on 26 November 1997
ITEM FOR PUBLIC WORKS
SUBCOMMITTEE OF FINANCE COMMITTEE
HEAD 706 - HIGHWAYS
Transport - Footbridges and pedestrian tunnels
79TB - Hillside escalator link between Central and Mid-Levels
Members are invited to recommend to Finance Committee an increase in the approved project estimate of 79TB from $245.3 million by $8.0 million to $253.3 million in money-of-the-day prices.
The approved project estimate of 79TB is insufficient to meet the cost of settling outstanding claims under the project.
2.The Director of Highways (DHy), with the support of the Secretary for Transport, proposes to increase the approved project estimate of 79TB from $245.3 million by $8.0 million to $253.3 million in money-of-the-day (MOD) prices.
PROJECT SCOPE AND NATURE
3.The scope of the project comprises the construction of a continuous pedestrian link between Conduit Road and the existing elevated walkway at Connaught Road. In Central District, the link passes through the Hang Seng Bank Headquarters Building and Central Market with pedestrian bridges across Des Voeux Road Central and Queen's Road Central. The link then continues as an elevated structure along Cochrane Street and Hollywood Road to Shelley Street and at-grade along Shelley Street except for a grade-separated crossing at Caine Road. At the end of Shelley Street, the link is again elevated to cross Mosque Junction to Peel Street and Robinson Road. Above Robinson Road, the link continues at-grade up to Conduit Road. The total length is about 800 metres with a vertical rise of 135 metres incorporating 20 escalators and 3 travelators.
4.The escalator link is built in one of the oldest urban areas in Central District. Many utilities and drainage systems lying underground are either uncharted or not properly recorded. This has led to a large number of design changes for the link and disruption to the works progress. As a result, the Contractor lodged claims for losses due to design changes and disruptions to works. We assessed the claims in accordance with the contract provisions and settled most of them with the Contractor. However, five outstanding claims involving a total sum of $45.6 million remain unsettled. Consequently, we agreed with the Contractor in December 1996 to appoint a Mediator to enter into mediation for the full and final settlement of all the claims.
5.As a result of the mediation, the Mediator recommended a figure of $9.3 million for the full settlement of all five claims. The Secretary for Justice (S for J) supports the recommendation and advises that if settlement cannot be made in the mediation, arbitration should proceed. The arbitration process will involve additional time and resources and the Government's liability under arbitration will be uncertain. On the advice of S for J, we consider, therefore, that settlement at $9.3 million is reasonable and is in the interests of the Government.
6.The Contractor has already indicated his willingness to accept the recommendation of the Mediator.
7.A comparison of the latest approved project estimate and the revised project estimate in MOD prices is as follows -
|(a)||Construction works under works contract|
|(c)||Works by other offices|
|(d)||(i) Consultants' fees for construction stage|
|(ii) Site staff costs|
|(f)||Sewerage and drainage improvements|
8.As regards (e) above (Contingencies), we have increased the contingency sum by $8 million to $9.3 million for the settlement of all five outstanding claims.
9.Subject to approval, we will phase the expenditure as follows -
|Up to 31 March 1997|
|1997 - 1998|
10.We take the price adjustment factor for 1997-98 as 1.0 because the project was substantially completed in October 1994 and hence the expenditure incurred in subsequent years will not be subject to inflationary adjustment.
11.The proposed increase in the approved project estimate will not give rise to any additional recurrent expenditure.
12.As there is no change in the approved project scope, we consider further public consultation is unnecessary.
13.The proposed increase in the approved project estimate does not have any environmental impact.
14.The proposed increase in the approved project estimate does not require land acquisition.
15.In July 1990, Finance Committee (FC) agreed to upgrade 79TB to Category A for the construction of an escalator link between Central and Mid-Levels at an estimated cost of $175.1 million, including a contribution of $15.9 million from the private developers for the construction of a twin footbridge link to the Hang Seng Bank Headquarters Building and a caisson retaining wall at Robinson Road.
16.In February 1991, FC approved an increase in the approved project estimate by $29.5 million to $204.6 million after a review of the cost of the works taking into account inflation and the difficult conditions of working in narrow streets with adjacent high rise buildings. As this increase did not affect the works funded by private developers, the private developers' contributions remained at $15.9 million. We started the construction of the escalator link on 28 February 1991 and opened the escalator link for use by the public on 10 October 1993.
17.In January 1994, FC approved a further increase of the approved project estimate by $28.1 million to $232.7 million taking into account inflation, the additional strengthening works to parts of the existing Central Market building and unforeseen ground conditions for sewerage and drainage works. We also required the private developers to increase their contribution from $15.9 million to $17.9 million as a result of inflation and variation of works.
18.In September 1995, the Secretary for the Treasury approved a further increase of the approved project estimate by $12.6 million to $245.3 million for the following reasons -
- extension of the construction period for the escalator link by 180 days due to additional works and unforeseen ground conditions which had in turn led to an increase in fees for the consultants and the contractor, salary costs for resident site staff, etc.; and
- undertaking of additional works and measures to enhance safety and proper usage of the escalator including the employment of additional site patrol attendants; provision of anti-sliding devices, additional close circuit television and public announcement equipment, etc.
19.The Director of Audit in his Report of August 1996 noted that 79TB had an outstanding claim subject to dispute, amounting to $24.0 million. Subsequently, the Contractor lodged four other claims. In December 1996, we agreed with the Contractor to lump the five outstanding claims in one global item for resolution in a single mediation. The total claimed value was $45.6 million.
20.The Mediation commenced in December 1996 and ended in June 1997. Details of the five claims and the Mediator's recommendation are as follows -
- Drainage and ductworks " the Contractor claimed for additional costs associated with design changes and losses due to disruptions to works (amounting to $28.0 million). Most of the claim details were not fully substantiated. However, we agreed with the Mediator's assessment that to some extent the cost of disruption should be met by the Government. The Mediator's assessed amount is $7.2 million.
- Reduction to prolongation costs for over recovery of overhead " the Contractor objected to the Engineer's final decision to deduct the prolongation costs for over recovery of overhead in the prolongation claim (amounting to $1.2 million). We agreed with the Mediator that deduction should not be made. The Mediator's assessed amount is $1.2 million.
- Cost resulting from under payment " the Contractor alleged that extra staff were brought in to facilitate the measurement of the quantity of works, including final measurement, together with interest charges for late payment as a result of delays (amounting to $5.7 million). We considered that the Contractor did not have a legal basis for claiming the cost of extra staff. However, we accept the Mediator's recommendation that interest should be allowed. The Mediator's assessment is $1.2 million.
- Prolongation costs of the roofing sub-contractor " We did not agree to this claim as the Contractor did not have enough substantiation. The Mediator did not recommend any payment to the Contractor under this claim.
- Under recovery of overheads " we did not agree to this claim as the Contractor did not have enough substantiation. The Mediator did not recommend any payment to the Contractor under this claim.
21.Although the Mediator was willing to support a settlement figure of $9.6 million based on his assessment of the five claims, the Contractor indicated in a meeting with the Mediator that a settlement figure of $9.3 million would be acceptable. Accordingly, in June 1997, the Mediator finally recommended a settlement figure of $9.3 million for the full settlement of all five claims. With the support of the Secretary for Justice and the Secretary for Treasury, we reached a non-committal settlement agreement with the Contractor on the recommended settlement cost in October 1997.