For discussion
on 30 March 1998


Water Supplies Department
New Subhead "Integrated Materials and Job Records Management System"
Subhead 001 Salaries
Subhead 001 Salaries

    Members are invited to approve -

  1. a new commitment of $22.12 million for developing and implementing an Integrated Materials and Job Records Management System in the Water Supplies Department;

  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 1998-99 from $445,686,180 by $681,180 to $446,367,360 for creating one non-directorate post to provide development support for the implementation of the proposed system; and

  3. 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 Water Supplies Department in 1998-99 from $1,282,667,000 by $689,190 to $1,283,356,190 for creating two non-directorate posts to provide business input and logistical support for the procurement and development of the proposed system.


The Water Supplies Department (WSD) has taken over from the Government Supplies Department (GSD) the management of waterworks stores but does not have a proper computerised materials and job records management system to meet its operational requirements.


2. The Director of Water Supplies (DWS), on the advice of the Director of Information Technology Services (DITS) and with the support of the Secretary for Works, proposes to develop and implement an Integrated Materials and Job Records Management System (IMJRMS) in WSD to provide an efficient and effective computer-based system to help manage the waterworks stores.


3. Prior to December 1996, waterworks stores 1were managed by GSD as part of its centrally held stock to be issued to departments for use on request (known as "unallocated store"). In October 1995, the Management Services Agency (MSA) conducted a review on the supply of waterworks materials, the job records system and the management of stores. Amongst other recommendations, MSA recommended that the management of unallocated waterworks stores should be transferred from GSD to WSD for better efficiency. The transfer took place in December 1996, upon the relocation of the two GSD depots in North Point and Cheung Sha Wan to the new warehouse in Chai Wan.

4. As an interim measure to manage the waterworks materials inventory transferred from GSD, WSD also took over GSD's stock control and accounting systems, namely the Inventory Management Procurement and Accounting Control Technique System (IMPACTS) and the Unit Record System (URS). These two systems were then no longer required by GSD which has developed a new computer system, "Computer System for Warehouse Operations, Stock Management and Stores Requisition2 " that came into operation in November 1996. Both IMPACTS and URS are systems over 20 years old and cannot meet WSD's operational requirements.

5. Both IMPACTS and URS are operated by the Information Technology Services Department's (ITSD's) staff at their Computer Bureau. They are out-of-date in both technology and design and are hence considered no longer suitable for modern-day materials management by GSD. Likewise, for the purpose of managing waterworks stores, the two systems have the following limitations and deficiencies -

  1. there is no on-line enquiry facility for stock inventory and location. WSD staff could only make reference to the periodic computer reports on stock position and rely on personal contacts to locate the available stock;

  2. there is no on-line processing facility for stock management. Computer updating can only be performed in batches at the ITSD's Computer Bureau. In view of the time required to prepare computer input forms and to arrange for despatch between offices and the limitation of the existing computer resources, it needs about two weeks to update the stock information, which is far too slow for efficient stores management;

  3. they require intensive manual efforts to input data and update job records;

  4. they require additional manual efforts to maintain data in different micro-computer systems located at various regional offices of WSD;

  5. the existing systems are inefficient in information retrieval, in tracing materials transactions and in monitoring the progress of job records, thereby resulting in unnecessary delays in the delivery of the requested waterworks materials and in the settlement of payments; and

  6. the existing systems are not Year 2000 compliant.

6. To provide WSD with its own proper system for managing the waterworks stores efficiently and cost-effectively, we propose to develop in WSD a fully integrated computer system, with a network of 70 workstations at different WSD offices, for inventory management, job records management and financial management.

7. The proposed system will improve efficiency and achieve annual savings of about $6.86 million, made up as follows -

$ million

Realisable savings


Deletion of nine posts



Reduction in overtime allowance


Notional savings


Accommodation cost for nine posts to be deleted



Operating cost for existing systems

2.99 3


Reduction of about 2 950 m2 in storage space



Total annual savings


In addition, there will be a one-off cost avoidance of $3.18 million, which will otherwise be required to modify IMPACTS for Year 2000 compliance.

8. The proposed system will also bring about the following intangible benefits upon full implementation -

  1. it will reduce the lead time for checking the availability of stock from three days to instant;

  2. it will reduce the lead time for acquiring store materials from 14 days to seven days;

  3. it will eliminate rejection of stores requisition orders due to the lack of stock (the current rejection rate is about 5%);

  4. it will speed up the time required for settling job accounts by about one and a half months through reduction of the average job closing time from three months to within two months and reduction of time for processing job records under different costing procedures from 21 days to seven days; and

  5. it will reduce the average stockholding level by about 8.6% (from $58 million to $53 million) and lead to a saving of storage space.

With the above improvements, we can shorten the average time required for routine maintenance and repair works by ten days.

