FINANCE COMMITTEE

Record of Meeting held on 12 January 1996 at 2:30 p.m.
in the Legislative Council Chamber

Present:

Absent:

In Attendance for specific items:

Mr T L HSU, JP	Deputy Director of Highways
Mrs Maureen CHAN	Principal Assistant Secretary for Security
Mr Gordon LEUNG	Principal Assistant Secretary for Security (Vietnamese)
Mr LEE Ka-keung, JP	Deputy Director of Immigration
Mr Clement CHEUNG	Principal Assistant Secretary for Health and Welfare
Mr TAM Che-cheung	Government Architect of Architectural Services Department
Dr FUNG Hong	Senior Executive Manager of Hospital Authority
Mrs Rosanna URE	Principal Assistant Secretary for Planning, Environment and Lands
Mr M C TSANG	Assistant Director of Marine

In Attendance:

Mr K C KWONG, JP	Secretary for the Treasury
Mrs Carrie LAM	Deputy Secretary for the Treasury
Mrs Lilian WONG	Principal Executive Officer (LegCo Unit), Finance Branch
Miss Pauline NG	Clerk to the Finance Committee
Mr Andy LAU	Chief Assistant Secretary (Finance Committee)
Mr Simon CHEUNG	Senior Assistant Secretary (Special Duties)

Item No. 1 - FCR(95-96)104

CAPITAL WORKS RESERVE FUND
HEAD 706 - HIGHWAYS
Transport - Roads
116TB - Extension of OBrien Road Footbridge across Hennessy Road

The Committee approved this item.

Item No. 2 - FCR(95-96)105

HEAD 70 - IMMIGRATION DEPARTMENT
Subhead 202 Repatriation expenses

2. In response to Members questions, the Principal Assistant Secretary for Security (PAS/S(V)) clarified that the supplementary provision of $5.1 million sought was to meet repatriation expenses, including expenses under the Orderly Repatriation Programme (ORP). About $2 million would be spent on Vietnamese migrants (VMs). The United Nations High Commission for Refugees (UNHCR) was not required to share any of the expenses under the ORP as it was a bilateral agreement made between the Hong Kong and Vietnamese Governments, and the Hong Kong and British Governments would share the expenses on an equal basis. The repatriation expenses under the Voluntary Repatriation Programme (VRP) had always been borne in full by the UNHCR.

3. Referring to the repatriation expenses required for 1995-96, the Deputy Director of Immigration (DD of Imm) advised that the expenditure of $165,000 for repatriating Ex-China Vietnamese illegal immigrants was to cover expenses relating to the repatriation of 84 persons. The total expenditure on the repatriation of VMs under this Subhead was in the region of $8.4 million. Members suggested that in future the estimated expenditure for repatriating VMs and other illegal immigrants should be separately presented in similar papers. Information on the British Governments share in repatriating VMs under the ORP should also be given.

4. In response to a Member, DD of Imm said that immigration offenders and convicted criminals would be required to pay for their own air-fares unless there was evidence showing that they could not afford the payment. In 1995 (up to November), out of 4,306 persons repatriated overseas, only 1,246 required public funds. The number of arrest and repatriation of such persons had increased because of the expansion of the Immigration Task Force and the stepping up of efforts against immigration offences.

5. A Member pointed out that the Secretary for Security had promised a target of 1,800 VMs to be repatriated each month, but the projection made in this paper indicated that the total number of VMs being planned for repatriation was only slightly over 1,000 for the whole year. She questioned the Administrations commitment to honour its promise to speed up the repatriation of VMs. In response, PAS/S(V) explained that the figure of 1,800 per month was a target agreed at the international forum on the Comprehensive Plan of Action, the accomplishment of which would depend on many factors, some of which were outside the Hong Kong Governments control, e.g. proposals by some US Congressmen to re-screen VMs. It had always been the intention that most of the target of 1,800 returnees per month would be repatriated under the VRP, to be supplemented by the ORP. The Hong Kong Government would soon be attending a Steering Committee meeting on the VM issue to be held under the auspices of UNHCR in Bangkok; and it was expected that the repatriation progress would be reviewed then.

6. The Chairman asked the Administration to note Members concern about the slow pace in the repatriation of VMs and the request for more detailed information to be provided to the Committee for funding proposals of this nature.

