SUPPLEMENTAL REPORT OF THE

PUBLIC ACCOUNTS COMMITTEE

ON

REPORT NO. 63 OF THE DIRECTOR OF AUDIT

ON

THE RESULTS OF

VALUE FOR MONEY AUDITS



June 2015

P.A.C. Report No. 63A



CONTENTS


Paragraph

Page

Part 1Introduction

The Establishment of the Committee

1

1

Membership of the Committee

2

1

Part 2Procedure

The Committee's Procedure

1

2 - 3

Confidentiality undertaking by members of the Committee

2 - 3

3

The Committee's Report

4

3

The Government's Response

5

3

Part 3Committee Proceedings

Meetings

1

4

Arrangement of the Report

2 - 3

4

Acknowledgements

4

4

Part 4Administration of the air traffic control and related services

A.Introduction

1 - 9

5 - 9

B.Procurement and implementation of the new air traffic control system project

10 - 94

9 - 51

C.Management of the precision runway monitor project

95 - 102

51 - 55

D.Administration of air traffic control service related charges

103 - 110

55 - 57

E.Administration of the mandatory occurrence reporting scheme

111 - 121

57 - 62

F.Conclusions and recommendations

122 - 124

62 - 82

SIGNATURES OF THE CHAIRMAN, DEPUTY CHAIRMAN AND MEMBERS OF THE COMMITTEE

 
83

CHAPTER IN THE DIRECTOR OF AUDIT'S REPORT NO. 63 DEALT WITH IN THE PUBLIC ACCOUNTS COMMITTEE'S REPORT

 
84

Appendix relating to Part 1: "Introduction"

Appendix 1Rules of Procedure of the Legislative Council of the Hong Kong Special Administrative Region

 
85 - 86

Appendix relating to Part 2: "Procedure"

Appendix 2Paper presented to the Provisional Legislative Council by the Chairman of the Public Accounts Committee at the meeting on 11 February 1998 on Scope of Government Audit in the HKSAR - 'Value for Money Audits'

 
87 - 89

Appendices relating to Part 3: "Committee Proceedings"

Appendix 3Witnesses who appeared before the Committee

 
90 - 91

Appendix 4Introductory remarks by Chairman of the Public Accounts Committee, Hon Abraham SHEK Lai-him, GBS, JP at the first public hearing of the Committee in respect of the Director of Audit's Report No. 63 on Monday, 8 December 2014

 
92 - 93

Appendices relating to Part 4: "Administration of the air traffic control and related services"

Appendix 5Opening statement made by the Secretary for Transport and Housing at the public hearing on 9 December 2014

 
94 - 97

Appendix 6Opening statement made by the Director-General of Civil Aviation at the public hearing on 9 December 2014

 
98 - 101

Appendix 7Table setting out the reasons for slippages in various milestones of the Air Traffic Management System contract

 
102 - 103

Appendix 8Table setting out the reasons for slippages in various critical tasks of the implementation of the air traffic control system project

 
104 - 105

Appendix 9Table comparing the actual figures with the estimated capital cost for the replacement of air traffic control system

 
106

Appendix 10Paper on "Replacement of the Air Traffic Control System of the Civil Aviation Department" provided by the Civil Aviation Department in December 2014

 
107 - 122

Appendix 11Reply dated 24 December 2014 from the Director-General of Civil Aviation

 
123 - 128

Appendix 12Reply dated 27 December 2014 from the Director-General of Civil Aviation

 
129 - 136

Appendix 13Flowchart showing the steps leading to the award of the tender for the Air Traffic Management System contract

 
137

Appendix 14Memo dated 8 December 2010 from the Director of Government Logistics to the Chairman of Central Tender Board

 
138 - 152

Appendix 15Letter dated 12 January 2015 from the Director of Government Logistics

 
153 - 155

Appendix 16Reply dated 25 March 2015 from the Director-General of Civil Aviation

 
156 - 164

Appendix 17Reply dated 12 January 2015 from the Director-General of Civil Aviation

 
165 - 190

Appendix 18Reply dated 18 February 2015 from the Director-General of Civil Aviation

 
191 - 194

Appendix 19Reply dated 25 April 2015 from the Director-General of Civil Aviation

 
195 - 202

Appendix 20Letter dated 15 April 2015 from the Director of Government Logistics

 
203 - 221

Appendix 21Letter dated 15 May 2015 from the Director-General of Civil Aviation

 
222 - 223

Appendix 22Table showing the six stages of the tender evaluation of the Air Traffic Management System contract, the corresponding tender clauses and the evaluation activities carried out by Tender Assessment Panel in each stage

 
224 - 229

Appendix 23Letter dated 15 January 2015 from the Director-General of Civil Aviation

 
230 - 243

Appendix 24Extract of Clause 8 of Part II of the Tender Document and Decision of the Review Body on Bid Challenges regarding the complaint lodged by an unsuccessful tenderer of the Air Traffic Management System contract concerning the requirement of possession of "proven performance record" by the Air Traffic Management System Contractor

 
244 - 261

Appendix 25Letter dated 20 March 2015 from the Director of Government Logistics

 
262 - 267

Appendix 26Relevant contract provisions on liquidated damages for the purchase of the existing Air Traffic Management System

 
268

Appendix 27Reply dated 15 May 2015 from the Director-General of Civil Aviation

 
269 - 271

Appendix 28Table setting out the duration and expiry date of the warranty period of the eight major contracts under the Air Traffic Control system project

 
272

Appendix 29Table setting out the milestones of Phase 1 and Phase 2 in the Implementation Plan of the Air Traffic Management System contract

 
273 - 274

Appendix 30Reply dated 27 May 2015 from the Director-General of Civil Aviation

 
275 - 277

Appendix 31Cost breakdowns for the two contract variations

 
278

Appendix 32Details and cost of each new function/enhancement for Contract Variation 1

 
279

Appendix 33Details and cost of each new function/enhancement for Contract Variation 2

 
280

Appendix 34Letter dated 13 February 2015 from the Director-General of Civil Aviation

 
281 - 282

Appendix 35Letter dated 29 December 2014 from the Secretary for Financial Services and the Treasury

 
283 - 285

Appendix 36Letter dated 13 January 2015 from the Secretary for Financial Services and the Treasury

 
286 - 287

Appendix 37Extract of Clauses 44 and 45 of Part IV of the Tender Document

 
288 - 292

Appendix 38Letter dated 27 May 2015 from the Director-General of Civil Aviation

 
293 - 294

Appendix 39Detailed work plan of transition of the existing Air Traffic Management System to the new Air Traffic Management System

 
295

Appendix 40Letter dated 24 December 2014 from the Secretary for Transport and Housing

 
296 - 298

Appendix 41Letter dated 12 January 2015 from the Secretary for Transport and Housing

 
299 - 351

Appendix 42Paper on "HEAD 702 - PORT AND AIRPORT DEVELOPMENT
Support - Intra-governmental services
New item - Government Facilities for the Second Runway of the new airport at Chek Lap Kok" for the meeting of Legislative Council Public Works Subcommittee of Finance Committee on 12 June 1996

 
352 - 360

Appendix 43Reply dated 7 February 2015 from the Director-General of Civil Aviation

 
361

Appendix 44Details of the cases which involved an overdue en-route navigation charges of $250,000 or more and the follow-up actions taken on these cases

 
362 - 363

ACRONYMS AND ABBREVIATIONS

 
364 - 365