Implementation Plan

9. We plan to implement the proposed system according to the following schedule -



(a) Tendering

April 1998 to August 1998

(b) Site preparation, procurement of equipment and services and installation of hardware and software

September 1998 to December 1998

(c) Data conversion and implementation of the core system

September 1998 to March 1999

(d) Full implementation

March 1999 to September 1999

(e) System nursing and review

October 1999 to March 2000


Non-recurrent Expenditure

10. We estimate the non-recurrent expenditure of the proposed system to be $26.18 million, made up as follows -

$ million
$ million
$ million
(a) Computer hardware and networking 4.85 0.00 4.85

(b) Software 1.03 5.85 6.88

(c) Implementation and data conversion services 0.00 5.68 5.68
(d) Site preparation 0.90 0.00 0.90
(e) Miscellaneous 0.90 0.90 1.80
(f) Contingencies
(10% of items (a) to (e) above)


(g) Development staff costs
(i) WSD 1.51 1.51 3.02
(ii) ITSD 1.04

Sub-total 2.55

Total 11.00

11. As regards paragraph 10(a), the cost of $4.85 million is for acquiring computer workstations, database servers, peripheral and data communication equipment.

12. As regards paragraph 10(b), the cost of $6.88 million is for the procurement of computer software application packages.

13. As regards paragraph 10(c), the cost of $5.68 million is for contracting out services to develop and implement the proposed system. This covers system set-up, application development, system testing and acceptance testing, project management and data conversion.

14. As regards paragraph 10(d), the cost of $0.9 million is for site preparation for the installation of computer equipment and cabling works for the peripheral equipment.

15. As regards paragraph 10(e), the cost of $1.8 million is for acquisition of miscellaneous items such as start-up consumables and training.

16. As regards paragraph 10(g)(i), the cost of $3.02 million represents the staff cost of WSD's project team responsible for providing support in the development of the proposed system, working with the system provider to set up and design the package solution to meet the operational need, to test the package system and to arrange training for end-users. The team involves 24 man-months of Engineer and 24 man-months of Technical Officer. We need to create two posts of one Engineer and one Technical Officer at a total notional annual mid-point salary (NAMS) value of $689,190 and to increase the establishment ceiling of WSD accordingly.

17. As regards paragraph 10(g)(ii), the cost of $1.04 million represents the staff cost for 12 man-months of Systems Manager (SM) required by ITSD for assisting WSD in arranging the outsourcing contract for the development of the proposed system. ITSD will need to create one SM post in 1998-99 at a NAMS value of $681,180.

Recurrent Expenditure

18. The estimated annually recurrent cost of the proposed computer system is $5.24 million for the first four years and $5.75 million from the fifth year upon full implementation. The breakdown is as follows -

1999-2000 to
$ million
$ million
(a) Computer hardware, software and data communication equipment 2.13 2.64
(b) System and technical support services 0.80 0.80
(c) Miscellaneous 0.65 0.65
(d) Staff cost for ITSD 0.15 0.15
(e) Staff cost for WSD 1.51

Total 5.24

19. As regards paragraph 18(a), the annual expenditure is for the maintenance of hardware, system and application software, and communications network equipment. It also includes the rental of communication lines. The terms and conditions of the existing computer bulk contract allow a special discount for the maintenance service charge of some equipment for the first four years. Thus, the full year recurrent maintenance cost will increase from $2.13 million in 1999-2000 to $2.64 million in 2003-04 and beyond.

20. As regards paragraph 18(b), the annual expenditure is for hiring services to provide on-going technical support services including system and network administration.

21. As regards paragraph 18(c), the annual expenditure is for providing on-going training for WSD staff, purchase of consumables and miscellaneous expenses.

22. As regards paragraph 18(d), the annual expenditure represents the staff cost of ITSD, comprising 0.5 man-month of Senior Systems Manager and one man-month of SM, for providing on-going advice to WSD on the system.

23. As regards paragraph 18(e), the annual expenditure represents the staff cost of WSD, comprising two posts of one Engineer and one Technical Officer, for the on-going system administration and computer operation upon full implementation of the system.

Cost-benefit Analysis

24. A detailed cost-benefit analysis is at the Enclosure. We are aware that the tangible benefits in terms of savings are unlikely to pay back the capital cost involved in the near future. However, as pointed out in paragraph 8 above, timely provision of waterworks materials will help improve the overall efficiency and cost-effectiveness of WSD's routine maintenance works and result in a better service to the public.

Implications on Fees and Charges

25. The project by itself would lead to an increase in water charges by 0.1% in real terms by 1999. This is based on the assumption that the demand for water supply remains static during the period from 1998 to 1999 and the present rate of Government subsidy for the waterworks operations continues to apply.


26. Based on the recommendation made in a study carried out on the work of GSD by MSA, we transferred the management of waterworks materials inventory from GSD to WSD in December 1996 for better operational efficiency. On 30 October 1996, we established a special suspense account, by resolution of the former Legislative Council made under section 30(I) of the Public Finance Ordinance, under WSD to facilitate the management of its own unallocated stores.

27. In August 1997, ITSD commissioned a feasibility study for the development of the proposed system. The study concluded that there are computer software packages available in the market. With some customization, the software packages can meet WSD's operational requirements. DWS plans to commence the related development work in early 1998 for implementation in late 1999 to avoid the occurrence of the year 2000 problem in the existing systems.


Works Bureau
March 1998

1. The unallocated stores of WSD maintains waterworks materials and equipment such as fresh and salt water pipes, water meters, valves and spare parts. In 1997, the unallocated stores handled about 81 500 stores requisition orders. The cost of the turnover was about $77.2 million.

2.On 14 July 1995, Finance Committee approved a non-recurrent commitment of $33,343,000 for GSD to develop a new computer system for warehouse operations, stock management and stores requisition.

3.This refers to fragmented staff effort and computer resources incurred by ITSD's Computer Bureau in operating the existing systems.