For discussion FCR(96-97)8
on 10 May 1996

ITEM FOR FINANCE COMMITTEE

CAPITAL WORKS RESERVE FUND
HEAD 710 - COMPUTERISATION
Information Technology Services Department
Subhead A004XS Replacement of the central bureau computer
HEAD 47 - INFORMATION TECHNOLOGY SERVICES DEPARTMENT
Subhead 001 Salaries

Members are invited to approve -

1. the revised basis for proceeding with the development and implementation of the Automated Communication, Technical Information and Operations Network computer system of the Architectural Services Department within the approved commitment under Subhead A004XS Replacement of the central bureau computer; and
2. an increase in the ceiling placed on the total notional annual mid-point salary value of all non-directorate posts in the permanent establishment of the Information Technology Services Department in 1996-97 from $301,036,000 by $3,876,420 to $304,912,420 for creating non-directorate posts to develop and implement the system.

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PROBLEM
PROPOSAL
JUSTIFICATION
FINANCIAL IMPLICATIONS

Non-recurrent cost
Existing financial commitment
Implementation plan

BACKGROUND INFORMATION
Scope and Benefits of the Automated Communication, Technical Information and Operations Network (ACTION) System

Purpose
Scope
Benefits and savings

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PROBLEM

The contractor for the development and implementation of the Automated Communication, Technical Information and Operations Network (ACTION) system has failed to deliver the project and we have cancelled the contract.

PROPOSAL

2. We intend to carry out the project in-house. In order to do so, we propose to -

1. revise the costing as presented to Members in 1990 in the light of reduced prices for hardware and software and the increased cost for system development; and
2. create 11 additional posts in the Information Technology Services Department (ITSD) for 14 months at a total notional annual mid-point salary (NAMS) value of $3,876,420.

JUSTIFICATION

3. In December 1995, we issued an information note (FCRI(95-96)36) to inform Members of the reasons for terminating the contract for the development and implementation of the ACTION system, and of the options available to us. To avoid further delay to the project, we plan to develop the system in-house so that development work can start as soon as possible. This requires the provision of additional staff to ITSD on a project basis to carry out the development work originally planned to be contracted out. We have therefore revised the project costing to take account of the in-house development approach and the current price level for hardware and software and other items. As we can meet the revised non-recurrent cost of the project from within the originally approved project commitment, we do not need any additional financial commitment for the development of the system.

4. The scope of the ACTION system and the benefits arising from its full implementation remain unchanged. We have updated the estimated savings in building maintenance and refurbishment budget and in the staff and accommodation costs to $24,089,000 per annum to reflect the current price level. The purpose and scope of the system and its benefits are summarised in the Enclosure.

FINANCIAL IMPLICATIONS

Non-recurrent cost

5. The Director of Information Technology Services (DITS) estimates that the full implementation of the ACTION system will incur a total non-recurrent cost of $28,767,000. This is made up of $20,163,000 for the purchase of computer hardware and software, training and consumables, and the hire of implementation services for which we normally seek Members’ approval as a project commitment; and in-house staff costs of $5,462,000 for ITSD and $3,142,000 for Architectural Services Department (ArchSD). Details of the non-recurrent cost are as follows -

6. As regards paragraph 5(a), the cost of $9,000,000 is for acquiring workstations, peripherals, data communication equipment and cabling at ArchSD offices as well as additional computer equipment and software for the ITSD Bureau computer. We have already incurred the bulk of this amount prior to the cancellation of the earlier development and implementation contract. In other words, most of the hardware and site preparation for the ACTION system are already in place.

7. As regards paragraph 5(b), the cost of $1,593,000 is for acquiring specialist service to specify the elemental coding requirements of the system. This task has largely been completed.

8. As regards paragraph 5(c), the cost of $7,660,000 is for acquiring data conversion services and temporary analyst/programmer staff to supplement the ITSD in-house staff for the development and implementation of the system.

9. As regards paragraph 5(d), the cost of $1,000,000 is for training and start-up consumables such as print ink, papers and stationeries.

10. As regards paragraph 5(e), the cost of $910,000 is a 10% contingency for remaining expenditure on acquiring computer hardware and system software, implementation services and training and consumables pertaining to paragraph 5(a), (c) and (d).

11. As regards paragraph 5(f)(i), the cost of $5,462,000 represents the staff cost of ITSD for the development and implementation of the system. This comprises 139 man-months of staff resources during a 14-month period. To create 11 non-directorate posts in 1996-97, we are seeking Members’ approval to increase the NAMS value of ITSD from $301,036,000 by $3,876,420 to $304,912,420.

12. As regards paragraph 5(f)(ii), the cost of $3,142,000 represents the staff cost of ArchSD (49 man-months) during the development and implementation stages. The Director of Architectural Services (DArchS) will provide the required resources by internal redeployment.