7. The Committee approved this proposal.

Item No. 3 - FCR(95-96)106

CAPITAL WORKS RESERVE FUND
HEAD 708 - CAPITAL SUBVENTIONS AND MAJOR SYSTEMS AND EQUIPMENT
Medical Subventions
New Subhead Redevelopment of the operating theatre block and rehabilitation block in Queen Elizabeth Hospital

8. In reply to a Members enquiry as to why this item was submitted to the Committee without going through the Public Works Subcommittee (PWSC), the Secretary for the Treasury (S for Tsy) explained that this proposal was a capital subvention item which by tradition came to the Committee direct. The PWSC at present only considered projects under the Public Works Programme. If it were considered by Members that subvented items of this nature should first be examined by the PWSC before they were submitted to the Committee for approval, the Administration would review the matter with the LegCo Secretariat and make suitable arrangements in future.

9. Members noted that the inflation allowance included in the proposal amounted to $265.76 million, which was more than 65% of the total cost of the project. A Member questioned whether it was appropriate to use money-of-the-day (MOD) prices in the present proposal if the payment period was to span over a number of years , up to 2003-04. She noted that the use of MOD prices had been extended to non-Airport Core Programme (non-ACP) projects since April 1995. According to Information Note FCRI(94-95)45 circularised to Members in April 1995, the Administration decided that it was practical to extend the general requirement for all non-ACP contracts to be fixed-price from the original 12 months to 21 months. It was also stated that to increase the fixed-price contract period beyond 21 months would create difficulties and possibly incur additional costs. It further stated that should a longer fixed-price period be insisted, contractors would likely inflate their tender prices so as to provide an adequate cushion against their worst forecast of inflation trends. The Member therefore asked the Administration to explain on what basis it considered the adoption of the fixed-price contract desirable in the present case.

10. In response, the Deputy Secretary for the Treasury (DS/Tsy) explained that there were basically two issues at stake : one was the use of MOD for working out the project estimate and the other was the way works contracts were let out. She said that the reference to a contract period of 21 months in the relevant FC information note related to the letting out of contracts on a fixed-price basis. As pointed out in the note, whether fixed-price contracts should be used for projects with contract period extending beyond 21 months would be examined on a project-by-project basis. The use of MOD prices for project estimate was a separate matter. Its purpose was to overcome the problem of constant-price approved project estimates which was based on the prevailing costs of construction at a given date and took no account of inflation over the contract period of the project. This helped to ensure better financial planning. In the present proposal, the project cost was calculated on MOD prices for the same reasons. What was important was that contracts were awarded following competitive tendering. The actual tender prices would be the result of this bidding process and which in turn reflected the market situation and the various market factors at work. The inclusion of an inflation allowance in the project estimate would not encourage tenderers to inflate their prices.

11. The Government Architect of the Architectural Services Department (GA/ASD) added that although the payment period extended up to 2003-04, the total works period for piling and construction of the superstructure was three years. The construction works in respect of the superstructure would last for about 20 months, expected to be completed by November 1999. Thus, the contract periods for both the piling contract and the superstructure construction were both below 21 months; the fixed-price lump-sum contract method was therefore appropriate in this case. DS/Tsy added that fixed-price lump sum contracts had an advantage to the extent that the contractors had to forecast for themselves the inflation and shoulder the risk of any major variations in price movements.

12. The Member further questioned if it was appropriate to use MOD prices for the furniture and equipment which would only be required after the completion of the project. She also asked if the adoption of the price adjustment factor which worked on the basis of past inflation trend might unnecessarily inflate the cost of the furniture and equipment, and enquired if present-day costs should be used for these items. In response, DS/Tsy advised that the price adjustment factor was calculated according to the Government Economists forecast of trend labour and construction prices, and the rates would be adjusted if so justified. The factor used in this paper was consistent with the forecast of an annual inflation of 10% between 1996 and 1999 and 7.5% from 1999 onwards for trend labour and construction prices.

13. As for the furniture and equipment, the Senior Executive Manager of the Hospital Authority (SEM/HA) explained that it was necessary to draw up specifications for the hospital equipment, in particular those used in the operating theatres in this project, at an early stage to facilitate the detailed design of the superstructure and the building services. However, actual placement of orders would take place at a later stage to catch up with the advance of technology. The actual commissioning period after installation would be about three to six months. DS/Tsy added that Members were invited to approve the project estimate for the purpose of commitment. The actual costs would be subject to competitive bidding.

14. Some Members queried the need to prolong the payment period to the year 2003-04 if the construction works were expected to be completed in November 1999 and the commissioning tests for equipment completed within another three to six months. A Member pointed out that by delaying payments to contractors, there was a higher tendency on the part of tenderers to include a higher cost for inflation in the bidding prices. It was therefore not in the public interest to adopt such a long payment period in the long run. In response, GA/ASD advised that the major part of the payment would be made before 2002. The cashflow required for 2002-04 was for minor works or modifications to be done after the construction period and for items where commissioning tests were necessary. DS/Tsy assured Members that it was neither Governments policy nor practice to delay payments if the contractual conditions were fully met. However, some Members were still not convinced of the need to take four years to settle payments and requested the Administration to provide a written reply to account for the breakdown in the estimated cashflow.

