ENG-1997 — Page 104

THE ECONOMY

60

calls on its contingent liabilities and enable it to cope with any short-term fluctuations in expenditure relative to revenue.

The two Municipal Councils, which operate through the Urban Services Department and Regional Services Department, are financially autonomous. They draw up their own budgets and expenditure priorities. The expenditures of the two councils are financed mainly from a fixed percentage of the rates from property in their respective areas. Additional income is derived from fees and charges for the services the councils provide.

The Housing Authority, operating through the Housing Department, is also financially autonomous. The government provides the authority with capital and land on concessionary terms to build public housing for rent and for sale. Part of the authority's recurrent expenditure, for clearances and squatter control, is financed from the General Revenue Account.

A trading fund is a department or part of one providing services on a commercial or quasi-commercial basis through the operation of a separate accounting system. Unlike a vote-funded department, trading funds are allowed to retain revenue generated to meet expenditure in providing the services and to finance future expansion.

Government Supplies Department

Purchases of goods and related services required by government departments are undertaken centrally by the Government Supplies Department, which provides similar services to certain non-government organisations, such as the Hospital Authority and the Vocational Training Council. These goods and related services are normally obtained by competitive tendering, without giving preference to any particular source of supply, to ensure that users' needs are met at the best possible prices, having regard to life-time cost and reliability of supply. Helping users to derive the best value in their purchases, the department formulates a specific purchasing strategy for each type of item based on market conditions, focusing on meeting requirements for high-value and critical items by cost-effective and reliable means.

In general, the department adopts open tender procedures in its purchases, particularly for general and common items. Selective tender procedures are used only for complex and critical purchases for which suppliers are required to undergo a qualification exercise before tendering. Restricted or single tender procedures are used where open competitive tendering would not be an effective means such as in cases involving compatibility with existing equipment, or patented/proprietary items, or unforeseen urgency. Restricted tender procedures may also be adopted for low- value purchases to save administrative costs.

Where open tender procedures are adopted, tender invitations are published in the Government Gazette and four local newspapers and are mailed to suppliers registered with the department. Consulates and overseas trade commissions are also informed. To allow easy access by overseas suppliers, the department has, since November 1995, included its tender invitations and related information on the Internet.

In 1996-97, the department placed orders of a total value of $4.03 billion, purchasing from 36 different countries. The major sources of supply were the USA, the UK, China, Germany and Hong Kong. Major items of purchase included