CP2 for quote external walls unquote (19 million HKD in CP2 and 50 million HKD in CP1) was achieved by changing the precast concrete cladding proposed by Farrells for a good quality natural
Significant reductions were realised by removing features inappropriate for a building in Hong Kong, eg double- glazing. The allowance for price and design risk was also reduced from 10 per cent to 5 per cent, a reasonable step at this stage in a project. We now believe that CP2 gives the right balance between construction costs and quality for a prestige building for HMG in Hong Kong. I hope that this answers your questions about how we were able to reduce the estimates from pounds 43 m to 30.6 m.
5.
I am sorry if you were earlier led to believe that increases in the estimated building costs would not/not result in reducing the scope of the building or changing the Schedule of Requirements: this can never be an assumption when funds are under great pressure. As you are aware, the original estimate was for 20 million pounds, and this was built into PES baselines. Farrell's selected scheme was estimated at the time at 24.2 million, and this was thought just manageable. After design development and revisions this rose to 26.5 million (at same rate of exchange). The effect of Sterling devaluation was to bring this figure up to 30.6 million pounds. This compared with our original PES estimate, suitably adjusted by GDP deflator and for altered exchange rate, of 24 million.
of 24 million. This sum should be available from the Treasury, though it will doubtless be a tough fight. But, as explained in first TUR, we now have little confidence about securing NEW funding for all of the real cost increases and we believe that we should therefore seek reductions in the scheme of at least 2.5 million pounds. Better to deal with this problem now than later: hence the proposals in first TUR. Car park rearrangements are estimated to reduce costs by half million pounds: deletion of one floor throughout by 1.5m pounds: omission of residential element by 2.7 million pounds.
You ask (para 7 of second TUR) what further cost reductions may be achievable without further significant changes to the
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These are of a minor nature (in percentage terms) but may well accrue with tight control as the design is refined. We will seek to do this and will keep you informed. Throughout, though, we have to remember that estimating is not an exact science, that estimates will vary as design develops, and that market conditions at the time of tender will dictate the outcome.
7. On your paragraph 10(a). Draft minutes of the latest Steering Committee are now being cleared. They (and papers for and minutes of any future meetings) will be sent to you as a matter of course.
8. On 10(b). We put a high priority on ensuring that OED officers visit Hong Kong regularly and frequently in their sponsorship and project management liaison role. They will brief you at Post regularly on progress and costs. Should there be a major development affecting the project which does not coincide with the visit of an OED officer, we shall certainly ask Swires to brief you instead. (Incidentally, we believe that you have already received a copy of our agreement with Swires but we have asked them to pass a further copy to you.)
9. On 10(c). I regret that there can be no question of secondment to Hong Kong of a UK based officer, as resources simply do not permit this. But I am told that consideration is being given to your proposals on how best to strengthen your
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