For discussion FCR(96-97)11
on 10 May 1996

ITEM FOR FINANCE COMMITTEE

CAPITAL WORKS RESERVE FUND
HEAD 708 - CAPITAL SUBVENTIONS AND MAJOR SYSTEMS AND EQUIPMENT
Education Subventions
Subhead 8012EC Improvement works to existing secondary schools based on the recommendations of the Education Commission Report No. 5 - phase 1
Subhead 8013EC Improvement works to existing primary schools based on the recommendations of the Education Commission Report No. 5 - phase 1
Subhead 8014EC Improvement works to existing primary schools based on the recommendations of the Education Commission Report No. 5 - phase 2
Subhead 8015EC Improvement works to existing secondary schools based on the recommendations of the Education Commission Report No. 5 - phase 2
Subhead 8017EC Improvement works to existing secondary schools based on the recommendations of the Education Commission Report No. 5 - phase 3
Subhead 8018EC Improvement works to existing primary schools based on the recommendations of the Education Commission Report No. 5 - phase 3

Members are invited to approve -

  1. increases in project estimates, from $438.5 million by $131.2 million to $569.7 million under Subhead 8012EC and from $417.0 million by $142.8 million to $559.8 million under Subhead 8013EC in money-of-the-day prices, for completing the improvement works at 53 secondary and 51 primary schools respectively in Phase 1 of the School Improvement Programme;
  2. increases in project estimates, from $29.9 million by $1,203.3 million to $1,233.2 million under Subhead 8014EC and from $28.4 million by $1,048.9 million to $1,077.3 million under Subhead 8015EC in money-of-the-day prices for conducting feasibility studies on additional schools and for carrying out improvement works eventually at 69 primary and 55 secondary schools respectively in Phase 2 of the School Improvement Programme; and
  3. new commitments of $78.4 million and $91.3 million in money-of-the-day prices under Subheads 8017EC and 8018EC respectively, for employing consultants to carry out feasibility studies on 72 secondary and 88 primary schools (including 18 special schools) respectively in Phase 3 of the School Improvement Programme.


PROBLEM

The approved commitments for Phases 1 and 2 of the School Improvement Programme (SIP) are insufficient for completing the improvement works required in the schools identified. Director of Education (D of E) also requires funds for conducting feasibility studies on improvement works for schools under Phase 3 of the SIP.

PROPOSAL

2. D of E, on the advice of the Director of Architectural Services (D Arch S) and with the support of the Secretary for Education and Manpower (SEM), proposes to -

  1. increase the project estimate of Subhead 8012EC from $438.5 million by $131.2 million to $569.7 million, and Subhead 8013EC from $417.0 million by $142.8 million to $559.8 million, to enable the remaining works under Phase 1 of the SIP to proceed;
  2. increase the project estimate of Subhead 8014EC from $29.9 million by $1,203.3 million to $1,233.2 million, and to increase the project estimate of Subhead 8015EC from $28.4 million by $1,048.9 million to $1,077.3 million, for conducting feasibility studies on additional schools and for carrying out improvement works eventually at 69 primary and 55 secondary schools under Phase 2 of the SIP; and
  3. create commitments of $78.4 million and $91.3 million under Subheads 8017EC and 8018EC respectively, for employing consultants to carry out feasibility studies on improvement works at 72 secondary and 88 primary schools (including 18 special schools) respectively under Phase 3 of the SIP.

JUSTIFICATION

3. Many existing schools have been built to old planning standards and cannot meet the requirements brought about by changes in curriculum and teaching approaches in recent years. The SIP aims at improving quality of education through providing primary and secondary schools with additional spaces and facilities for teaching, out-of-class activities and supporting services for both teachers and students. The improvement involves addition or alteration works within the existing school premises and if required, construction of extensions to the school buildings (either as an annex or on the roof-top). The scope of the improvement works varies from one school to another depending on the specific requirements of the schools, their site conditions and layout of individual school premises.

Increase in project estimates for Phase 1 of the SIP

4. In respect of Phase 1 of the SIP, Members approved in April 1995 project estimates of $438.5 million and $417 million for carrying out improvement works at 50 secondary and 60 primary schools respectively. Following detailed feasibility studies, D Arch S confirmed that it was technically not feasible to carry out improvement works at 23 (3 secondary and 20 primary) schools. To ensure that as many schools as possible can benefit from early improvements, we have subsequently injected another 17 (6 secondary and 11 primary) schools into Phase 1 of the SIP. D Arch S has studied and confirmed the feasibility of improvement works at these additional schools. Consequently, Phase 1 of the SIP will now involve works at 53 secondary and 51 primary schools.

