Replies to LegCo questions

LCQ12: Competitive bidding for delivery of welfare services

Following is a question by the Hon Leung Kwok-hung and a written reply by the Secretary for Health, Welfare and Food, Dr York Chow, in the Legislative Council today (November 30):

Question:

Some members of the public have complained to me that since the Social Welfare Department (SWD) introduced competitive bidding for the delivery of welfare services, there have been cases of contracts being awarded to the lowest tender and pledges made by the bidding organisations far exceeding the specifications set out in the tender documents. In this connection, will the Government inform this Council :

(a) of the number of contracts awarded by SWD through competitive bidding in the past five years broken down by types of services, together with the differences between the costs of services pledged by the successful bidders in their tenders and those set out in the relevant tender documents, as well as the number of contracts awarded to the lowest tenders;

(b) whether SWD will change its existing practice of not making public the details of the successful bidders' tenders, the reasons for awarding the contracts to the organisations concerned and the vetting criteria involved; if it will, of the details; if not, the reasons for that, and

(c) whether SWD will review its existing competitive bidding scheme and seek the views of social welfare organisations, with a view to enhancing the transparency and fairness of the scheme?

Reply:

Madam President,

The Social Welfare Department (SWD) started to make available purpose-built premises for residential care homes for the elderly (RCHEs) for open bidding by non-government organisations (NGOs) and private RCHE operators in 2001.

SWD also started adopting tendering as the mode for inviting NGOs to operate the 18 teams of Enhanced Home and Community Care Services (EHCCS) in 2001.

The objectives for SWD to award the service contracts of purpose-built RCHE premises and EHCCS through tendering are to allocate public resources in a fair and transparent manner, enhance the quality of elderly services through healthy competition, and enhance the cost effectiveness of these 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 and consider contracting out subsidised residential care services through open tender where practicable, with a view to reducing the operating costs of subvented RCHEs.

Unit cost is not the prime consideration of SWD in awarding the contracts. Rather, service quality is the determining factor. In this regard, SWD has put in place a quality-based assessment mechanism which has the following features:

(a) In vetting a tender, SWD will assess the quality aspect first. It will cease vetting the tender if the quality aspect has failed to attain the passing marks, and will not proceed with the assessment of the service volume aspect of that tender;

(b) The weighting of the scores on service quality and service volume is 80:20;

(c) The contract sum for each contract is fixed. Also, a reasonable upper and lower ceiling for the service volume is fixed for each contract. To prevent vicious competition on price (such as proposing unrealistic unit costs), tenderers may only propose a service volume within the fixed range;

(d) The financial capability of the tenderers will be assessed, to ensure that they are financially capable to deliver the service volume which they have committed in the tender; and

(e) The successful bidders are required to abide by the contractual requirements and the service quality which they have committed in their tenders. Also, they are subject to performance monitoring as stipulated in the contracts, and are required to submit performance indicators reports regularly.

The above mechanism can effectively prevent tenderers from obtaining the contracts solely by virtue of low price, committing more than the permitted service volume, or failing to deliver their commitments after they are awarded the contracts.

My replies to the specific questions raised by the Hon LEUNG Kwok-hung are as below:

(a) SWD has hitherto awarded nine contracts for operating RCHEs at purpose-built RCHE premises. Each contract has a fixed contract sum and an upper and lower ceiling for the service volume. Seven successful bidders proposed to provide the permitted maximum service volume at the fixed contract sum.

SWD first awarded the 18 EHCCS contracts in 2001. The contracts were re-tendered in 2005. Each contract also has a fixed contract sum and an upper and lower ceiling for the service volume. For the 18 contracts awarded in 2005, 14 successful bidders proposed to provide the permitted maximum service volume at the fixed contract sum.

(b) Within the confines of the requirements on the disclosure of Government tender information, SWD will provide information to unsuccessful tenderers as far as possible. SWD will organise de-briefing sessions to make known the tendering results and share with unsuccessful tenderers the overall performance of the tenders in terms of scoring and other aspects, so that the latter may learn from experience. At the request of individual unsuccessful tenderers, SWD will explain to them in greater details about the strengths and weaknesses of their tenders, so that they may make improvements in future. Also, SWD encourages successful bidders to share their experience with the sector, with a view to promoting cross fertilisation of experience and mutual learning.

(c) SWD's tendering and assessment procedures are in full compliance with the Government's Stores and Procurement Regulations. Premised on the principles of transparency, fairness and justice, the tendering, assessment and contract approval processes ensure a level-playing field for eligible tenderers. The endorsement of the Central Tender Board (CTB) or the Government Logistics Department (GLD) is required for each tendering exercise. Potential tenderers are invited to a briefing session on the terms and conditions of the tender. Queries about the tendering exercise will be answered during the briefing session. Moreover, for each tendering exercise, SWD will set up a vetting committee comprising representatives from relevant departments. The assessment results and recommendations of the vetting committee on the successful bidders will have to be approved either by CTB or GLD, depending on the amount of the contract sum. The award of contracts is contingent upon the approval of CTB or GLD. Through various channels, SWD collects feedback from the sector, and reviews and makes improvements to the tendering mechanism and procedures from time to time.


Ends/Wednesday, November 30, 2005
Issued at HKT 12:45

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