XN000022-1992-04-02 — Page 2

THURSDAY, APRIL 2, 1992

GOVT CONFIDENT OF CONTROLLING ACP COSTS: FS

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THE GOVERNMENT IS CONFIDENT THAT PROJECT COSTS IN BUILDING THE NEW AIRPORT AT CHEK LAP KOK AND RELATED PROJECTS WILL BE KEPT UNDER CONTROL, THE FINANCIAL SECRETARY, MR HAMISH MACLEOD, SAID TODAY (THURSDAY).

IN A

STATEMENT AT A PRESS CONFERENCE ON THE UPDATED COST ESTIMATE OF $112.2 BILLION FOR THE AIRPORT CORE PROGRAMME (ACP), MR MACLEOD SAID -A COMPREHENSIVE PROJECT MANAGEMENT AND CASH-LIMITING COST-CONTROL SYSTEM WAS IN PLACE.

"WE ARE ALSO USING FIXED PRICE LUMP SUM CONTRACTS AS FAR AS POSSIBLE AND THIS PROTECTS US AGAINST UNFORESEEN COST INCREASES DURING CONSTRUCTION, HE SAID.

It

EXPLAINING THE 13.8-PER-CENT INCREASE IN THE OVERALL COST ESTIMATE FROM $98.6 BILLION, MR MACLEOD SAID SINCE LAST JULY THERE HAD BEEN EXTENSIVE ANALYSIS OF THE REQUIREMENTS AND DESIGNS OF VARIOUS PROJECTS.

NEGOTIATIONS HAD ALSO BEEN HELD WITH THE PROVISIONAL AIRPORT AUTHORITY (PAA) AND THE MASS TRANSIT RAILWAY CORPORATION (MTRC) TO AGREE WHAT SORT OF SUPPORT THEY NEEDED ΤΟ OBTAIN PRIVATE SECTOR FINANCING.

THE INCREASES SHOWN IN THE NEW UPDATE AROSE FROM SOME DESIGN CHANGES, PLUS REFINEMENT OF THE ESTIMATES. FIGURES WERE STILL GIVEN AT MARCH 1991 PRICES WITH THE AIM OF SHOWING IN A STRAIGHTFORWARD WAY WHAT WAS HAPPENING IN PRACTICAL TERMS TO THE BASE COSTS.

MR MACLEOD SAID HIS MAIN MESSAGE AS FINANCIAL SECRETARY WAS THAT THE COST TO THE TAXPAYER HAD NOT GONE UP BECAUSE THE COST TO BE BORNE BY THE GOVERNMENT FOR THE 10 ACP CORE PROJECTS HAD REMAINED CONSTANT AT $59.3 BILLION.

"IT HAS BEEN POSSIBLE TO ACHIEVE THIS BECAUSE INCREASES IN CERTAIN PROJECT COSTS ARE OFFSET BY LOWER EQUITY REQUIREMENTS AND BY PREVIOUSLY UNQUANTIFIED REIMBURSEMENT FROM THE MTRC.

"IT

IS ALSO IMPORTANT TO NOTE THAT GOVERNMENT EXPENDITURE ON ACP PROJECTS UP TO 1996-97 WILL ONLY ABSORB ABOUT ONE-QUARTER OF TOTAL GOVERNMENT CAPITAL EXPENDITURE, HE SAID.

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MR MACLEOD SAID THE $1.5 BILLION INCREASE IN THE ESTIMATED COST OF BUILDING THE AIRPORT, TO $46.3 BILLION, AROSE MAINLY AS A RESULT OF A MORE ACCURATE ASSESSMENT OF COSTS THAN WAS POSSIBLE IN JULY.

ON THE NEW COST ESTIMATE OF $22.1 BILLION FOR THE AIRPORT RAILWAY, COMPARED WITH THE JULY ESTIMATE OF $12.5 BILLION, MR MACLEOD STRESSED THAT THE ACTUAL COST INCREASE WAS ONLY $3.9 BILLION

WHICH WAS NEEDED TO COVER ESSENTIAL RAILWAY DESIGN MODIFICATIONS AND SOME EXTRA CIVIL ENGINEERING WORKS.

/"THE REMAINING