5. Although the total number of schools now covered under Phase 1 is smaller than that originally envisaged in the approved project estimates, a total 104 compared to 110, we require an increase in the project estimates of Subheads 8012EC and 8013EC by $131.2 million and $142.8 million respectively. The reasons are -

  1. those additional schools injected into the programme to replace some of the schools at which improvement works are technically not possible have quite different requirements which entail a higher cost;
  2. following detailed feasibility studies and design, some schools require more site preparation, construction and building works than originally envisaged and hence higher project cost, and
  3. we require an allowance for inflation during the construction period. We are reflecting this by changing the project estimates from constant prices to money-of-the-day (MOD) prices.

6. As regards paragraph 5 (a) and (b) above, they reflect changes in the detailed scope of works in some of the schools included in Phase 1 of the SIP. D of E considers these changes necessary in order to bring improvement to the schools concerned. We normally expect higher project costs in schools which require complicated geotechnical works resulting from additional or extensive foundation and structural works; building of new transformer rooms to allow for higher level of electricity consumption; provision of emergency vehicular access and sprinkler system to meet fire services requirements, and other minor adjustments to the design and scope of work to meet the unique requirements of individual schools.

7. As illustrated in the table below, the increases in commitments of Subheads 8012EC and 8013EC attributable to additional substructure and building works constitute some $108.9 million and $128.4 million respectively. These increases also lead to some corresponding increases in cost estimates for consultants’ fees and contingencies. In addition, the revised project estimates have also included an inflation allowance of $64.7 million and $52.9 million for Subheads 8012EC and 8013EC respectively.


Subhead 8012EC Subhead 8013EC
Factor Amount
($million)
Amount
($million)

Price variation1

3.0

3.0

Additional substructure works

61.0

71.4

Additional building works

47.9

57.0

Consultants’ fees

-1.0

5.7

Contingencies

9.2

5.2

Others2

-53.6

-52.4

Sub-total (at March 1995 prices)

66.5

89.9

Inflation allowance to convert the estimate to MOD prices

64.7

52.9

Total (in MOD prices)

131.2

142.8

8. A comparison of the cost breakdowns of the approved estimates (at March 1995 prices) and the revised project estimate (in MOD prices) for Phase 1 and the detailed reasons for the changes in estimates are at the Enclosure.

Increase in commitment for Phase 2 of the SIP

9. In April 1995 Members also approved funds for D of E to conduct feasibility studies on improvement works at 69 primary and 55 secondary schools under Phase 2 of the SIP. Based on the experience of Phase 1, which indicates that more than one-fifth of the schools might have difficulties for carrying out improvement works following feasibility studies, D of E and D Arch S consider it necessary to conduct feasibility studies on a greater number of schools so that we can eventually identify the target number of schools to undergo improvement under Phase 2 of the SIP. Accordingly, D of E and D Arch S have decided to conduct feasibility studies on 86 primary and 69 secondary schools under Phase 2.

10. In Phase 2 of the SIP, the consultants employed by D Arch S have so far completed feasibility studies on 62 schools (33 primary and 29 secondary schools). D Arch S estimates that the total cost of conducting feasibility studies and for eventually carrying out improvement works for the target number of 69 primary and 55 secondary schools will be $2,310.5 million in MOD prices. D Arch S further advises that the average cost of implementing improvement works at schools in Phase 2 will be higher than the respective costs for Phase 1. This is mainly because schools included in Phase 2 will require additional building and construction work to provide special access and facilities for disabled persons as required by the Disability Discrimination Ordinance enacted in 1995. D Arch S estimates that facilities included in Phase 2 schools to meet requirements of the Disability Discrimination Ordinance account for $529.5 million in MOD prices or 22.9% of the total project costs for Phase 2.

Creation of commitment for Phase 3 of the SIP

11. To continue to improve the facilities in more schools, D of E intends to carry out feasibility studies on 72 secondary and 88 primary schools (including 18 special schools) in Phase 3 of the SIP. As in the two previous phases, D Arch S proposes to employ private consultants to undertake the feasibility studies because he does not have the in-house resources to conduct the large number of feasibility studies and detailed designs which will involve extensive works given that the schools were built at different time with varying designs and are located throughout the territory.

Timing of the programme

12. If Members approve the above proposals, D Arch S will immediately award tenders for the remaining works in Phase 1 and commission the feasibility studies on the additional schools and commence the improvement works at schools with detailed design completed in Phase 2. He will also start commissioning the feasibility studies in Phase 3. This will allow works to start during the summer vacation to avoid disruption to classes. D Arch S expects that improvement works to the schools in Phase 1 will be completed by mid 1997, and schools in Phase 2 by early 1998. He also anticipates that the feasibility studies on Phase 3 schools will complete by mid 1997 and improvement works by late 1999.

