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LCQ3: Large number of public works contracts and consultancy study contracts awarded to certain companies

Following is a question by the Hon Albert Chan and a written reply by the Secretary for Development, Mr Paul Chan, in the Legislative Council today (May 7):

Question:

I have learnt that certain works contractors and consultancy firms were awarded a large number of public works contracts and consultancy study contracts for works projects in the past several years.  Some members of the public have expressed the concern that the progress of a large number of public works and consultancy studies may be seriously affected in the event that such companies suddenly close down.  In this connection, will the Government inform this Council:

(1) in each of the past three years, regarding the top three companies which were awarded the highest total value of public works contracts, of (i) their names, (ii) the total value of the contracts awarded to each of them, and (iii) the number of contracts awarded to each of them (set out in table form);

(2) in each of the past three years, regarding the top three companies which were awarded the highest total value of consultancy study contracts for public works, of (i) their names, (ii) the total value of the contracts awarded to each of them, and (iii) the number of contracts awarded to each of them (set out in table form);

(3) whether it has analysed the main reasons for the aforesaid companies being awarded such a large number of public works contracts or consultancy study contracts for works projects; if so, of the findings; if not, the reasons for that; and

(4) whether it has measures to ensure that the progress of the public works or consultancy studies concerned will not be seriously affected in the event that the aforesaid companies suddenly close down; if so, of the details; if not, the reasons for that?

Reply:

President,

With regard to the Government's procurement system for public works projects, we adhere to the principles of "maintaining open and fair competition" and "achieving best value for money" in formulating the tendering and tender evaluation policy for works and consultancy contracts.  The existing mechanisms for contractor management, consultant management as well as works and consultancy contract management have proved effective in monitoring the progress of various works and consultancy studies.  A mechanism for monitoring the performance of contractors and consultants is also in place to ensure effective implementation and delivery of infrastructure projects.

My reply to the four parts of the question is as follows:

(1)&(2) The names of the top three companies which were awarded works contracts of the highest total value and the total value and number of works contracts awarded to each of these companies in each of the years from 2011 to 2013 as well as the corresponding information on the consultancy contracts are set out in Table 1 and 2 of Annex 1 respectively.

(3) To ensure proper use of public money, tender evaluation for works and consultancy contracts has to comply with the principle of maintaining open and fair competition.  Such evaluation is to be conducted in accordance with the various relevant procurement rules and the procedures as specified in the tender documents.

To ensure that the successful tenderer possesses adequate technical capability and resources to complete the project awarded, the tendering department will generally adopt a "two-envelope two-stage" approach in evaluating tenders for works and consultancy contracts.  The department will require the contractor or the consultant to submit the tender, comprising a Technical Proposal and a Price/Fee Proposal in separate envelopes.  The tender assessment panel established by the department will complete the first-stage assessment on the Technical Proposal based on the evaluation criteria specified in the tender documents before reviewing the Price/Fee Proposal, and then determine the overall score by combining the technical and price/fee scores obtained at the two stages.  For simpler works contracts, the tendering department may adopt the formula approach as stipulated in the tender documents to determine the overall score based on the Contractors' Performance Rating (The Contractors' Performance Rating of a contractor reflects his performance in public works contracts over the past three years.  The Rating is updated by the Development Bureau quarterly.) and the tender price.  Generally, the tenderer with the highest overall score will be awarded the contract, subject to his meeting the relevant financial criteria upon financial vetting.

(4) The progress of a project will inevitably be affected when a contractor or consultant closes down suddenly during the contract period.  To minimise such a risk or the potential impact, we have taken the following preventive measures:

(a) During the execution of a works or consultancy contract, the works department responsible for the project will closely monitor the progress, workmanship/quality and cost, and regularly assess the performance of the contractor and the consultant concerned.  This will enable the works department to detect any operational irregularities of the contractor or consultant as soon as possible and take appropriate follow-up actions.

(b) There are provisions in works and consultancy contracts which stipulate that the Government may arrange for other companies (such as, an existing term contractor or the successful bidder from the re-tender exercise) to complete the outstanding works under specified circumstances, such as bankruptcy or liquidation of the contractor/consultant or failure of the contractor/consultant to complete the contract.

(c) To ensure proper delivery of public projects, we take into account the requirements for different categories of works in devising and administering the lists of approved contractors for public works.  In general, only approved contractors on the lists are invited to submit tenders.  Contractors are required to meet the financial, technical and management criteria for admission to the lists.  For the financial criteria in particular, listed contractors must comply with the requirements in the Contractor Management Handbook and regularly submit their accounts to the Development Bureau to demonstrate that their financial status fully meets the relevant criteria for the approved lists.  In cases where the contractors fail to submit their accounts or meet the financial criteria within the prescribed time, the Development Bureau can take appropriate regulatory actions as provided in the Contractor Management Handbook.  Such actions may include suspension from tendering for public works, downgrading, demotion or even removal from the approved lists.

Attachment:

Ends/Wednesday, May 7, 2014
Issued at HKT 16:46

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