The Chairman extended a warm welcome to three new members who had joined the Subcommittee in the current session; they were Dr Hon Samuel WONG Ping-wai, Dr Hon Philip WONG Yu-hong and Hon CHAN Kam-lam. She also reported that the Subcommittee had held nine meetings in the last session, and the purpose of the current meeting was to continue with the examination of consultancy contracts which had been awarded without going through the open tender process.

I Award of contracts without going through the open tender process

(Concerns raised by members at the meeting on 24 September 1996)

(LegCo Paper No. CB(1) 152/96-97(01) - Response to members' concerns by the Administration and the KCRC)

2. Mr Samuel LAI informed members that Mr Kevin Hyde, Chairman of the Kowloon Canton Railway Corporation (KCRC) was unable to attend the meeting as he had just received a heart surgery on 22 October 1996. The Chairman on behalf of members of the Subcommittee sent their warmest regards and wished Mr Hyde a speedy recovery.

3. As the written response to concerns raised by members at the meeting on 24 September 1996 had been circulated vide LegCo Paper No. CB(1) 152/96-97(01), the Chairman advised that it was unnecessary for the Administration to provide detailed briefings, and invited members' comments on the subject.

4. On the 210 staff employed by International Bechtel Incorporated (Bechtel) in connection with consultancy studies on the Western Corridor Railway (WCR) project, members expressed dissatisfaction at the inclusion of administrative and clerical support staff since consultants' staff received significantly higher salaries and this would be wasteful of resources. They also noted that a significant number of engineers were employed by Bechtel on the project and that their scope of duties had not been set out in the response provided by KCRC. A member also expressed worries that such a significant number of staff might undermine KCRC's impartial authority in awarding consultancy contracts. In reply, Mr Gordon SIU explained that the arrangement for allowing Bechtel to employ its own administrative and clerical staff had the support of the Administration as this provided KCRC with flexibility in staff deployment in the early stage of the WCR project. As regards the employment of engineers, Mr Ian McPherson said that KCRC was lacking experience in the design and construction of major and capital intensive projects such as WCR, and would therefore have to rely on extensive professional opinions from engineers of different fields. To facilitate members' understanding, Mr SIU undertook to provide the following information:

a breakdown of the grades and levels of the 210 staff employed;
an analysis of the staff complement of the company, with cross-references to the increase in work undertaken since the award of consultancy contracts relating to the WCR project; and
the future staffing projections for the remainder of the project.

5. On the inter-working relationship between the Administration and consultancy firms, Mr McPherson said that KCRC had set up an integrated team with members from various departments of the Administration for pursuing issues relating to the WCR project. Mr L N Parker and Mr C K MAK confirmed this arrangement. Mr Parker added that his staff normally met with KCRC consultants between one to three times per week and the latter fully understood the stance of the Administration. On the subject of land resumption, he assured members that the relevant consultancy studies would be awarded shortly and the Administration should be able to take a decision on the WCR project by the end of 1996.

6. In response to a member, Mr SIU confirmed that KCRC Management Board members had already been invited to sit on the Tender Boards. As regards a member's enquiry on whether policy changes and consultancy contracts needed only be brought to the attention of the Managing Board or whether the Board's approval was required, Mr LAI clarified that under the revised arrangements, all policy changes relating to delegation of authority should be approved by the Board. For consultancy contracts, the Managing Board's approval would be required if the amount of the contracts exceeded a prescribed level. Notwithstanding this, all consultancy contracts awarded which were less than $20 million would be referred to the Managing Board irrespective of the amount of fees involved. At members' request, Mr LAI undertook to elaborate on the above in writing. He also undertook to provide the Subcommittee with updated versions of KCRC's manual of policy and procedures.	KCRC
7. In referring to the answer on the corporate structure of KCRC, a member did not accept KCRC's response that the Managing Board should delegate much of its powers to the Chief Executive Officer and that this was "in accordance with normal corporate governance". The member was of the view that the description was abstract and in reality practices varied with different organizations. He appreciated that KCRC had introduced improvements to its corporate structure recently but considered a need for an independent consultancy study to review the corporate structure of KCRC. He also enquired if KCRC had commissioned consultancy studies to review its own corporate structure. In reply, Mr LAI said that KCRC had not commissioned any consultancy study of this nature, but the corporate structure had been under constant review internally. Mr SIU supplemented that the Administration had worked closely with KCRC recently and was satisfied with the corporate structure of the Corporation. He nevertheless undertook to consider the member's suggestion for an independent consultancy study.	Admin
8. In commenting on a suggestion for inviting the former KCRC Chairman in 1989 to the meeting to discuss the decision made in 1989 on excluding consultancies from the corporate tendering policy, Mr SIU highlighted the fact that KCRC had not handled large-scale projects as WCR in the past and it might be inappropriate to ask the ex-Chairman to explain a decision made in 1989 based on the present situation. Nonetheless, he advised that the ex-Chairman had exchanged correspondences with KCRC recently on this subject, and undertook to seek the consent of the ex-Chairman for circulating the two relevant letters for members' reference. He also agreed to obtain the views of Mr P V Quick, the Managing Director of KCRC in 1989, on the subject.	Admin
9. Some members were of the view that the Administration should not have allowed one person to assume the duties of both Chairman and Managing Director of KCRC as this had resulted in an over-delegation of power to the management. In reply, Mr SIU advised that other corporations such as the Mass Transit Railway Corporation (MTRC) had also adopted this approach and no problems had been encountered so far. He considered it more important to look into cases individually with a view to bringing about improvements in the future.

