Following is a question by the Hon Albert Ho Chun-yan and a reply by the Secretary for Development, Mrs Carrie Lam, in the Legislative Council today (December 8):
Question:
Last month, there was a report that in awarding the tender on a heritage tourism development at the site of the former Marine Police Headquarters in Tsim Sha Tsui, the Government had forgone public money of more than $1.5 billion because of the discrepancy in the calculation of the gross floor area (GFA) done at different time as well as the market value used in the calculation of the premium payable for the additional GFA. In this connection, will the Government inform this Council:
(a) when it commissioned a consultant to conduct the "Study on the Development Opportunities of the Former Marine Police Headquarters Site in Tsim Sha Tsui", invited tenders, awarded the project to the successful tenderer, signed agreement with it, carried out on-site measurement of GFA and amended the agreement; of the respective GFA of the buildings known to it at each of these stages; whether the authorities had, after knowing the exact GFA, amended the content of the agreement, including GFA and the project value; why they had not requested on-site survey when commissioning the consultant to conduct the study, and whether it is a common practice for not doing so; whether any mistake was made during the entire process, what lessons the authorities had learnt and what price they had paid; and whether there was any dereliction of duty on the part of anyone;
(b) given that the GFA of the historic compound in the project was estimated at 4,300 square metres and 5,610 square metres respectively, of the impact of such discrepancy on the tender price or project value when the tenderers bid and the authorities approved the tender for the project, and why additional premium was not levied; whether there are any other example in this regard; if so, of the number of cases in the past five years involving technical amendments but additional premium was not levied, the respective discrepancies in GFA surveyed in each of these cases, and the number of tenders which only and roughly listed the GFA of the buildings concerned in their Planning Briefs that was subject to detailed survey; and the respective actual discrepancies in the GFA, and whether or not additional premium had been levied; and
(c) given that the GFA of the project had increased from 7,213 square metres to 7,413 square metres, how the authorities calculated the market value of the additional 200 square metres GFA, resulting in the Government being able to collect an additional premium of $94,530,000 only?
Reply:
President,
In order to answer Hon Albert Ho Chun-yan's question comprehensively, I shall first explain the planning and development processes of the Former Marine Police Headquarters (FMPHQ) site. The lot on which the FMPHQ stands is located in a tourist area in Hong Kong and has a group of five buildings of high historical value. To preserve these historical buildings and to make good use of the lot's potential at the same time, the Government explored the development option for this piece of land as early as in the 1990's. In that connection, the Town Planning Board (TPB) embarked on rezoning the lot to "Comprehensive Development Area" use on the Outline Zoning Plan (OZP) in December 1993. Moreover, in accordance with the Antiquities and Monuments Ordinance and after consulting the Antiquities Advisory Board (AAB), the Government declared in 1994 the Tsim Sha Tsui FMPHQ buildings and its compound, including the Main Building, the Stable Block, the Signal Tower and the Accommodation Block of the Former Fire Station, as monuments. The remaining Main Block of the Former Fire Station was classified by the AAB as a Grade 3 historical building.
Subsequently, the Planning Department (PlanD) commissioned a consultant in 1999 to conduct the "Study on the Development Opportunities of the Former Marine Police Headquarters Site in Tsim Sha Tsui" with the aim to find a practicable option for this preservation and development project. The study was completed in June 2001 and made recommendations on the site's development requirements and parameters. Those recommendations were subsequently included in the Planning Brief of this CDA site. The Planning Brief was endorsed by the TPB in May 2002 to provide guidance for the preparation of the Master Layout Plan (MLP) of this site. In June of the same year, the Executive Council agreed that the Government should develop the Tsim Sha Tsui FMPHQ site into a heritage tourism facility by way of an open land tender. The Tourism Commission which was responsible for coordinating the tender exercise conducted the tendering in November 2002 after obtaining approval from the Central Tender Board.
Although the project was implemented by way of a land tender, it was different from the usual arrangement for Government land sale in a number of ways. Firstly, the successful tenderer has to preserve the existing buildings. Secondly, a two-envelope system was adopted for the tender assessment, i.e. the tenderers' technical proposal and proposed premium to be paid to the Government were considered on the respective weightings of 75% and 25%. In other words, the tender scoring criteria placed more emphasis on the technical proposal, including whether the proposal could achieve the heritage preservation and restoration objectives, the conservation of the surrounding environment and layout of the historical buildings, whether the proposed development concept was creative, the feasibility of the proposal and its tourism and economic benefits, the tenderers' experience in heritage conservation and heritage tourism projects, etc. Based on the various criteria mentioned above, the assessment panel gave every tender a score and an overall assessment in examining, analysing and selecting the tenders submitted. Therefore, reserve price was not adopted as a criterion for tender assessment. Thirdly, the tender document also indicated that the lot was zoned for "CDA" use and that the TPB had approved the Planning Brief. The successful tenderer, after having acquired the development right of that lot, still had to submit a MLP to PlanD for the TPB's approval. Therefore, the tender document encouraged the tenderers to follow the Planning Brief as far as practicable.
