COVERING CONFIDENTIAL
that autumn's PES round, however, the £20m construction costs were accepted, spread over the years and built in to the capital baseline, where they remain.
4. The investment appraisal stage is therefore behind us: there never was a "do nothing" option and the selected option, which was free of the (huge) land cost element, was bound to be, and to remain, the cheapest. Given that there is now no likelihood, for political reasons, of being able to change course, there is probably no call for further investment appraisals.
5. We are, instead, now in the realms of cost control. The design brief specified a £22.5m budget (at first quarter 1992 price levels). The successful outline design was rough-costed at about £24.0m. The brief refinement and design amendment exercise currently underway is looking for cost reductions as well as minimising the cost impact of design changes. It is too early to say what the results will be, but we should not expect dramatic changes. More worrying is the impact that concurrent airport work will have on construction prices in Hong Kong in the mid-1990's: all the more important, in this respect, to move ahead quickly. The scope for savings in the total cost is small, unless the requirement reduces. Mr Hum's Steering Committee is keeping a careful watch on any changes of requirements. We have also appointed Swire Property Projects Limited as our Project Managers in Hong Kong. One of the most important parts of their brief is cost control.
6. OED ought, now that the design selection exercise is past, bring the Treasury up to date on all this. We will draft accordingly, and clear with RMD.
SC1315.HK
Market
M HR Bertram
COVERING CONFIDENTIAL
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