Cost estimate and design went ahead without key site investigation
Failure to include to obtain and include further ground investigation data during the finalisation of design for a key cross-border boundary crossing project contributed partly to an increase in tender prices as contractors decided to hedge against the risk by allowing for more temporary works.
According to a paper on top-up funding application issued last week to the Legislative Council’s Panel on Development, the discovery of worse than expected ground conditions meant that HK$698.6 million has to be added to the estimated cost of the Liantang/Heung Yuen Wai Boundary Control Point project.
The bureau said further site investigation in late 2011 was hampered by access problems and adverse weather.
However the project estimate was compiled in early 2012 regardless, on a design of the tunnel based on ground information and site investigation results already available at the time.
“Hence, part of the results of the further site investigation could not be timely incorporated in the tunnel design and the additional cost in tunnelling works due to poor ground condition was not reflected in the cost estimate prepared for the funding application of [the project] in early 2012,” the bureau said.
Had the results of the further site investigation been available then the Civil Engineering and Development Department, which is managing the project, would have found a number of faults found along 1.4 kilometres of tunnel.
This meant more extensive temporary works were necessary such as grouting, shotcreting, temporary supporting structures and strengthening works of the permanent lining along this tunnel section.
For example, up to 20 percent more rock bolts and rock anchors were necessary to withstand the ground conditions in the fault zones.
In addition, there was a longer stretch of mixed ground along the route of the tunnel to be excavated by tunnel boring machine (TBM), some 700 metres as opposed the previous estimate of 300 metres.
“This would lead to a higher construction cost due to a slower rate of construction, higher construction risk, more wear and tear problem associated with the operation of TBM and the need of more grouting work when working in the more difficult ground condition,” the bureau said.
The bureau’s request for further funds comes just one and half years after the government obtained funding for main construction of the project.
In July 2012, the Finance Committee approved HK$16.3 billion at money-of-the-day prices for the project, the major parts of which include site formation of 23 hectares of land, a 4.3 kilometre viaduct and 5.7 kilometres of tunnel.
Legislators on the Panel on Development will today review the government’s application to increase the approved project estimate by HK$8.55 billion or 52 percent to HK$24.8 billion.
The bureau’s paper advised that despite cost saving measures, tender prices from contractors were still higher than government estimates.
“According to our analysis, the high tender prices are due to the recent surge in construction prices in heavy civil engineering works and E&M works, the poor ground condition for tunnelling works and tenderer’s perception on the higher risks associated with construction constraints,” the bureau said.
Increased demand for workers, heavy lifting plant and work requiring specialist subcontractors meant that the heavy civil engineering work plus E&M works accounted for 46.5 percent or HK$3.97 billion of the HK$8.55 billion increase.
The bureau noted the prices for heavy plant increased sharply from mid-2012 onwards.
“Within a year, the hiring rates for crawler cranes for heavy civil engineering works (for construction of viaducts) and plant for bored piling increased by about 30 percent and 40 percent respectively,” the bureau said.
Currently major infrastructure projects making intensive use of heavy plant include the Hong Kong-Zhuhai-Macao Bridge and associated projects, the Central-Wan Chai Bypass and the five railway extension projects of the MTR Corporation (0066).
Such heavy demand meant tenderers allowed for higher plant costs in their tenders.
The same could also be said for specialist subcontractors required for prestressing of precast bridge segments and for tunnel construction requiring drill-and-blast and handling of sophisticated tunnel boring machines.
For E&M work, the bureau noted statistics compiled by the Architectural Services Department showing a huge surge in tender prices by some 54 percent from the first quarter of 2012 to the second quarter of 2013.
“Besides, as the majority of the E&M works would only be carried out at the late state of the project (ie 2017/18), tenderers might have put additional risk premium to cater for possible further market surge for the E&M works in their tenders,” the bureau said.
The technically demanding nature of the construction of the 4.8 kilometre Lung Shan Tunnel coupled with a tight construction programme and highly constrained access meant contractors had to be more careful in planning and do more site investigation beforehand.
Thus tender prices were increased to reflect increased deployment of resources to cope with these restrictions.
“Moreover, tender analysis revealed that tenderers placed a high risk premium than expected to cater for the tight programme, as they may have to face heavy liquidated damages and regulatory actions if they cannot complete the works on time,” the bureau said.
A company boss of a listed contractor who worked on the tenders concurred.
“The geology of the tunnel is complicated and hence [there is] a lot of risk. Also the programme is rather tight, in particular at this remote area where we need to pay staff and workers a lot more now that they have a choice,” the boss said.
The remaining items were HK$2.98 billion to meet a 78 percent increase in the estimate to meet payments against contract price fluctuation payments and a HK$506.3 million increase for contingencies.
Contract 5 of the project, for site formation, was awarded to the San Hing Civil-Richwell Machinery Joint Venture for HK$510.5 million in March last year while Contract 3 for four link roads and associated works went to Chun Wo Construction and Engineering later in July for HK$2.55 billion.
The award for Contract 2 for the Lung Shan Tunnel, which would be the longest road tunnel ever built in Hong Kong on completion in 2018, has not been announced yet although the bureau’s paper said work for the contract already started last year.
Contract 6 for the viaduct section and a bit of tunnel is still under tender assessment.
As part of the cost-saving measures, Contract 1 was cancelled in December 2012 after returned tenders for Contract 1 “significantly exceeded the original estimate” and the contract split up into Contract 5 and Contract 6.
This was to enlarge the scope of contractors available to tender and thus get more competitive tenders.
Over cost-saving measures included inviting alternative designs, providing a barging point for delivery of precast bridge deck segments, providing more working areas and reviewing designs after feedback from tenderers.