Traditional Chinese Simplified Chinese Email this article news.gov.hk
LCQ 17: Construction costs of the Hong Kong-Zhuhai-Macao Bridge Hong Kong Boundary Crossing Facilities Project
*********************************************************

     Following is a question by the Hon Kenneth Leung and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (November 26):

Question:

     On the 6th of this month, the Government issued a press release indicating that the expenditures of the Hong Kong-Zhuhai-Macao Bridge Hong Kong Boundary Crossing Facilities Project (the Project) might exceed the approved project estimate by $5 billion.  In this connection, will the Government inform this Council:

(1) of the approved and latest estimates of expenditure of various works items under the Project and, among the various works items, the respective increases in expenditure, and their percentages in the approved estimates, of those major expenditure items (e.g. wages, construction materials and engineering equipment) which will likely involve overspending;

(2) whether there are any mechanism and method in place at present to mitigate the impact of adjustments in construction costs on the overall expenditures of the Project; if there are, of the details; and

(3) whether it has conducted a study on the overspending of the Project to reduce the overspending amounts by improving the tendering process, the procurement work, the division of labour, and the contract design, etc.?

Reply:

President,

     My reply to the three parts of the Hon Kenneth Leung's question is as follows:

(1) In the PWSCI(2014-15)7 paper issued by the Government on October 14 this year, it gives an overview of the potential capital works items (a total of 89 items) to be submitted to the Public Works Subcommittee in the 2014-15 Legislative Council (LegCo) session. One of them is the Hong Kong-Zhuhai-Macao Bridge (HZMB) Hong Kong Boundary Crossing Facilities (HKBCF) project. We stated in the said paper that as the tender prices/estimated tender prices for the works contracts awarded/to be awarded are higher than the estimate in 2011, together with the increase in provision for price adjustment, we need to seek the approval of the Finance Committee for increasing the approved project estimate to meet the latest forecast of construction expenditure. Subsequently, the Transport and Housing Bureau stated in a press release issued on November 6 that as regards the cost for the HZMB HKBCF, the approved project estimate in November 2011 was $30.4339 billion. But according to the current preliminary estimate, the approved project estimate has to be increased by about $5 billion, mainly because the tender prices/estimated tender prices for the works contracts awarded/to be awarded are higher than the estimate when the Government sought approval from the LegCo in 2011 due to the surge in wage levels of construction workers, prices of construction materials and machinery, etc., in recent years.

     The Highways Department (HyD) is still conducting detailed assessment on the progress of the project and the latest increased cost. When the amount is finalised, the Government plans to give a detailed account to the LegCo Panel on Transport and then seek approval for the increase in the approved project estimate from the LegCo Public Works Subcommittee and the Finance Committee.

(2) Under the mechanism for public works in general, the Government will allow in the project cost estimate a provision for price adjustment to cater for fluctuations in labour and material costs during the contract period.

     According to the existing mechanism, we will adopt the price adjustment factor(s) derived from the Government's latest set of assumption(s) on the trend rate of change in the price of public sector building and construction output for the contract period to convert the cost estimate of a capital works project from its constant price into the money-of-the-day (MOD) prices. The difference between the MOD prices and the constant price will be the provision for price adjustment to be included in the project cost estimate.

     Since the provision for price adjustment is the best estimate based on the latest information available at the time of funding application, supplementary provision has to be sought if there is volatile cost fluctuation or significant deviation of the actual situation from the estimated trend. Currently, the HZMB HKBCF project is facing this situation.

(3) Regarding the cost of the HZMB HKBCF, the HyD has implemented a series of measures to strictly control the project expenditures. When devising the design of the HKBCF, the HyD has optimised and adopted as far as possible cost-effective design and materials for stringent cost control. On tendering and procurement, the HyD has examined in detail the appropriate arrangement and packaging of works. As such, the superstructure works of the HKBCF have been divided into a number of civil, building as well as electrical and mechanical contracts and the scope of the contracts have been reduced as far as possible to increase the number of contractors capable of undertaking the works, thus resulting in more competitive tender prices.

Ends/Wednesday, November 26, 2014
Issued at HKT 13:00

NNNN

Print this page