Existing financial commitment

13. ACTION project is currently funded under Capital Works Reserve Fund Head 710 Computerisation Subhead A004XS, which comprises a larger, consolidated computerisation project in ITSD. The financial position of this subhead is as follows -

14. Apart from the ACTION system, DITS has fully implemented the project under Subhead A004XS and no further commitment is required. Based on the revised costing, full implementation of ACTION will require a total non-recurrent commitment of $20,163,000 of which $10,149,000 has been expended on computer hardware and other preparatory work. Thus, the remaining balance of $19,194,000 in Subhead A004XS is sufficient to meet the outstanding non-recurrent project cost of ACTION estimated to be $10,014,000.

Annually recurrent cost

15. DITS and DArchS estimate that the ACTION system will incur an annually recurrent cost of $6,983,000 from 1997-98 onwards, made up as follows -

16. As regards paragraph 15(a), the annual expenditure of $1,098,000 is for maintaining the computer equipment.

17. As regards paragraph 15(b), the annual expenditure of $1,071,000 is for acquiring temporary analyst/programmer staff to supplement the ITSD staff for providing on-going application maintenance to the ACTION system.

18. As regards paragraph 15(c), the annual expenditure of $100,000 is for training the ITSD support staff.

19. As regards paragraph 15(d), the annual staff cost of $1,380,000 is to meet the cost of half of a Systems Manager post, one Analyst/Programmer I post and one Analyst/Programmer II post for providing on-going support and maintenance of the ACTION system.

20. As regards paragraph 15(e), the annual expenditure of $1,320,000 is for renting data communication lines.

21. As regards paragraph 15(f), the annual expenditure of $100,000 is for acquiring consumables.

22. As regards paragraph 15(g), the annual staff cost of $1,914,000 is to meet the cost of half of a Senior Property Services Manager post, half of a Property Services Manager post and one Property Services Officer post for providing on-going user support to the ACTION system.

23. We shall be able to more than offset the above annually recurrent expenditure by estimated savings of $24,089,000 arising from the full implementation of the ACTION system as described in paragraph 4 above. We expect a net recurrent saving of $17,106,000 per annum.

Implementation plan

24. DITS plans to implement the proposed ACTION system according to the following schedule -

BACKGROUND INFORMATION

25. On 18 May 1990, Finance Committee approved implementation of the ACTION system as a stand-alone project. On 14 December 1990, Finance Committee considered FCR(90-91)121 and approved the inclusion of the ACTION system as part of a major computer project, that is, the present Subhead A004XS Replacement of the central bureau computer.

26. In April 1994 we awarded by open tender a fixed price development and implementation contract for the ACTION system. The contractor commenced work in May 1994 and the ACTION system was to be developed and put into operation in stages commencing April 1995 with full completion by 1 July 1995. No ACTION system was ready for acceptance by Government on 1 July 1995. In accordance with the provisions of the contract, Government served notice of termination of the contract in September 1995. No payment was due or has been made in accordance with the contract.

27. We submitted an information note FCRI(95-96)36 to Finance Committee in December 1995 to report on the project progress leading to the termination of the contract and the alternate project options being considered. Although the option now proposed to take forward the ACTION system does not necessitate an increase in the approved commitment of the project, we consider it necessary to seek Members’ approval before we proceed.

Finance Branch
May 1996

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Enclosure to FCR(96-97)8

Scope and Benefits of the Automated Communication, Technical Information and Operations Network (ACTION) System

Purpose

The proposed ACTION system will be an effective and efficient system for the Architectural Services Department (ArchSD) to manage the maintenance of some 7 000 Government buildings scattered all over the territory. It will provide a more efficient means of diagnosing the needs and requests of client departments and will facilitate the effective allocation and control of the maintenance budgets. It will also improve the response time to and accuracy of works orders issued to contractors for the maintenance works and enhance the monitoring of the contractors’ performance.

Scope

2. The scope of the system is, inter alia -

1. to register information of buildings, services, occupiers, contractors and suppliers in a centralised database;
2. to capture day-to-day repair requests, check for duplication and to print out in both English and Chinese repair orders to contractors;
3. to capture details of work done to readily provide the historical background and up-to-date information on buildings and services installations, which will permit proper medium and long term planning and allocation of resources;
4. to facilitate fast invitation of tenders and monitoring of contractors’ performance;
5. to interface with the accounting system to permit full and efficient management of the certification and payment process and to provide budgeting information together with control on committed and actual expenses of repair orders and contracts;
6. to provide timely and accurate statistical and management information on building maintenance activities; and
7. to interface with and integrate into the existing or future computer systems within the department to facilitate the flow of useful information which would improve new and maintenance works.

Benefits and savings

3. The proposed system will improve the analysis, planning and prioritisation of building maintenance works. ArchSD estimates that with the full implementation of the proposed system, its annual building maintenance provision and refurbishment budget provision can be reduced by $7,600,000 and $9,300,000 respectively.

4. Furthermore, the ArchSD staffing level can be reduced by 20 Works Supervisor II posts, resulting in an annual staff cost saving of $4,186,000. Eight Data Processor posts at the Treasury for payment processing will also be reduced, resulting in a further annual staff cost saving of $1,687,000. In addition, there will be a reduction of two-thirds of the accommodation requirements for existing paper files, equivalent to an annual accommodation cost of $1,316,000.

5. The above benefits add up to a total annually recurrent saving of $24,089,000 per annum after full system implementation.

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