Progress made in the refinement of cost estimates
8.
Much progress has been made in the past nine months. Detailed design,
contract documentation which was held in abeyance prior to the initialling of the MOU picked
up momentum again immediately in July 1991. Great effort has been put in to gain the lost
time in order to achieve the timely completion of the ACP. Details of project scope and cost
estimate have been developed and closely reviewed during this relatively short period of time.
Furthermore, in order to prepare contract documentation on the basis of mostly fixed price
lump sum basis, the project requirements are defined in greater detail and more accuracy
(because, in most cases, no remeasurement of quantities will be provided for during the
construction stage). In other words, we have made a lot of progress in the planning and
implementation of the ACP which is normally done in a matter of years, and that is also why
there appears to be some notable changes in the estimates over a seemingly short period of
time.
9.
While it is expected that the above costs will be subject to further refinement
when major tenders are received and awarded, we are confident that the net effect of such
cost adjustments can be contained within the $2.5 billion contingency allowance mentioned
in paragraph 4 above. Preliminary assessment of the recent tenders received by Government
indicates that in most cases, there will be favourable tender prices due to keen competition.
There will also be closer scrutiny of the interface between projects and the apportionment of
cost between various parties. With the introduction of a specially designed project (including
cost) management system, we are confident that the scope and costs of the ACP can be kept
under prudent control.
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