bank account. The Director of Civil Aviation has informed me that it is the intention that the Ordinance should be amende due course to require the operators to comply with these direct banking arrangements.
127. The second variation to the original intentions was the decision, made with the aim of securing the co-operation of the aircraft operators, to abandon the simple formula and devise a more complicated and administratively more costly one which involved the fixing of different fees based on the estimated costs of each individual operator. This arrangement is now regarded by the Deputy Crown Solicitor as a requirement under the Air Passenger Departure Tax Ordinance. This meant that the Director of Civil Aviation had to examine the estimates submitted by each operator, a task that was made more difficult by the absence, in some instances, of proper criteria for determining whether the estimates were reasonable.
128. I have expressed my doubts to the Director of Civil Aviation as to whether the arrangements that have been made for the collection of the tax are cost-effective and have suggested that the Government has lost its way from initial simple intentions and has involved itself in considerable efforts to overcome problems that could have been avoided had it been made clear to the aircraft operators in the first place that the fee payable to them would be a uniform amount per passenger, to be decided by the Government after taking into account the estimated cost of collecting the tax and the notional interest benefits arising from the retention of the tax money for the period to be specified in the Ordinance. The Director of Civil Aviation does not fully accept my comments and maintains that there was no oversight, stating that the initial decision to inform the operators that the fee would be based on the estimated full cost of collecting the tax and later to tell them that the interest would be claimed back, was a positive one which did not conflict with previous intentions. He also maintains that the more complicated formula for determining the fee was necessary to mute objections by recognizing the legitimate cost disparities between operators following the considerable difficulties and level of confrontation experienced from the operators. However, he accepts that there is scope for improvement and he has informed me that a management study will commence in the near future to examine the tax collection system.
129. Accordingly, I have recommended to the Deputy Financial Secretary that the management study team be given broad terms of reference which would include a reconsideration of the basic intentions behind the Air Passenger Departure Tax Ordinance, with particular reference to the need for direct banking and the need to simplify the present cumbersome, complex and detailed arrangements for examining each aircraft operator's, and the aircraft operators' contractor's, cost estimates.
130. Head 34- Defence: Miscellaneous Measures. Subhead 629. Defence Costs Agreement: capital works (block vote). Under the terms of an agreement between the Hong Kong Government and the British Forces, the Argyle Street Camp was to be handed back to the Hong Kong Government by the end of 1979. As part of the arrangements the supply sub-depot in Argyle Street was to be relocated and in December 1978 a contract for the construction of a new supply sub-depot at Osborn Barracks, which included a nominated sub-contract for a cold storage and air-conditioning installation, was let by the Architectural Office of the Building Development Department. The sub-contract sum for the cold storage and air-conditioning installation was $1.9 million of which $1.2 million was for the installation of two sets of identical refrigeration plant, each capable of supplying the entire cold storage system to provide 100% standby capacity.
131. The works for the construction of the supply sub-depot were certified substantially complete in January 1980 and the sub-depot was handed over to the British Forces, although an Inspection Board of the Forces recommended against acceptance of the refrigeration plant as it had not been suitably tested. Also the Principal Government Electrical and Mechanical Services Engineer was unhappy with the performance of the refrigeration plant but nevertheless was forced to take over the operation of the plant because of the urgency of handing over the Argyle Street Camp to the Government. During 1980 and 1981 frequent breakdowns occurred as a result of bursts and leakages which caused loss of refrigerant, temperature fluctuations and water contamination and despite extensive repairs and the replacement of defective parts it was decided eventually in early 1982 that in order to restore normal cold storage operations individual refrigeration units for each of the cold stores should be installed. In 1982 the defective parts of the plant, which included the refrigeration compressors and distributing piping, were dismantled and replaced by a new system at an additional cost of $1.1 million. The dismantled parts of the plant and the associated spares which in total cost approximately $460,000 are now in storage and no new use has been found for them.
132. An audit review to determine why the refrigeration plant required replacement only two years after it had been installed revealed that the primary causes were that the design of the system was unnecessarily complicated, the time scale for the installation of the cold storage equipment was too short and no time was allowed for testing and commissioning after the completion of the installation. The situation was exacerbated by the inexperience of the Building Services Branch of the Architectural Office on this type of installation and the award of the sub-contract for the central plant to a contractor who was found to lack the necessary technical expertise and practical experience and whose organization and workmanship was poor.
133. The Director of Building Development has informed me that the cold storage system in this case was the only one of its type ever handled by his department, that this was an unfortunate instance resulting from a number of unfavourable factors and that, with the experience gained, he hopes that such a case will never recur. The Director has also informed me that prequalification of contractors is now a normal practice for projects requiring special attention and expertise, and that building services installations are always thoroughly tested and commissioned before being
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