10. The Chairman advised that as the KCRC had tabled three papers for members' reference, she would invite members' comments on each of these papers. Mr SIU confirmed that proposals made in the papers had been passed by the KCRC Managing Board at its meeting on 22 October 1996. The Administration had taken part in formulating the proposals and was in full support of the suggested improvement measures.

(Post-meeting note: The tabled papers were circulated vide LegCo Paper No. CB(1) 186/96-97 after the meeting.)

Award of Technical Studies Consultancies Phase I

11. With reference to the list of Phase I Studies appended to the information paper, a member questioned if all nine studies were necessary. He suggested that unnecessary studies should be deferred until the Administration had taken a decision on the project. Mr Parker and Mr MAK affirmed that the nine studies were essential to enable the Administration to decide on the land resumption, design and alignment of the project, etc., and to formulate the project plan. Mr Parker added that the Administration had examined the content of each of the nine studies and had requested KCRC to trim the proposals down to the basic essentials. The Administration was satisfied that the current proposals represented the absolute minimum necessary to enable the Administration to take a decision by the end of the year.

12. In response to a member, Mr McPherson advised that a total of 32 invitations were issued for the eight packages of consultancy studies involved in the Phase I Technical Studies. Four invitations were issued for each package and more than one response had been received for all four invitations. On the relationship between Phase I and Phase II Studies, he said that tenderers on Phase I Studies were required to undertake the studies on the basis of a stand-alone scope and there were no obligations on the part of KCRC to appoint the same consultants for the Phase II Studies.

13. Members noted that only a list for the Phase I studies had been provided and requested the Administration and KCRC to provide more information and detailed descriptions in information papers in the future. Hon CHAN Kam-lam on behalf of the Democratic Alliance for the Betterment of Hong Kong voiced his objection to the technical studies taking place before the Administration made a decision on the project. Hon Albert CHAN Wai-yip on the other hand indicated the support of the Democratic Party for the studies as these would facilitate construction of the project.

Admin

Retendering of Core Consultancies

14. A member welcomed KCRC's decision on the retendering of core consultancies, but expressed his concern on transitional arrangements for consultancy works, in particular on studies relating to management matters. Mr SIU advised that the KCRC Managing Board had only come up with the decision on retendering on 22 October 1996 and the management was still working on the schedule of implementation. Mr LAI added that retendering would take place when the overall programme for the project and the Administration's stance on KCRC's proposal was known. He undertook to reflect members' concerns on this subject for the Managing Board's consideration.

KCRC

15. On the need for using a new consultant's service to assist in the development of the prequalification and tender documentation, Mr McPherson explained that this was the Managing Board's recommendation for ensuring the necessary checks and balances and for building specific safeguards into the tendering systems in view of the limited number of staff in KCRC management. Mr SIU indicated his support for this arrangement so long as the process was open and fair. He also emphasized that the study should be conducted by a new consultant to avoid possible conflicts of interests with consultants currently commissioned by KCRC. At members' request, Mr McPherson agreed to provide information on the costs, nature and scope of the proposed consultancy service for members' reference.

KCRC

16. Mr SIU shared members' views for KCRC to re-inforce its staff complement and establish its own project management team to oversee the progress and development of its project and minimize reliance on outside consultancies. He also undertook to consider members' suggestions on allowing such public bodies as the Airport Authority and MTRC to bid for tenders for the WCR project, including the proposed consultancy study on prequalification and tender documentation, although he cautioned that works on the new airport projects was reaching their peak between now and 1998. A member further remarked that the Administration should consider and plan for the transfer of technical experiences in such projects as WCR and the new airport to future railway developments in Hong Kong. This suggestion was noted by Mr SIU.

MTRC

West Rail Resources Requirements

17. In response to a member on the details of the minimal level team stated in the information paper, Mr McPherson said that the Managing Board had accepted a general proposal for minimizing the number of staff for overseeing and managing the technical studies but the details had yet to be work out. He nevertheless undertook to advise the options which had been developed to decide on a minimal team level, and to describe the circumstances of uncertainties referred to in paragraph 4 (a) to (d) of the information paper. Mr McPherson also advised that the proposal would be considered at the Managing Board meeting on 28 October 1996 and agreed to inform the Subcommittee when the Board had made a decision.

KCRC
KCRC

18. In response to a member on the termination of contracts for staff, Mr McPherson confirmed that one month's notice was required for the termination of appointment in accordance with the contractual agreements.

II Work Schedule of the Subcommittee

19. The Chairman invited members' view for drawing up a work schedule for the Subcommittee. After deliberations, members decided that unless so requested by members upon receipt of responses to the concerns raised at the meeting, no further meetings would be held until the Administration had taken a final decision on the WCR project in December 1996.

III Any other business

20. The meeting ended at 5:00 p.m.

Legislative Council Secretariat

30 December 1996

Last Updated on 22 August 1998

LegCo Panel on Transport