TNAG-2961-FCO40-4240-Future-of-Hong-Kong-British-Consulate-General-building-incl-1993 — Page 71

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aspects of the official British presence in Hong Kong. Ne asked OED to look again at the financial calculations.

3. OED compared the cost of building the space which would not be fully used for part of the 10 year cycle with the cost of renting and fitting out an equivalent area in the peak years of the cycle. Their appraisal (which was forwarded to

the Treasury under cover of Mr Smith's letter of 22 June to Mr Marr) demonstrated conclusively that it is more economical to build as now planned than to rent for 4-5 years in the ten year cycle (with the associated costs of setting up the operation every ten years).

9.

We therefore consider that the present design makes sense in policy terms and that, while there is some risk that some space may be underutilised for part of the ten year cycle (a maximum of 1200 sqm or 7.2% of the building in 1998, less than 6% for the bulk of the "trough" years), the option gives significant value for money advantages over rental. OED's comparison did not include calculations for the potential cost of fees for a redesign of the Consulate General to eliminate the passport operation space. The indications are that little if anything would be saved in capital costs from such a redesign, while considerable running costs would be incurred in renting other accomodation. Putting cost aside, the Steering Committee noted that any redesign would cause inevitable (and unwelcome) delays to the construction project which would almost certainly prevent the Consulate General from being ready for occupation on schedule (ie July 1996). That would add significantly to the pressures on our operations in Hong Kong during the transition period.

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