apr 1998 | Mar 1999 | The forfeiture of the tunnel contracts disrupted the interfacing works for diverting the Preliminary Treatment Works flows to the tunnel transfer system. As a result, the scope of works under the contract has to be revised and some of the facilities have to be amended to cope with the changes hence causing delays to the completion of the contract.
|
| 310DS | SSDS Stage I: sedimentation tanks
electrical and mechanical equipment | Apr 1998 | May 1999 | As the result of the delay in completion of the tunnel transfer system, significant portion of the sewage from SSDS Stage I catchment areas cannot be conveyed to SCISTW for testing and commissioning of the sedimentation facilities. Alternative arrangements have to be worked out and agreed with the contractor hence causing delays to the completion of the contract.
|
| 311DS | SSDS Stage I: sewer tunnel system from Kwun Tong and Kwai Chung to Stonecutters Island | Jul 2000 | | Tunnel maintenance work substantially completed in January 1998 (see note (1) of Enclosure 1).
|
| 315DS | SSDS Stage I outfall | May 1998 | Nov 2000
| As the result of the delay in completion of the tunnel transfer system, significant portion of the sewage flow from SSDS Stage I catchment areas cannot be conveyed to SCISTW for treatment and subsequent discharge via the outfall. The effluent produced from the treatment of North West Kowloon sewage is not adequate for commissioning of the outfall and hence the contract is extended to provide an alternative operational arrangement until the availability of the tunnel flow.
|
| 316DS | SSDS Stage I: construction of sludge transfer facilities and supply of sludge containers | May 1999 | May 2000 | The interim sludge disposal service under the contract is extended to cope with the latest forecast completion date of the tunnel transfer system.
|
| 320DS | SSDS Stage I: completion of sewer tunnel system from Kwai Chung to Stonecutters Island | Aug 1999 | Nov 2000 | Replacement of mucking system and poor ground conditions cause delay in completion of the contract.
|
* SCISTW = Stonecutters Island Sewage Treatment Works.
(PWSC0131/WIN5)
Enclosure 3 to PWSC(1999-2000)15
312DS - Strategic Sewage Disposal Scheme Stage I:
construction supervision of the main works
A comparison of the cost breakdowns of the approved project estimate and the revised project estimate -
| Approved
Project
Estimate
($ million)
| Revised
Project
Estimate
($ million)
| Increase
(Decrease)
($ million)
|
|---|
| (a) consultants' fees for construction supervision
| 25.0 | 37.0 | 12.0
|
| (b) resident site staff costs
| 62.0 | 161.0 | 99.0
|
| (c) contingencies | 31.2 | 19.0 | (12.2)
|
| _______ | ________ | _______
|
| Total | 118.2 | 217.0 | 98.8
|
| _______ | ________ | _______
|
2. The breakdown of the increase in costs of construction supervision and resident site staff with respect to the causes of extensions and delays detailed in paragraphs 6 and 7 of the paper is shown as follows -
| Amount of Increase/
(Decrease)
$ million
|
|---|
| (a) Delay in completion of the western tunnels under 320DS
| 27.6
|
| (b) Knock-on disruptions to six contracts due to forfeiture of original tunnel contracts | 72.0
|
| (c) Poor performance of the contractor for 288DS | 11.4
|
| Sub-total | 111.0
|
| (d) Reduction in contingencies | (12.2)
|
| Total | 98.8
|
(PWSC0131/WIN5)
Enclosure 4 to PWSC(1999-2000)15
312DS - Strategic Sewage Disposal Scheme Stage I:
construction supervision of the main works
Breakdown of estimates for consultants fees
| Consultants' staff costs | | Estimated
man
months
| Average
MPS
salary
point
| Multiplier
factor | Estimated
fee at
Dec 98
prices
($ million)
| Estimated
fee in
MOD prices
($ million)
|
|---|
| (a) Original Estimate
|
| Construction Supervision
| Professional
Technical
| 149
50 | 40
16 | 2.4
2.4 | 22.5
2.5
| 22.5
2.5
|
| Resident Site Staff
| Professional
Technical | 344
705
| 40
16
| 1.7
1.7
| 36.7
25.2
| 36.8
25.2
|
| _____ | _____
|
| Sub-total(a) | 86.9 | 87.0
|
| _____ | _____
|
| (b) Additional Costs
|
| Construction Supervision
| Professional
Technica | l67
23 | 40
16 | 2.4
2.4 | 10.1
1.2 | 10.7
1.3
|
| Resident Site Staff | Professional
Technical | 534
1093 | 40
16 | 1.7
1.7 | 57.0
39.0
| 58.7
40.3
|
| _____ | _____
|
| Sub-total(b) | 107.3 | 111.0
|
| _____ | _____
|
| (c) Revised Estimate
|
| Construction Supervision | Professional
Technical | 216
73 | 40
16 | 2.4
2.4 | 32.6
3.7 | 33.2
3.8
|
| Resident Site Staff
| Professional
Technical | 878
1799 | 40
16
| 1.7
1.7
| 93.7
64.2 | 95.5
65.5
|
| _____ | _____
|
| Sub-total (a) + (b) | 194.2 | 198.0
|
| _____ | _____
|
Notes :
(1) A multiplier factor of 2.4 is applied to the average MPS point to arrive at the full staff costs including the consultants overheads and profit, as the staff will be employed in the consultants offices (at 1.4.98, MPS pt. 40 = $62,780 p.m. and MPS pt. 16 = $21,010 p.m.). A multiplier factor of 1.7 is applied in the case of site staff supplied by the consultants.
(2) The figures given above are based on estimates prepared by the Director of Drainage Services. We will only know the actual man months and actual fees after the completion of the works.
Enclosure 5 to PWSC(1999-2000)15
312DS-Strategic Sewage Disposal Scheme Stage I :
construction supervision of the main works
Savings identified in other items are sufficient to offset the proposed increase of $98.8 million (MOD) in the APE for 312DS as shown below -
Enclosure 5 to PWSC(1999-2000)15
312DS - Strategic Sewage Disposal Scheme Stage I:
construction supervision of the main works
Detailed staffing level of resident site staff covered by 312DS
| Date | Professional | Technical | Clerical | Total
|
|---|
| 1 Oct 1997 | 57 | 116 | 36 | 209
|
| 1 Apr 1998 | 43 | 76 | 19 | 138
|
| 1 Oct 1998 | 29 | 55 | 13 | 97
|
| 1 Apr 1999 | 27 | 42 | 9 | 78
|
| 1 Oct 1999 | 22 | 30 | 8 | 60
|
| 1 Apr 2000 | 15 | 19 | 4 | 38
|
| 1 Oct 2000 | 9 | 13 | 3 | 25
|
| 1 Apr 2001 | 4 | 6 | 2 | 12
|
| 1 Oct 2001 | 2 | 4 | 2 | 8
|
| 1 Apr 2002 | 0 | 0 | 0 | 0
|
Note :
(1) The RSS expenditure before 1 April 1998 was covered by SSTF item no. 018SS.
(PWSC0131/WIN5)
1.The approved project estimate of 312DS ($118.2 million) was established on the basis of our estimated cumulative expenditure under 018SS of $491.8 million up to 31 March 1998, leaving an outstanding commitment of $118.2 million to be funded from the CWRF.
2.This is the actual expenditure up to 31 March 1999.