FINANCIAL IMPLICATIONS

13. For Phase 1, D Arch S estimates that the total cost for conducting feasibility studies and implementing the improvement works at 53 secondary and 51 primary schools are $569.7 million and $559.8 million in MOD prices respectively. The revised cashflows for the projects are as follows -

Subhead 8012EC

Year $ million
(December 1995)
Price
adjustment
factor
$ million
(MOD)

1994-95
(Actual)

5.8

-

5.8

1995-96
(Actual)

70.0

-

70.0

1996-97

367.1

1.07500

394.6

1997-98

79.5

1.18250

94.0

1998-99

4.1

1.30075

5.3

Total

526.5


569.7

Subhead 8013EC

Year $ million
(December 1995)
Price
adjustment
factor
$ million
(MOD)

1994-95
(Actual)

6.2

-

6.2

1995-96
(Actual)

67.0

-

67.0

1996-97

353.4

1.07500

379.9

1997-98

83.4

1.18250

98.6

1998-99

6.2

1.30075

8.1

Total

516.2


559.8

14. As regards Phase 2, D Arch S estimates that the total cost for conducting feasibility studies and implementing improvement works at 69 primary and 55 secondary schools are $1,233.2 million and $1,077.3 million in MOD prices respectively, made up as follows-


Subhead 8014EC
$ million
Subhead 8015EC
$ million

(a) Site investigation

12.8

9.8

(b) Substructure

131.5

123.9

(c) Building

393.9

335.6

(d) Building services

174.4

130.8

(e) External works

31.7

25.0

(f) Contingencies

89.4

75.0

(g) Consultants’ fees

200.9

178.1

(h) Site supervision

21.8

19.3

(i) Furniture and equipment

20.7

44.0

Sub-total

1,077.1 (December 1995 prices)

941.5 (December 1995 prices

(j) Inflation allowance to convert the estimate to MOD prices

156.1

135.8

Total

1,233.2

1,077.3

The expenditure will be phased as follows -

Subhead 8014EC

Year$ million (December 1995)Price Adjustment factor$ million (MOD
1995-96 (Actual)18.9-18.9
1996-97451.81.07500485.7
1997-98509.01.18250601.9
1998-9997.41.30075126.7
Total1,077.1
1,233.2

Subhead 8015EC

Year$ million (December 1995)Price Adjustment$ million (MOD
1995-96 (Actual)16.6-16.6
1996-976407.91.07500438.5
1997-98425.61.18250503.3
1998-9991.41.30075118.9
Total941.5
1,077.3

15. As regards Phase 3, D Arch S estimates that the costs for employing consultants to carry out feasibility studies on 72 secondary and 88 primary schools are $78.4 million and $91.3 million in MOD prices respectively, made up as follows -

Subhead 8017EC Subhead 8018EC


Subhead 8017EC
$ million
Subhead 8018EC
$ million
(a) Consultants' fees57.665.9
(b) Site investigation10.313.0
Sub-total67.9 (at December 1995 prices)78.9 (December 1995 prices)
(c) Inflation allowance to convert the estimates to MOD prices10.512.4
Total78.491.3

The expenditure will be phased as follows -

Subhead 8017EC

Year$ million
(December 1995)
Price
Adjustment
Factor
$ million
(MOD)
1996-9717.51.0750018.8
1997-9850.41.1825059.6
Total67.9
78.4

Subhead 8018EC

Year$ million
(December 1995
Price
Adjustment
factor
$ million
(MOD)
1996-9719.41.0750020.9
1997-9859.51.1825070.4
Total78.9
91.3

16. In all of the calculations above, we derive the MOD estimates on the basis of the Government’s forecast of trend on labour and construction prices over the period between 1996 and 1999.

17. D of E estimates that the revised annually recurrent costs arising from the additional facilities provided in Phase 1 will be $12.3 million under Subhead 8012EC and $13.1 million under Subhead 8013EC. For Phase 2, the annually recurrent costs for Subheads 8014EC and 8015EC will be $20.8 million and $13.6 million respectively. All additional annually recurrent costs will be met through SEM’s allocation on education subventions. The proposed feasibility studies for Phase 3 will not give rise to annually recurrent expenditure.

BACKGROUND INFORMATION

18. The SIP was one of the recommendations of the Education Commission Report No. 5. Members approved on 11 March 1994 Phase 1 of the SIP by creating commitments of $21.6 million and $17.6 million under Subheads 8012EC and 8013EC respectively for employing consultants to carry out feasibility studies and detailed design for improvement works at 50 secondary and 60 primary schools. On 7 April 1995, Members approved an increase in the project estimate of Subhead 8012EC from $21.6 million by $416.9 million to $438.5 million, and an increase in the project estimate of Subhead 8013EC from $17.6 million by $399.4 million to $417.0 million, for implementing the improvement works.

