For discussion
on 11 June 1999


Marine Department
New Subhead "Replacement/upgrading of the Vessel Traffic Services System"

    Members are invited to approve the creation of a new commitment of $226 million for replacing and upgrading the vessel traffic services system.


The existing vessel traffic services (VTS) system will reach the end of its serviceable life in two years. If it is not replaced and upgraded in time, we will not have a reliable system to ensure navigation safety and fulfil international requirements for VTS as prescribed by the International Maritime Organisation (IMO) and other bodies from time to time.


2. The Director of Marine (D of M), with the support of the Secretary for Economic Services, proposes to replace and upgrade the VTS system at an estimated cost of $226 million.


3. The VTS system is composed of a network of eight radar stations, automatic trackers, Very High Frequency (VHF) communication and directional finding equipment, voice logging and data recorders, data processors and consoles with radar displays.

4. Set up in the Vessel Traffic Centre (VTC) on the outer pier of the Macau Ferry Terminal and at various strategic locations including Waglan Island, Shek Kwu Chau and Black Point, the VTS system is able to monitor and control vessel movements continuously, thereby facilitating the safe and expeditious execution of port calls made by ocean-going vessels. It also maintains port call records and the invoicing system for port and light dues payments, and supplies information to port users, government agencies and the general public.

5. The VTS system has proved to be an essential tool in ensuring navigational safety in Hong Kong waters since it came into operation in 1989. In fact, all major ports in the world recognise the benefits of the VTS system and use it to monitor vessel traffic. It is by international standards a basic equipment for navigation control.

6. During the last 12 months, about 83 400 ocean-going ships entered and departed Hong Kong, representing an increase of 45 259 or 119% over 1989 when the existing VTS system commenced operation. Based on the growth rate in the last 15 years, we estimate that ocean-going vessel traffic will grow by 7.5% per annum in the next five years. The increase in traffic, coupled with the increasing number of fast speed vessels plying in the Hong Kong harbour, has greatly increased the risk of collision. Moreover, the existing system is approaching the end of its estimated service life of 12 years. To sustain navigation safety and to ensure adequate functioning of the VTS system in the long term, the Director of Electrical and Mechanical Services (DEMS) has conducted a study on the long-term service capability of the VTS equipment.

7. The study indicates that many components are showing signs of aging with reducing reliability. The overall equipment fault rate has increased in recent years. DEMS estimates that the daily average equipment fault rate will increase from the past record of one fault per day to 1.6 faults per day by 2002, thereby affecting the smooth VTS operation. Furthermore, due to technological advancement, the key components of the existing system have become obsolete and the manufacturer has advised that production of parts for maintenance has been suspended. It is therefore necessary to replace and upgrade the VTS system as a matter of priority to ensure navigation safety in the Hong Kong waters. As an interim measure, we are developing maintenance strategies and operational contingency plans to cope with any random failure of the system.

8. Under our current proposal, we will replace the outdated equipment and introduce more advanced technology to comply with the operational standards of VTS equipment recommended by the International Association of Marine Aids to Navigation and Lighthouse Authorities. We also propose to install a new Closed Circuit Television (CCTV) System to enhance vessel identification and indication of sea and weather conditions, and build in other new features to comply with requirements of the IMO and the International Telecommunications Union. With the proposed replacement and upgrading, we expect that the VTS system can provide effective service to meet the traffic needs of the next 15 years. FINANCIAL IMPLICATIONS

Non-recurrent Cost

9. We estimate that the project will require a capital cost of $226 million, broken down as follows --

$ million
(a) Electrical and mechanical equipment installation
    (i) Radar system
    (ii) Microwave system
    (iii) VHF communication and directional finding system
    (iv) Tracking and display system
    (v) CCTV system
    (vi) Power system
    (vii) Automatic identification system
    (viii) Installation, testing, commissioning, training
    and documentation
    (ix) Maintenance spares

Sub-total 160.7
(b) Renovation and refurbishment works
    (i) VTC
    (ii) Remote sites

Sub-total 34.3
(c) Project management charges by Electrical and
Mechanical Services Trading Fund
(d) Contingency (10% of (a)) 16.1

Total 226.0


10. As regards paragraph 9(a), the cost of $160.7 million is for the supply, installation, testing, commissioning and warranty of all the equipment of the project. A brief description of the functions of the various systems is at Enclosure 1.

11. As regards paragraph 9(b), the cost of $34.3 million is for the necessary renovation and refurbishment works at the VTC and other installation sites to accommodate the replacement system. The works will be carried out by the Architectural Services Department.

12. As regards paragraph 9(c), the cost of $14.9 million is for the project management fee payable to the EMSTF. EMSTF will be responsible for the detailed system design, preparation of tender specification, tender documentation and assessment, contract administration, and testing, commissioning and monitoring of all the equipment installed. A computation of the charges is at Enclosure 2. In the light of Government's Enhanced Productivity Programme, DEMS has critically examined its services and has quoted efficiency saving of about $3.7 million from the standard EMSTF charges for the management of this project.

13. Subject to Members' approval, we will phase the expenditure as follows -

Year $ million
1999-2000 6.4
2000-01 107.7
2001-02 83.7
2002-03 28.2

Total 226.0


14. We shall invite open tender for the electrical and mechanical works. We intend to award the contract for electrical and mechanical works on a fixed-price lump-sum basis as the requirements are to meet the detailed specifications stipulated by EMSTF and there is little scope for uncertainty. The renovation and refurbishment works at the VTC and other sites will be undertaken by the term contractors of the Architectural Services Department.

