THE Government has been harshly criticised for mishandling the Hongkong University of Science and Technology project, the cost of which overran by $1.6 billion, and for treating the Legislative Council's Finance Committee in a ''cavalier manner''. The broadside came from the seven-member Public Accounts Committee, which spent 15 months preparing a detailed study of the controversial third university, sponsored by the Royal Hongkong Jockey Club and opened in October 1991. The 482-page report levelled severe criticism against the former secretary for lands and works, Mr Nicky Chan Nai-keong, and to a lesser extent, the university's vice-chancellor and president, Professor Woo Chia-wei. It blamed the the Chief Secretary, Sir David Ford, for ''possibly comprising the Government's legal position'' in the event of the Jockey Club's non-compliance with the conditions in financing the project as stated by the Executive Council. This was because Sir David had made no reference to those conditions in conveying the Executive Council's acceptance of the funding offer to the Jockey Club. To avoid similar mistakes in the future, such as the construction of the Northern Hospital near Sheung Shui, the committee recommended the Finance Committee play a more active role in monitoring financing arrangements. Legislators were urged to look into the possibility of setting up a select committee to follow up the issue, committee member Dr Leong Che-hung said after the report was tabled to the legislature yesterday. The Public Accounts Committee investigation was prompted by the Director of Audit's report, which highlighted the escalation of the cost from $1.9 billion to $3.5 billion. The Executive Council had decided to build a third university in 1986 and a year later donations from the Jockey Club were accepted and the Finance Committee approved the $1.9 billion estimate. Legislators were informed only in June 1990 that the cost had almost doubled. Both the Government and the Jockey Club welcomed the committee's findings and recommendations, although other key figures involved in the saga, such as university council chairman Sir Sze-yuen Chung, were not available for comment last night. The chief executive of the Jockey Club, Major-General Guy Watkins, said that while the report was thorough, he did not necessarily agree with everything it said. He said the recommendations were mainly concerned with the Government and not the club which helped fund the project. He also pointed to the fact that bringing the completion date forward by three years had made the project more expensive. In its report, the committee said it regretted that: The Executive Council had not been fully informed of the two options offered by the Jockey Club in building the university; The Government's failure to convey to the Jockey Club conditions imposed by Exco on the project; and The Finance Committee was not kept informed of the high escalation of costs until June 1990. It then recommended: The Finance Committee and Exco be kept more fully informed of significant developments of projects on a timely basis; The Government, as a matter of principle, should not undertake any major projects on a ''design-as-you-build'' basis. Even if this approach is taken, full justification should be provided to the Finance Committee beforehand and great care should be exercised to control the costs; and A formal agreement between the Government and outside parties should be drawn up before the commencement of these joint projects. The agreement should set out the costs and scope of the projects as well as the duties and responsibilities of the parties concerned. However, the Government hit back, rejecting some of criticisms. A spokesman said although two options for building the university were initially suggested after lengthy discussion, it was agreed by all parties concerned that there was only one realistic option - which was to have the Jockey Club funding and building the project if it was to be completed in time. ''The presentation of both options would not have altered the financial information included in the relevant Exco memorandum,'' he said. Accepting that tighter financial control was required, the Government did not believe the increase in cost estimates could have been avoided or significantly reduced, he said. The committee was extremely critical of the way the selection of the campus design was handled by Mr Chan and Professor Woo. Mr Chan, the former chairman of the assessment panel for the university's architectural design competition, was admonished for recommending the runner-up design without consulting other panel members. The Public Affairs Committee was unanimous in all recommendations and conclusions except for those relating to the selection of the campus design. Chairman Mr Stephen Cheong Kam-chuen, who is also a member of the university's council and planning committee, refrained from taking part in the discussion on the design selection. While Mr Martin Lee Chu-ming, Miss Emily Lau Wai-hing and Dr Leong, alleged that the selection of the ''runner up'' design instead of the winning blueprint had led to the excessive costs for the project. However, the remaining members, Mr Martin Barrow, Mr Simon Ip Sik-on and Mr Peter Wong Hong-yuen, did not agree with their colleagues and the six members' opinions were so split on the subject that they decided to present two sets of views on this subject in the report. Tabling the report to Legco yesterday, Mr Cheong said: ''I would like to emphasise that the criticisms in our report are in no way intended to affect the integrity or reputation of the HKUST, which, we, as a committee of the Council, firmly believe will play an essential role in Hongkong's tertiary education process.'' The report aimed to point to the way forward in the more efficient use of public funds and to avoid a repeat of similar incidents. It was being drawn up after a marathon 28 meetings, including five public hearings with 13 public figures and witnesses, between 1991 and last year. Dr Leong said if members agreed to form a select committee to follow up the issue, it should seek to verify if the use of first runner-up design rather than the winning design led to the cost overrun. ''I would also like to have an explanation from the Finance Branch for the late submission of related papers to us two years ago, and who should be held responsible for the whole problem,'' he said. Mr Lee said he would consult other United Democrat legislators to see if the matter called for a motion debate.