Lawmakers to consider $7.93b extra funding to complete
The government is to go back cap in hand to legislators for more funds, HK$7.93 billion to be exact, in order meet ballooning costs on the Central-Wan Chai Bypass project.
Legislators on the Legislative Council’s Panel on Transport will meet this Friday to consider the application to increase the approved project estimate by 28.3 percent to HK$36 billion.
According to a Transport and Housing Bureau paper submitted yesterday to the panel, the main reasons for the proposed increase in the approved project estimate were deeper foundations and inadequate allowance for increases for price adjustments.
The bureau said that deeper than expected bedrock especially along the route of the bypass across the Causeway Bay Typhoon Shelter necessitated construction of deeper diaphragm walls and barrette piling.
With the effect of higher than expected tender rates included, the cost of the tunnel construction work jumped 17 percent or HK$975.3 million to HK$5.64 billion.
The biggest increase however was in the price adjustments.
Most government contracts include contract price fluctuation to allow for adjustments to the monthly payments to contractors to allow for market fluctuations in the cost of labour and materials.
Unfortunately when the government was estimating the budget in 2009, it assumed two percent per annum increase for price adjustment factors for the period 2009 to 2013 and three percent for the period 2014 to 2019.
However based on the government’s latest assumptions as of September 2013, the trend rate of change in prices for the same period was very different.
According to actual statistics, for the years 2010, 2011 and 2012, the factors for price adjustment were 2.9 percent, 5.9 percent and 6.3 percent respectively.
For the period of 2013 to 2017, the factor was now fixed at six percent while for the period of 2018 to 2023, a factor of five percent would be adopted.
“The actual and forecast price adjustment factors are much higher than the assumptions in March 2009,” was the bureau’s dry comment on the situation.
To cover the item of price adjustments, the government was now proposing that its budget be increased by HK$6.96 billion to HK$10.49 billion, a whopping increase of 197 percent.
There were also increases in the cost of marine works and tunnel structures, earthwork support and tunnel E&M works but this was offset by decreases in cost for items such as roads, retaining walls and landscaping works.
The net increase was estimated at HK$725.3 million.
However this increase of HK$725.3 million would be offset by a reduction in the estimate for contingencies by the same amount.
As such the increase in approved project estimate would come from deeper foundations and price adjustments only.
The bureau said the remaining estimate of HK$1.43 billion for project contingency should not be reduced further as there was a considerable amount of marine works and underground works of high risk nature remaining to be carried out before commissioning in 2017.
“We would expose ourselves to unacceptable budget risk if we reduce contingency level further,” the bureau said.
The Central-Wan Chai Bypass is being implemented under two closely related projects, the Wan Chai Development Phase II under the Civil Engineering and Development Department and the Central-Wan Chai Bypass and Island Eastern Corridor Link by Highways Department.
In the present application, the government could perhaps consider themselves fortunate that the percentage increase was lower than that for an earlier related project, the Central Reclamation III.
Part of the bypass was built under that contract from 2003 to 2012.
In an application for additional funds in 2008, the approved project estimate was revised from HK$3.56 billion to HK$5.76 billion, an increase of 62 percent.