Replies to LegCo questions

LCQ13: Service contracts for RCHEs through open tender

Following is a question by the Dr Hon Yeung Sum and a written reply by the Secretary for Health, Welfare and Food, Dr York Chow, in the Legislative Council today (January 26):

 

Question:

 

        Will the Government inform this Council:

 

(a)    of the number of welfare service units contracted out through competitive bidding by the Social Welfare Department since 2001, the number of tenders received for the welfare service units, and how the unit costs of the services contracted out through the above mode compare to those under the Lump Sum Grant; and

 

(b)    whether it has assessed the total savings achieved by adopting the system of contracting out through competitive bidding, and the impact of the system on the quantity and quality of welfare services; if it has, of the assessment results; if not, the reasons for that?

 

Reply:

 

        At present, the Social Welfare Department (SWD) contracts out residential care services through open tender.  This mode of providing residential care services has been in place since 2001.

 

        Under this mode, the Government awards the service contracts for operating purpose-built residential care homes for the elderly (RCHEs) through open tender by non-government organizations (NGOs) and the private sector.  To avoid vicious competition by bidding at the lowest price, price is not the prime consideration of the Government in awarding the service contracts.  Service quality is the determining factor, constituting 80 per cent of the weighting in the assessment.

 

        The objectives of awarding service contracts for RCHEs through open tender are to provide a level-playing field such that both NGOs and private operators will have equal opportunities to run residential care homes with places subsidized by the Government, and to enhance the cost-effectiveness of the services.  In the Director of Audit's Report No. 38 on residential services for the elderly published in 2002, the Director of Audit recommended that the Administration should review the cost-effectiveness of providing residential care places, consider contracting out subsidized residential care services through open tender where practicable, and reduce the operating costs of subvented RCHEs having regard to the lower costs which SWD had attained through awarding RCHE service contracts by open tender.

 

        Unlike care and attention (C&A) homes and nursing homes (NHs) subvented under the Lump Sum Grant (LSG), RCHEs operated under service contracts through open tender (contract homes) are required to provide continuum of care and a specific number of non-subsidized residential care places. 

 

        Our replies to the specific questions raised by Dr Hon YEUNG Sum are as below:

 

        (a)    As at December 2004, SWD has awarded seven service contracts for operating RCHEs through open tender.  Six are operated by NGOs, and one by a private operator.  All of them have commenced operation.  The number of tenders received for each contract varies.  The greatest number of tenders received per contract is 26, and the smallest number is six.  The average number of tenders received for each contract is 15.

 

        As the cost structure on staffing expenditures in contract homes and RCHEs subvented under the LSG is different, and because of site-specific factors, the average unit cost of a subsidized residential care place between the two types of homes are different.  It is not appropriate to make a direct comparison between them.

 

        For reference purpose, according to the 2004-05 Budget Estimates, the average monthly unit cost of a residential care place in the seven contract homes is estimated to be $5,945.  The average monthly unit cost per place in C&A homes and NHs subvented under the LSG are estimated to be $7,753 and $11,622 respectively.

 

        (b)    The seven service contracts involve 604 subsidized and 355 non-subsidized places.  For reference purpose, SWD estimates that there is a saving of about 34 per cent in the recurrent expenditures regarding the average unit cost of a subsidised residential care place provided through service contracts vis-a-vis the LSG. 

 

        As contract homes are required to provide a specific number of non-subsidized places at their premises, there will be an increase in the supply of non-subsidized places in addition to an increase in the subsidized places when Government awards RCHE service contracts through open tender.

 

        Contract homes must comply with the service specifications, requirements and indicators as stipulated by SWD.  SWD monitors and conducts surprise visits to the contract homes, with a view to assessing their performance and service quality.  SWD's assessment results indicate that the contract homes have so far been operating satisfactorily, and have been complying with the specifications and requirements of the service contracts in general.  Also, contract homes are required to conduct users' satisfaction survey at least once a year.  The outcomes of the surveys show that about 85 per cent of the users are satisfied or very satisfied with the services of the contract homes.  SWD will continue to monitor the operation of the contract homes and regularly review the effectiveness of individual homes.

 

Ends/Wednesday, January 26, 2005

NNNN