Hong Kong MTR

Cost overrun for Hong Kong’s Sha Tin-Central MTR Link could be HK$16 billion, lawmaker says

Chairman of the Legislative Council Panel on Transport Michael Tien said total cost of the 17km, 10-station project could rise to HK$96 billion

PUBLISHED : Monday, 04 December, 2017, 1:13pm
UPDATED : Monday, 04 December, 2017, 2:42pm

Lawmaker Michael Tien Puk-sun said on Monday that it would be “barely acceptable” for the Sha Tin to Central rail link project cost to increase by about HK$15 billion (US$1.92 billion) even as he highlighted the challenges and setbacks faced in project construction.

The rail link, originally meant to cost HK$79.8 billion, is funded by the government, with the city’s MTR Corporation doing construction, testing and commissioning.

But Tien, chairman of the Legislative Council Panel on Transport, believed the cost overrun for the Sha Tin to Central rail link might end up being HK$16 to HK$17 billion, bringing the project’s final cost to about HK$96 to HK$97 billion.

The government will need to seek approval from the Legislative Council’s Finance Committee to cover the extra cost, with MTR set to reveal the additional amount it requires “before or after Christmas”, chairman Fred Ma Si-hang said last week.

Tien acknowledged that most taxpayers would feel that HK$15 billion was an “astronomical figure”. But he explained that the cost projections for the seven-year project had been made before tenders for project works were called.

“When the government secures funds from the Legislative Council, it is based on an estimation of the economic situation at that time, and it is difficult for it to play the market to estimate the tenders in the next few years,” he said.

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Tien, speaking on a radio programme, added that the 17km Sha Tin to Central rail link, comprising 10 stations, required complicated engineering, with one section crossing Victoria Harbour in a submarine tunnel. There are two parts to the rail link – one section runs from Tai Wai to Hung Hom, and the other from Hung Hom to Admiralty.

In comparison, the Guangzhou–Shenzhen–Hong Kong Express Rail Link, also built by MTR on behalf of the government, has just one station in Hong Kong. Project costs ballooned by HK$19.6 billion to HK$84.4 billion, with the start date of the link postponed by three years to the third quarter of next year.

MTR has been criticised for its management of both railway projects.

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Giving a breakdown of costs for the Sha Tin to Central rail link, Tien said that about HK$4.1 billion was spent on heritage preservation after archaeological treasures were found near the new Sung Wong Toi station. He also estimated the additional cost of materials and salary inflation to be about HK$8 billion, or about 10 per cent of the original cost of HK$80 billion.

Other extras included costs resulting from construction delays and the government changing its requirements. These included the late handover of certain critical work sites at the new Exhibition station in Wan Chai, after a military shipwreck was found, and another at a Wan Chai site caused by the discovery of an abandoned pipe pile near Fenwick Pier Street.

Tien suggested that in future, project cost estimates for short-term engineering works should include actual tender prices before funding was secured.

He admitted though that this approach had disadvantages, as Legco might not be able to approve projects within a limited validity period for tenders, and this might make lawmakers feel pressured to sign off on projects quickly.

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He added that this approach was not suitable for longer-term projects, as it was impossible to call for tenders and then begin engineering works only a few years later.

For those cases, it was better to decide on the project cost from the start and pay the project manager upfront instead of using an entrustment agreement, which required the government to bear all work costs.

Completion of the Tai Wai to Hung Hom section is expected to happen in the middle of 2019 and for the cross-harbour section to Admiralty, in 2021.