The tenderers had to submit concept plans in their tender submissions. The concept plans naturally had to tally with the MLP approved by the TPB. In taking the project forward, if the successful tenderer would like to amend the concept plans accepted in its tender submission, it had to obtain the TPB's approval for amending the MLP and to apply afterwards to the Lands Department (LandsD) in accordance with the lease conditions.
In May 2003, the tender was awarded to Flying Snow Limited for $352.8 million. The relevant land grant document was signed in June 2003.
As regards the project's GFA, which is the crux of this question, the Planning Brief endorsed by the TPB mentioned that the GFA of the five existing historical buildings was estimated to be about 4,300 square metres and recommended the potential additional GFA to be 7,900 square metres. The subsequent tender document mentioned that the GFA of the historical buildings on the lot was approximately 4,300 square metres, which was believed to have come from the figure mentioned in the Planning Brief. After surveying the relevant site area and applying the established calculation formula, LandsD determined that the potential additional GFA of the lot should not exceed 7,213 square metres.
Subsequently, as the GFA indicated on the building plan submitted by the developer to the Buildings Department (BD) did not tally with the GFA specified in the MLP endorsed by the TPB, the building plan was not approved. In June 2006, the developer requested the TPB to agree to its proposed technical amendment so as to confirm that the relevant GFA should be rectified as 6,172 square metres. To facilitate the TPB in assessing the application, the developer conducted a detailed on-site survey with the attendance of representatives of BD and LandsD. The GFA of the existing historical buildings was verified to be about 5,610 square metres. Subsequently, in December 2006, the TPB confirmed this verified figure as the GFA of the historical buildings. This was a technical amendment based on a detailed survey, and reflects the actual GFA of the historical buildings. There was no question of the developer having been given extra GFA in substance. Moreover, no additional premium could be levied on such a technical rectification.
Regarding the three parts of the Honourable Member's question, in addition to the above background information, I would like to supplement my reply as follows:
(a) The usable GFA of this preservation tourism project was partly from the historical buildings, i.e. "the existing buildings". When PlanD commissioned the consultant to conduct the planning study, it did not require the consultant to carry out a detailed on-site survey. No detailed on-site survey was conducted in relation to this group of historical buildings before the tender. The developer's development right included the right to revitalise these existing GFA.
The GFA of the existing buildings was included in the land tender. These existing buildings were subject to preservation constraints and that no addition or alteration works were to be carried out. During the open tender process, all tenderers could, in accordance with the actual condition of the existing buildings, assess and estimate the GFA of the existing buildings. Therefore, I do not consider that any mistake had been made in the tendering exercise. In future, in order to avoid misunderstanding, if the Government is to adopt this type of unique development mode again, that is preserving, restoring and revitalising existing buildings of historical value, and it involves the participation of the private sector through tender in the preservation and development of historical buildings, it may not be appropriate for the Government to provide an estimated GFA figure of these buildings in the tender document. The reason is that the GFA of the existing building to be preserved will not change and the tenderers can survey or assess the space of the existing buildings themselves.
(b) As I have already explained, the GFA of the historical buildings as mentioned in the tender document of the project was about 4,300 square metres. That figure was only a description of the historical buildings (i.e. "existing buildings") to be preserved.
A two-envelope system was adopted for the tender assessment. The weighting of premium was only 25%. Together with the fact that reserve price was not adopted as a criterion for tender assessment, we are unable to ascertain whether the above-mentioned description of the GFA had affected the tenderers' proposed premium. What was important was that the TPB's verification of the GFA of the existing buildings as 5,610 square metres in December 2006 was only a technical amendment based on a detailed survey. There was no question of the developer having been given extra GFA in substance.
I have already explained that the development mode of this project is very unique. There is no similar land tender case involving a two-envelope tender for preserving and revitalising historical buildings in the past 5 years.
(c) I have already explained that in this tender exercise, the person who had successfully been awarded the tender should submit concept plans and other relevant documents in the tender submission. According to the land lease condition, the consent of the Director of Lands had to be obtained before these concept plans and documents could be changed. Apart from the technical rectification of the GFA of the historical buildings, the developer had made several amendments to the MLP after obtaining the TPB's approval. The developer had also correspondingly requested the LandsD to accept the amendments to the concept plans, which include increasing the additional new GFA from 7,213 square metres to 7,413 square metres, as well as other amendments in relation to the design. The LandsD had collected a premium of $94.53 million from the developer to reflect the enhancement in value arising from the variations.
Ends/Wednesday, December 8, 2010
Issued at HKT 15:46
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