was approved by the Finance Committee in September 1981. The Finance Committee were not informed however of the likely quantum of the financial claims from the contractors arising from the late change in scope. The insta on of the ice skating rink commenced in August 1982 and delayed the completion of the whole project by two andalf months.
151. In response to my enquiries, the Director of Architectural Services informed me that the design of the Coliseum was not unique in the architectural field although it could be said to be so in Hong Kong. The Director stated that the functional requirements of the project and the site constraints dictated the choice of the form of construction and hence every difficulty that followed had to be accepted. The Director also stated that the situation was aggravated by the performance of the superstructure contractor who proved to be lacking in organization and expertise. While concurring with my view that the time allowed for the completion of the contract works was too short because of an underestimation of the complexity of the structure, the Director opined that there was an element of overestimation in the superstructure contractor's abilities and that with hindsight a prequalification exercise should have been carried out. The Director agreed in principle that major changes in scope should be avoided after the letting of a contract, although he pointed out that each case should be considered on its merits. Where changes in scope were proposed he agreed that an assessment of the consequential financial costs should be made and brought to the attention of the approving authorities and that in this particular case the Urban Council would be approached with a view to seeking reimbursement of these costs.
152. Head 707 – New Towns and Public Housing (other than Housing Authority). Podium over Sha Tin railway depot. In July 1979 the Finance Committee of the Legislative Council approved the upgrading of a project to Category A of the Public Works Programme for the construction of a podium over the Sha Tin railway depot to provide land for private development. The project was to be wholly funded from the premium payable by the developer. A contract for the construction of the podium foundations was awarded in July 1979 and consultants were appointed to supervise the works. In the meantime, however, the developer proposed a revised development scheme necessitating alterations to the podium foundations and as the alterations involved substantial additional expenditure, the developer was required to deposit $1.5 million with the Government being the estimated cost of the additional works and to give an undertaking to meet any costs in excess of this amount upon completion of the contract.
153. The contract was certified as complete in February 1981 but because of contractual claims and disputes the final account was not settled until March 1984. Following an audit review of the contract in October 1985 which revealed that no action had been taken to ascertain the actual cost of the additional works, the Director of Civil Engineering Services requested the consultants to re-measure the works for which the developer was liable. The actual cost was found to be $4.7 million and a further amount of $3.2 million was recovered from the developer in November 1985. The delay in recovery has resulted in a loss to the revenue by way of interest forgone estimated at $188,000. The Director of Civil Engineering Services has since promulgated revised procedures to safeguard against a similar occurrence in future.
154. Head 707 – New Towns and Public Housing (other than Housing Authority). Subhead 7138TH. Sha Tin New Town stage II – road D15 (road P6 to Fo Tan Nullah). In November 1983 a contract in the sum of $7.6 million was awarded for the construction of a road from Fo Tan Nullah to Fo Tan Road in Sha Tin. Part of the site of the contract was occupied by the Sha Tin temporary and interim sewage treatment plant which had earlier been taken out of service. As the plant was required to be demolished before the construction of the new road, the contract specified that the contractor had to remove all disused electrical and mechanical equipment and metal scrap off the site. It also specified that these materials would be the property of the contractor and tenderers should take their value into account when pricing their tenders. However, 13 items of equipment were auctioned by the Government for $370,000 and other items were removed for reuse elsewhere before the commencement date of the contract in January 1984 and the contractor submitted a claim for reimbursement of the financial loss suffered resulting from a breach of contract by the Government. The contractor's claim was considered valid and on the basis of the tender build-up notes submitted by the contractor, the consultants assessed the credit value of the equipment removed at $950,000 and the claim was settled at $1,093,023 inclusive of interest.
155. An audit review revealed that the claim arose as a result of a misunderstanding between the consultants for the contract and the Director of Territory Development and could have been avoided had the intention of the Government regarding the disposal of the equipment been clearly established in the first instance or had the contract documents been carefully vetted prior to tendering. Before the invitation to tender in September 1983 the Director of Territory Development was informed by the Director of Electrical and Mechanical Services that 18 items of equipment were worth retaining and that the contract should specify that the contractor would be required to remove and transport the equipment to new locations. Unfortunately the consultants were not formally notified of this requirement by the Director of Territory Development although the matter was discussed in May 1983 at a meeting held to clarify what items of equipment were to be disposed of under the contract. No minutes were taken of the meeting but the Director of Territory Development's recollections were that in accordance with the Government's intention the Electrical and Mechanical Services Department would remove most of the equipment before the contract was let, whilst the consultants' recollections were that all the equipment except for one piece was to be removed from the site by the contractor and they had included in the contract specification a clause to provide for this. The fact that the contract specification did not correctly reflect the Government's intention however was not discovered although a copy of the contract documents had been sent to the Director of Territory Development for his comments and approval prior to the invitation to tender.
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