19. Members further approved on 7 April 1995 Phase 2 of the SIP by creating commitments of $29.9 million and $28.4 million under Subheads 8014EC and 8015EC respectively for employing consultants to carry out feasibility studies and detailed design at 69 primary and 55 secondary schools respectively.

20. At present, D Arch S is carrying out improvement works at 53 secondary and 51 primary schools in Phase 1 of the SIP. As regards Phase 2, we have completed feasibility studies on 62 schools.

21. Apart from the aided schools in the various Phases mentioned above, D Arch S has commenced construction works at six government schools in Phase 2 and feasibility studies and detailed design for 22 government schools in Phase 3.

Education and Manpower Branch
May 1996

1 -- Price fluctutaion payments under the contract.
2 -- This item includes site investigation, building services, external works, site supervision, and furniture and equipment.
3 -- The inflation allowance is in respect of expenditure on the project in the financial years 1995-96, 1996-97, 1997-98 and 1998-99.


Enclosure to FCR(96-97)11

CAPITAL WORKS RESERVE FUND
HEAD 708 - CAPITAL SUBVENTIONS AND MAJOR SYSTEMS AND EQUIPMENT
Education Subventions
Subhead 8012EC Improvement works to existing secondary schools based on the recommendations of the Education Commission Report No. 5 - phase 1
Subhead 8013EC Improvement works to existing primary schools based on the recommendations of the Education Commission Report No. 5 - phase 1

In respect of Phase 1 of the School Improvement Programme, a comparison of the approved and revised project estimates is as follows -


Subhead 8012EC Subhead 8013EC

Approved
estimate
(March 1995
$ million
Revised
estimate
(MOD)
$ million
Approved
estimate
(March 1995)
$ million
Revised estimate
(MOD)
$ million

(a) Site investigation

4.9

2.5

5.6

4.7

(b) Substructure

26.1

92.6

21.2

96.3

(c) Building

156.8

238.0

161.8

246.3

(d) Building services

82.4

50.4

79.2

57.6

(e) External works

14.4

12.2

21.6

13.9

(f) Consultants’ fees

73.7

72.6

66.7

72.7

(g) Site supervision

15.3

16.9

18.7

16.2

(h) Furniture and equipment

37.5

42.4

15.0

15.3

(i) Contingencies

27.4

42.1

27.2

36.8

Total

438.5

569.7

417.0

559.8

2. As regards (a) (site investigation), the actual site investigation requirements are less than envisaged.

3. As regards (b) (substructure), the substantial increases are mainly due to the need for additional works following detailed site investigations. The major additional works are explained in paragraph 6 of the main paper which include among others, complicated geotechnical works, piling and/or foundation designs, and extensive repaving works to provide emergency vehicle access.

4. As regards (c) (building), the increases are due to the need to extend the scope of works in some cases to bring the school up to the required standards, to do more demolition works in five cases, to construct a transformer room in 12 cases, and to put in extensive sprinkler system in two cases.

5. As regards (d) (building services), the approved estimates included provision for certain factors e.g. alternations and overhaul of existing building services installation which in some cases did not arise. The actual amounts required are now found to be less than originally envisaged.

6. As regards (e) (external works), in some cases there was less space than envisaged for planting or hard paving, resulting in less external works required and lower costs.

7. As regards (f) (consultants’ fees), the original estimate provided for feasibility studies for 50 secondary and 60 primary schools. The Director of Architectural Services has in fact conducted feasibility studies on 56 secondary and 71 primary schools, the additions being the replacement of non-feasible schools. The increase of consultancy fee in respect of secondary schools has been absorbed by the original estimate of Subhead 8012EC but the increase in respect of primary schools under Subhead 8013EC requires additional provision.

8. As regards (g) (site supervision), the increase under Subhead 8012EC is mainly attributable to the need to carry out improvement works to three additional schools. The decrease under Subhead 8013EC on the other hand is due to the reduction of nine primary schools.

9. As regards (h) (furniture and equipment), the increase is mainly a result of price adjustment on the unit cost. In addition, the increase in respect of Subhead 8012EC is partly due to the increase of three secondary schools, the cost in respect of Subhead 8013EC could remain almost the same partly because price adjustment has been offset by the reduction of nine primary schools in the programme.

10. As regards (i) (contingencies), the increase largely corresponds to the increase in the total project cost to allow for contingencies.


Last Updated on 2 December 1998