HK High-Speed Train – Severely Budget Overrun, High Speed Rail Delays for 1 Year

Apple Daily

7th May 2013

<Severely Over-Budget High Speed Rail Link’s Completion is Delayed for at Least a Year>

嚴重超支 高鐵延誤一年

With the support of pro-government lawmakers, the Legislative Council approved the HK$66.9 billion (US$8.6 billion) budget for the High Speed Rail project, which is scheduled to be in service by 2015. Based on confidential documents obtained by Apple Daily, the contractors estimate that the High Speed Rail project has been delayed by at least one year. To date, the total cost of the project is 12% higher than the contract price, amounting to HK$4.4 billion (US$566 million). This extra cost has eaten up almost all of the emergency budget. The Hong Kong SAR government will also face a massive claim of billions of dollars (hundreds of million US dollars).

According to the original plan, the High-Speed Rail project was to have been completed by April 2015. A test-run period was to follow with the link officially entering service in August. There are rumours circulating within the MTR Corporation (Hong Kong’s “underground railway” operator) that “a number of contractors said in a meeting with the MTR management that the High Speed Rail may not be completed even in 2016. The management did not want to hear what the contractors had to say and kicked them out of the meeting.”

The construction phase of the High-Speed Rail project began in January 2010: the two key projects are the construction of the West Kowloon terminal, and boring tunnels to connect it with China’s railway network. At the moment, the delays facing the construction of the West Kowloon terminal are the most serious. The construction contract for the terminal amounted to HK$12.2 billion (US$16 billion). The terminal project includes the main building at the north end of the plot, while at the southern end the terminus will have an extension connecting it to the West Kowloon Cultural District. The bid to construct the main terminal – at HK$8.9 billion (US$1.2 billion), the largest single contract of the High-Speed-Rail project – was won by a joint venture between Gammon and Leighton.

Design Whilst Building – Lack of Coordination

Based on the documents obtained, the contractors responsible for the main terminal building estimate completion will be delayed by at least a year. In the first 16 months since construction began, delays have already added six months to the project. The major reason given for these delays is that the original designs for the terminal were incomplete, requiring substantial amendments before construction could commence, and meaning that design work is being done alongside the construction work. The contractor also criticised the approval process for the designs as being indecisive, involving too many opinions and lacking in coordination, all of which contributed to the delay. In addition, design changes have also increased the difficulty of the project and the construction time.

An MTR source said that MTR wanted to change the design to reduce the number of foundation piles and reinforce the outside wall design, in order to reduce the construction time and cost. However, problems were found with the subsoil, demanding a redesign, and this in turn led to amendments to the design of the terminal’s ceiling. One of the documents states “Because their preparation was not done thoroughly and the administration was a mess, there was a lot of information that MTR could not provide to the contractors”, causing delays. On the other hand, the document shows that there were abnormal movements on a number of the underground retaining walls at the terminal, requiring remedial measures which also contributed to the delay.

Albert Lai Kwong-tak, the founding chairman of The Professional Commons and member of the Engineering Sector of the Chief Executive Election Committee, commented after reviewing the document that it is unusual to have such a long delay, and the delays will undoubtedly push the cost of the project up. On this single contract alone, the total cost is HK$2.4 billion (US$3.1 billion) more than the original budget, which is around 20-30% budget overrun, the problem is very serious.

Delays to the construction of the West Kowloon Terminal of the High-Speed Rail project: contractors say the design approval process lacks coordination

Artist’s impression of West Kowloon Terminal

Emergency Funding Almost Gone

The tunnel-boring project is divided into seven phases with varying degrees of complexity and their own challenges: the tunnel between Tse Uk Tsuen and Shek Yam Estate had a problem with water leakage during boring. Even if construction goes on non-stop it may not be completed on schedule. Costs will certainly go up though.

According to MTR’s in-house estimates, by January 2013 the completed cost of the High-Speed Rail project was expected to exceed the original contract price by 12% or HK$4.4 billion (US$570 million). There are signs that cost over-runs will continue to grow. As things stand the budgeted emergency funding has almost all already been spent.The HK$66.9 billion (US$8.6 billion) budget allocated by the Hong Kong SAR government included a significant proportion of emergency or reserve funds. As of the end of 2012, all of the major contracts for the High-Speed Rail have been approved, totalling HK$44.8 billion (US$5.67 billion) and only non-railway projects remain to be tendered. MTR’s project management fee amounted to HK$4.239 billion (US$554 million).

Approximately HK$5 billion (US$600 million) emergency funding was provided for in the original budget: Cost overruns to date – with only 60% of the project complete – have consumed almost all of this emergency provision, and more cost overruns are to be expected due to the massive claims contractors will be able to bring, due to delays to the project.Neither MTR or the Hong Kong SAR government has responded as to whether there will be further delays to the project. Rather, they provided a synchronised answer saying that the goal is to complete the railway by 2015. MTR claimed that the construction is continuing according to plan, and that emergency funds will be able to cover all the claims caused by the delay.

HKSAR Government’s Funding for the ProjectRailway construction*: HK$55.1 billion (US$7.1 billion)
Non-railway construction*: HK$11.8 billion (US$1.6 billion)
Special Ex Gratia Allowance#: HK$86 million (US$11 million)
Total budget: HK$66.9 billion (US$8.6 billion)

*includes MTR’s project management fees of HK$4.239 billion (US$554 million)
# Ex gratia allowance for Choi Yuen Tsuen and other New Territories villages being affected by the project

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