Environment Bureau has failed to learn from its previous costly mistakes

PUBLISHED : Sunday, 03 August, 2014, 4:25am
UPDATED : Sunday, 03 August, 2014, 4:25am

Last month, the Finance Committee wisely postponed acting on the Environment Bureau's request to build an organic waste treatment facility in north Lantau to treat food waste.

The facility, with capacity to process 200 tonnes of food waste per day, will cost taxpayers HK$1.53 billion to build and HK$72.4 million per year to operate. The debate in the committee laid bare the bureau's inexperience in planning major infrastructure for waste management.

The capital cost when the facility was first presented in 2011 was HK$489 million versus the current request for HK$1.53 billion, a 300 per cent increase. The bureau says the initial figure was a broad-brush estimate while the current figure is based on the latest market prices for construction. But given the huge increase within three years, how can taxpayers have any confidence that the cost will not increase by another 300 per cent during the construction in the next three years? Will today's market price become tomorrow's broad-brush estimate, resulting in ever higher cost overruns?

Several legislators pointed out that a French waste-management operator had offered to bear the cost of capital investment and a Hong Kong-based consortium offered to design, build and operate the facility at one fifth the amount the bureau wants. But it rejected these proposals, insisting on shouldering the capital cost and keeping the asset on Hong Kong taxpayers' balance sheet, instead of letting an investor own and run it for a fee.

We are witnessing the same amateurish effort in the bureau's proposal to build a mega incinerator at a capital cost of HK$18.24 billion with annual recurring cost of HK$402 million. Is this a broad-brush estimate or based on today's market price? In both cases, despite calling the operating arrangement as a design build operate model, taxpayers are taking on the immense capital cost, instead of letting an investor build the incinerator and paying him an annual fee to operate it. The stakes are, of course, much higher than with the organic waste treatment facility.

What has the bureau learned on financial management, risk mitigation and waste management facilities operations in the past 10 years during the tenure of three environment secretaries and their staffs who went on numerous fact-finding trips overseas and paid millions to consultants? Or is all they know to collect waste in black plastic bags and dump them in landfills and an incinerator?

Dr Tom Yam, Lantau