Recurrent Cost

15. D of M estimates that the new VTC system will incur an additional recurrent expenditure of $1.9 million in 2002-03, and $2.4 million in subsequent years when the new system is in full operation. A comparison of the operating cost of the existing system and the new VTS system is as follows -

Existing system New VTS system

2002-03 Upon full

($'000) ($'000) ($'000)
(a) In-house staff costs 33,790 33,790 33,790
(b) Contract services
    (i) staff costs
10,150 11,270 11,270
    (ii) specialised stores
850 1,160 1,160
    (iii) other costs
1,000 1,370 1,370
(c) Maintenance 3,200 3,200 3,200
(d) Data processing 300 400 900
(e) Other expenses 3,582 3,582 3,582
Total 52,872 54,772 55,272

16. As regards paragraph 15(a), the expenditure is the costs of professional and technical staff in the Marine Department (MD) for operating the VTS system. The new system will not require additional operational staff. While inclusion of new features in the system will modernise the mode of operation, savings in staff costs will be insignificant and the existing deployment of staff for manning control stations represents the minimum requirement.

17. As regards paragraph 15(b), the expenditure is for contracting out technical services, including procurement of materials, stores, tools, test equipment and spare parts ordered specifically for the use of testing and monitoring the VTS system, and setting up a dedicated maintenance unit at the VTC. The increase in costs is mainly due to the addition of new features to the system such as the Automatic Vessel Identification System and CCTV.

18. As regards paragraph 15(c), the expenditure is for maintenance services of the main VTS system provided by the EMSTF. The form of service procurement and the estimated costs are subject to review when MD is untied from the use of EMSTF services from August 2001 onwards.

19. As regards paragraph 15(d), the expenditure is for the payment of maintenance contract of the VTS Informatic Sub-system. The increase in cost is mainly due to the variation of the maintenance for Midrange Computer Systems Bulk Contract approved by the Government Supplies Department last year.

20. As regards paragraph 15(e), the expenditure is for the general expenses required for operating the VTS system, including light and power, consumables, transportation costs, fuel and oil.

Impact on Fees and Charges

21. At present we recover the full cost of the VTS system, including maintenance costs, from the users of the system through collection of port and light dues and passenger embarkation fees. We estimate that the full cost of the existing VTS system will be fully recovered by 2003-04 when the new system comes into operation. The cost of replacing and upgrading the VTS system will continue to be recovered in the same manner. This will entail an increase of about 4% in real terms for the port and light dues and passenger embarkation fees upon the full implementation of the new system in 2003-04. The new system and the additional cost incurred are essential to maintain and improve safe operation of the Hong Kong port in the light of continued increase in marine traffic.

Implementation Plan

22. After consultation with DEMS, D of M plans to implement the proposal according to the following schedule -

Activity Target completion date
Design and specification preparation October 1999
Contract award April 2000
Manufacturing, installation, testing October 2001
Acceptance of VTC December 2001
Acceptance of all remote sites December 2002

We will phase the work and put in measures to avoid disrupting the provision of services during the replacement period.


23. The Finance Committee approved a commitment of $215 million in 1986 vide FCR(86-87)63 for D of M to procure and install the first computerised VTS system (formerly known as Vessel Traffic Management System) in Hong Kong. Since its operation in 1989, the system has been an essential tool for improving navigation safety in Hong Kong.

24. The shipping industry has been consulted through the Port Operations Committee on the proposed replacement and upgrading of the VTS system. The Committee supported the proposal.


Economic Services Bureau
June 1999

Enclosure 1 to FCR(1999-2000)20

Major Electrical and Mechanical Equipment
Installations for the Vessel Traffic Services (VTS) System

1. Radar System

The radar system consists of radar scanner (antenna), radar transceiver and control electronic equipment for the detection of vessel movements in Hong Kong waters, especially in and along high-risk and busy waterways.

2. Microwave System

The microwave system is an essential communication system for the transmission of radar target data, Closed Circuit Television (CCTV) images, voice and data information between remote radar stations and Vessel Traffic Centre (VTC).

3. Very High Frequency (VHF) Communication and Directional Finding (DF) System

The VHF communication and DF system provides a rapid exchange of pertinent navigational information between the VTC and vessels via international VHF marine radio channels. This system also provides a digital readout of the bearing of any vessel calling on designated VHF marine radio channels on the tracking and display system in VTC.

4. Tracking and Display System

The tracking and display system is used to analyze target information provided by radar system and automatic identification system (AIS) and tag each moving vessel target with a unique identifier. The system is capable of identifying potential vessel conflicts and presenting the information on graphics-based display to facilitate overall efficient VTS operation. The system includes high performance computer servers, computer workstations, data communication network and associated specialized software.

5. CCTV System

The CCTV System includes cameras at strategic locations for the monitoring at VTC of vessel traffic within busy and high-risk waterways so that prompt responsive action can be taken during emergency.

6. Power System

The Power System contains alternative current (A.C.) supply facilities, emergency diesel generators and uninterruptible power system for the provision of smooth and stable power supply to all VTS mission critical electronic equipment at VTC and all remote stations.

7. Automatic Identification System (AIS)

AIS makes use of modern and advance Global Positioning System and VHF digital communication technology for high efficient and effective ship-to-shore and ship-to-ship communication and provides vessel information and navigation data for the VTS System.

Enclosure 2 to FCR(1999-2000)20

Calculation of the
Electrical and Mechanical Services Trading Fund (EMSTF)
Project Management Fee

A. Project cost $160,690,000
B. EMSTF Project Management Fee

Project value Charging rate
On the first $400,000 25.0 100,000
On the next $1,600,000 20.0 320,000
On the next $13,000,000 16.5 2,145,000
Remainder of the project value
11.0 16,025,900

EMSD Trading Fund (normal rate)
Less: Efficiency savings of EMSTF


Total 14,872,720

Say 14,872,000