TNAG-1415-FCO40-1896-Public-finance-in-Hong-Kong-1985 — Page 225

68. With regard to the overpayment of allowances in various departments brought to notice in my tw previous reports:

--

-an amount of $25,000 in overpayments of shift duty allowance has been recovered from staff of the Engineering

Development Department;

an amount of $1.5 million in overpayments of special subsistence allowance to watchmen of the Supreme Court was written off by the Finance Committee of the Legislative Council in March 1985; and

-applications for write-off of amounts of $305,000 and $1 million, in overpayments of obnoxious duty allowance to staff of the Regional Services Department and the Medical and Health Department, and of $577,000 in shift duty allowance to staff of the Electrical and Mechanical Services Department, are currently under consideration by the Finance Branch of the Government Secretariat.

69. Procurements under single tender arrangements. Procurement of stores and services in the Government is normally arranged through competitive tendering as an effective means to secure economy. There are however cases where competitive tendering is not appropriate and the circumstances are such that the needs of the procuring department can only be met from one source. In such cases, a single tender will be invited from the sole supplier. The Government stores regulations prescribe in general terms the procedures to be followed when calling for single tenders, including the level of authority required for the approval of an offer. Where the tender value exceeds $1 million the advice of the Central Tender Board is required and requests for the issue of single tenders with a value exceeding $1 million are required to be routed through the Director of Government Supplies who will forward them with his recommendation to the Deputy Financial Secretary for consideration by the Central Tender Board.

70. To obtain economy and the best possible value in such a non-competitive environment, bearing in mind that the value of the stores and services required may be substantial, it is essential that the contract conditions and the price offered by the supplier are critically examined and adequately negotiated, as the supplier will understandably use his unique position to maximize his return.

71. Recently I reviewed six cases involving expenditure ranging from $2.8 million to $94 million where stores or services were obtained under single tender arrangements and I noticed a number of weaknesses in the manner in which the contracts were processed. These weaknesses arose, in my opinion, because the Government stores regulations prescribing the procedures to be followed by departments when calling for single tenders do not include guidelines for negotiating the best possible terms from the tenderer. I observed that:

-the need for conducting negotiations with the tenderer was not in all cases recognized by the controlling officers and in some cases negotiations for better contract terms were carried out only at the request of the Central Tender Board;

—in some cases, objective yardsticks to assess the reasonableness of the tender prices were not used, or better

yardsticks could have been used;

-in two cases, adequate research into areas such as market conditions and price trends, which would have

facilitated negotiations with the tenderer, was not carried out prior to the negotiations;

—in the case involving a total expenditure of $94 million, there was no participation by the Government Supplies Department during the negotiations with the tenderer, and therefore specialist procurement knowledge was not used; and

-a proper record of the negotiations carried out was not maintained. Such a record would have facilitated appraisal by the management of the terms offered and indicated where improvements could be negotiated in future.

I have forwarded my observations to the Deputy Financial Secretary and the Director of Government Supplies, and requested them to consider the desirability of issuing comprehensive guidelines in order to ensure that single tenders are critically examined and adequately negotiated with due regard to economy.

72. Provision and management of departmental quarters. The Secretary for District Administration, who heads the City and New Territories Administration, is responsible for managing the stock of departmental quarters in New Territories districts which in 1982 numbered 275. Departmental quarters are provided only to house those officers who must be accommodated in the districts to meet operational requirements and priority is given to those who need to perform duties during emergencies, such as tropical cyclones, rainstorms and landslips. In a recent review of the arrangement for controlling these departmental quarters, I noted that many quarters were not occupied for considerable periods and that there were long delays in allocating them to eligible officers. Some of the delays were understandable, such as the case of one quarter which could not be allocated because of reports that it was haunted. However, the most serious case of delay arose out of the decision to transfer the lands function of the City and New Territories Administration with the relevant staff and some departmental quarters to the newly formed Lands Department. The departmental quarters were to be transferred on the understanding that the general grades staff occupying them in the Lands Department would make themselves available to the Secretary for District Administration in times of emergency.

73. The Lands Department was created with effect from 1 April 1982 and the list of quarters actually required for the various grades of officers in the districts of the New Territories Region, which included officers to be transferred to the

14

Page 225Page 226