Cost

Estimation
Public Works Projects in Hong Kong:

"Estimating using Risk Analysis" (ERA) shall be used for

all Cat C, B and A estimates and whenever an estimate
review is required by the resource allocation process.
“Engineers are not God. They can’t predict everything,” the source said. “The complexity of the
underground work is not something that can be fully controlled.”

The project will be even more expensive than the Hong Kong section of the controversial
high-speed rail project linking the city with Shenzhen and Guangzhou, which is set to cost
HK$84.4 billion after overrunning by HK$19.6 billion in 2015.

Construction of both the Sha Tin-Central link and the high-speed rail project is funded by the
government and carried out by the MTR.

A Transport and Housing Bureau spokesman declined to comment on the latest cost estimate but
stopped short of rallying behind the MTR – of which the government is the majority shareholder
with a 75 per cent stake.

“The government reserves comment on the cost estimate submitted by MTR Corp at this stage.
The Highways Department will ask MTR Corp to provide detailed information, and in
collaboration with its monitoring and verification consultant, critically scrutinise … [and] see if
there are sufficient justifications for the cost estimate,” the statement read.

Engineers are not God. They can’t predict everything

Following confirmation, the government would then seek extra funding from the Legislative
Council “in a timely manner”, the spokesman added, so that construction works could carry on as
planned.

The corporation blamed the extra spending on preserving heritage sites uncovered near
the new Sung Wong Toi station, a delay in the handover of construction sites from the government
and incomplete works at the Exhibition Centre station in Wan Chai when it was handed over from
the government.

The government commissioned additional foundation works at Exhibition Centre station too,
MTR Corp said.

The rest stemmed from labour shortages, unfavourable ground conditions and tweaks to the design
and methodology, it said.
 WHY ESTIMATING USING RISK ANALYSIS?

Estimating - All too often risk is either ignored or dealt with in an arbitrary way
by simply adding (about) 10% "contingency".

using Risk - Estimating needs to be structured, logical, accountable and easy

to explain and trace. Estimating using Risk Analysis (ERA) does
Analysis this.

- ERA - ERA is a procedure to identify project (or contract) related risks in

a formal manner and then to give a realistic estimated cost for
each risk which makes the relevant importance of each risk
immediately apparent.

- As the project is developed towards the tender stage(s) the object

is to resolve as much of the uncertainty as possible, concentrating
on the major risks.
 There are two types of estimate:

(a) Base Estimate: The "risk free" part i.e. the certain features,
the work that is unlikely to change, prepared by pricing the
known features using current rates and prices and standard
techniques appropriate to the stage of the project.

(b) Average Risk Estimate: The Base Estimate plus Average Risk

ERA Allowances.
 There are two types of Risks viz :

(a) Fixed Risk : A risk which will be incurred as a whole or not

at all. Although an "all or nothing" allowance, the
likelihood of it occurring can vary and this likelihood or
probability also needs to be assessed.
For example: A secondary access road can be required in
total or not at all. The need or probability should be
assessed.

ERA (b) Variable Risk : A risk relating to an event or feature which

can occur in varying degrees, with correspondingly varying
probabilities.
For example: Piling, where the design and cost vary
depending on the substrata. Both the probability of using a
particular piling solution as well as the probable length of
the piles have to be assessed to estimate the allowance.
ERA
ERA
Example
Example
Example
 Cross Bay Link
Tseung Kwan O
 Cross Bay Link
Tseung Kwan O
 Cross Bay Link
Tseung Kwan O
 Cross Bay Link
Tseung Kwan O
 Cross Bay Link
Tseung Kwan O
 Unit cost of bridge

Cross Bay Link = $2,952.2 Million / (1,000 x 35.8 m2)

Tseung Kwan O
= $82,472 m2
 Actual
Expenditure
vs
Forecast
 Key Stages

(I) Project Launch/Execution

a) Handing over of sites to the contractor;
b) Mobilization by the contractor; and
c) Setting up liaison groups with the stakeholders.

Construction (II) Project Performance/Control

a) Baseline and regular environmental monitoring (in accordance

Staging and with the Environmental Permit);

b) Material & design submissions, method statements and
programme by the contractor;
Programming c) Liaison with utilities undertakers (including electricity, water,
gas and telecom) for temporary supplies, diversion of existing
utilities and laying of new utilities;
d) Submission of temporary traffic diversion scheme to TD and
Police; and
e) Monitoring progress vs programme and expenditure vs budget.

(III) Project Close

a) Preparation/publicity for commission of the works; and
b) Handing over of completed works to maintenance parties.