Liantang-Heung Yuen Wai border costs blow out by HK$8.5 billion

Development Bureau says rising construction costs are behind call for more funds, and stands by its method of estimating project costs

PUBLISHED : Tuesday, 31 December, 2013, 3:35am
UPDATED : Tuesday, 31 December, 2013, 3:35am

Taxpayers are being asked to stump up an additional HK$8.5 billion for the building of a new eastern border crossing.

Blaming mainly a surge in construction costs, the government is seeking to increase funding for the Liantang-Heung Yuen Wai crossing from HK$16.25 billion - approved by legislators in July last year - to HK$24.8 billion, a rise of more than 50 per cent.

It describes the blowout as an "isolated case" and insists its method of cost estimation is effective, despite a series of over-budget projects in recent years.

In a paper submitted to the Legislative Council's development panel yesterday, the Development Bureau gave five reasons for the budget revision.

Construction costs - including equipment prices and a sharp rise in wages - account for just under half of the increase.

A larger provision for future cost increases accounts for just over a third.

Poor ground conditions - not known about when the government applied for funding to Legco's Finance Committee last year - account for 8.2 per cent.

Explaining this point, a spokesman for the bureau said 70 per cent of the site investigation had been completed by the time the original budget was drawn up. But a number of faults were later found straddling a stretch of tunnel of about 1.4 kilometres long.

A tight schedule for the project, which is expected to be completed by 2018, was also cited, as companies tendering for work might have to pay extra for overtime. More money was also requested for contingencies.

The request comes just two months after lawmakers criticised the government for having underestimated costs when it emerged that an additional HK$550 million had to be paid for site preparation and infrastructure work on the project. This did not affect the total budget as the money was to be paid from an existing contingency fund.

Asked repeatedly at a media briefing whether the latest budget would be final, the bureau spokesman did not rule out the possibility of further revision.

"While we will closely control the expenditure, we do not have a crystal ball," he said. "If there is no major fluctuation in the market, we are confident that this budget can enable the completion of the project on time."

A number of major public works in recent years have gone over budget, including the Central-Wan Chai bypass, the Hong Kong-Zhuhai-Macau bridge, the new RTHK headquarters and the West Kowloon Cultural District.

This has sparked calls for the government to review its method of estimating the construction costs of public projects. But another bureau spokesman argued that the latest application was an isolated case.

"Between the fourth quarter of last year and the third quarter of this year, our public works departments have put up about 40 contracts of major works for tendering, each with a price of over HK$30 million. On average, the tender price is seven per cent below the amount of funding approved," he said.

Panel deputy chairman Tony Tse Wai-chuen said the cost increase for the border crossing was "difficult to accept" and said the government should revisit its cost estimation method.

But engineering sector lawmaker Lo Wai-kwok said the technical difficulties cited in the paper were reasonable.