15. Some Members expressed concern on the potential risks of contracts going to tenderers who made an unreasonably low inflation allowance in their bids to get the jobs. S for Tsy said that as Chairman of the Central Tender Board he would like to advise Members that in selecting tenders, the Board would ensure that the successful bids were fully conforming with the specifications, and there were no irregularities in pricing.. The tenderers should also be on the approved lists of contractors for such works. With these safeguards, the chances for works to be aborted due to unreasonably low bids were very remote.

16. Members pointed out that in the absence of information on items to be spent on contingencies and that the Administration would have a free hand in making use of this money once approved, they questioned the need for including the inflation element in the contingencies which made up some $60 million in MOD prices. In reply, GA/ASD explained that it was necessary to allow for inflation in the contingency sum as the need to draw on this provision would usually arise towards the latter part of the contract periods.

17. In response to questions, SEM/HA confirmed that during the construction period, Queen Elizabeth Hospital (QEH) had already made internal decanting arrangements. Some of the patients, in particular those requiring hydrotherapy, would have to be referred to the Kowloon Hospital. He admitted that some inconvenience would be caused but HA would make all suitable arrangements to reduce the inconvenience. As for the value-for-money consideration, he confirmed that waiting times would be reduced for most specialties and the use of the operating theatres would be maximised.

18. Members agreed that there was a pressing need to improve the operating theatres and ancillary facilities in QEH, but queried why it would take more than four years to complete the redevelopment works when compared to the 4 1/2 years to construct the Tsing Ma Bridge. GA/ASD explained that the project also involved the decanting of existing facilities and demolition of the old block. There were also site constraints which made it difficult to advance the completion time-frame. Besides, shortening the contract period further would most likely increase the project cost.

19. The Chairman requested the Administration to take note of Members views on the project and report back to the relevant LegCo Panel on how far the completion of the redevelopment works could be advanced. He also asked the Administration to provide an information paper on the calculation of the inflation allowance and the contingencies in MOD estimates to facilitate Members understanding of these aspects when considering future funding proposals.

20. The Committee approved the item.

Item No. 4 - FCR(95-96)107

HEAD 100 - MARINE DEPARTMENT
Subhead 603 Plant, vehicles and equipment

21. The Chairman requested Members to refer to an information paper provided to the Environmental Affairs Panel (LegCo Paper No. PL467/95-96) and a supplementary note to Members of the Committee (LegCo Paper No. FC54/95-96) when considering this issue.

22. Members raised queries about the poor response to the contracting-out of the marine refuse scavenging and collection service and asked if the tenderers were aware of the standard of vessels required. The Assistant Director of Marine (AD/M) replied that detailed requirements were included in the contract document. In the tendering exercise conducted in 1995, three of the four bidders did not meet the tender specifications. The fourth bidder had put up a proposal which was far too costly and the standard of provisions included far exceeded that required for the purpose. The Administration therefore considered it more cost-effective to provide an expanded service with in-house resources.

23. Regarding the source of floating refuse, the effect of the new vessels in reducing floating refuse in Hong Kong waters and whether more prosecution action should also be considered, AD/M explained that 80% of the refuse was generated from shore. With the additional purpose-built vessels, there would be a wider coverage of refuse scavenging service in Hong Kong waters and the quantity of floating refuse collected could be increased by about 34%. At present active measures had been taken by the working group, of which representatives from the two municipal departments were members. Joint efforts had been made with these departments to undertake special operations to collect refuse at black spots. As for prosecution actions, despite efforts from various departments, prosecutions had not been easy. Members said that the working group should continue to look for ways to improve the situation which should also include campaign to promote harbour cleanliness. AD/M noted a Members suggestion that heavier penalty might serve as an effective deterrent.

24. Referring to the suggestion of building marine refuse collection points close to incinerators and landfills, AD/M said that this might not be very cost-effective as longer vessel travelling time would be required. However, he agreed that there should be a more comprehensive approach in the planning of refuse collection facilities.

25. The Committee approved this item.

26. The Committee was adjourned at 4:30 p.m.

Legislative Council Secretariat
7 March 1996

Last Updated on 27 November 1998

FINANCE COMMITTEE

Record of Meeting held on 12 January 1996 at 2:30 p.m. in the Legislative Council Chamber

Record of Meeting held on 12 January 1996 at 2:30 p.m.
in the Legislative Council Chamber