Government implements quick-win measures to plug procurement loopholes and releases Audit Commission's management letter
The Secretary for Financial Services and the Treasury, Mr Christopher Hui, announced today (October 20) that the Government Logistics Department (GLD) had implemented six quick-win measures focusing on three aspects, namely institutional change, enhancement of cross-departmental information exchanges and reshaping of work culture, as proposed by the Task Force on Review of Government Procurement Regime (Task Force) to plug loopholes in government procurement procedures as soon as possible. Furthermore, the Financial Services and the Treasury Bureau (FSTB) released in full the management letter submitted by the Audit Commission on its review of the incident on the Government's procurement of bottled drinking water to demonstrate the Government's transparency in handling the incident and its commitment to revamp its procurement and contract management regime.
Mr Hui said, "While the incident on the procurement of bottled drinking water clearly involved suspected fraudulent acts by a particular company, it also revealed that the perceptiveness and alertness of the relevant officers in conducting due diligence checks and addressing potential fraudulent acts could not adapt to the current business environment and were obviously below reasonable expectations. The Task Force and I consider it essential to tackle the problem at source through reshaping the work culture, enhancing the capability of procurement officers in exercising due diligence and empowering officers with sufficient authorities on the regime level. This will help ensure greater effectiveness for officers in handling procurement matters in future, not only serving as advocates of fair competition, but more importantly, as gatekeepers for government procurement."
He stated that the Task Force, since its establishment in August, had been exploring measures to enhance the tendering and procurement regime and procedures. Among them, the Task Force considered that six quick-win measures should be launched sooner to plug loopholes at the earliest time. The FSTB has directed the GLD to implement these six measures immediately. Details are as follows:
(1) Promulgate internal guidelines to stipulate specific requirements on due diligence checks: The GLD issued an internal memorandum to government officers in late August to remind them of the aspects in the procurement and contract management processes which require proper due diligence checks. The GLD further promulgated today internal operational guidelines which set out specific requirements and provide detailed guidelines on conducting due diligence checks at various stages, including preparation of tender documents, tender evaluation and contract management, to help procurement officers guard against potential fraudulent acts more effectively;
(2) Set up a Procurement and Stores Management Audit Section to step up inspections: The GLD has expanded the functions of its original internal audit team and reorganised it into the Procurement and Stores Management Audit Section starting from October. As a dedicated team for conducting third-party audits, the Section steps up inspections of due diligence work on departments' procurements under a risk-based approach and reports to the relevant Heads of Departments for attention as appropriate;
(3) Revise Standard Terms and Conditions of Tenders and Contracts (STC) to strengthen vetting and contract management power: The GLD has revised the STC today to strengthen the Government's power in tendering and contract management, including requiring tenderers and contractors to give consent to the Government for verifying directly with third parties the authenticity of information submitted, allowing the Government to conduct site visits during the tender evaluation process and throughout the contract period, etc. The revised STC also empowers the Government to terminate contracts immediately if contractors are found to have made material misrepresentations or provided false information;
(4) Establish a digital database for information sharing: Procurement work is not confined to the GLD, as departments may also procure services and goods on their own. To leverage the procurement experience of departments, the GLD established an internal digital database in mid-October to keep collecting from departments information related to contractors' tendering situations and contract performances. The database serves as a government-wide procurement information portal that can be accessed by procurement officers anytime, assisting them to identify high-risk tenderers in a more effective and timely manner;
(5) Strengthen staff training to guard against fraud: The GLD, in collaboration with the Hong Kong Police Force and the Hong Kong Customs and Excise Department, organised five seminars in September. The seminars, with a total attendance of over 750, focused on introducing scam tactics and identification techniques to officers involved in procurement and finance matters for departments to heighten their anti-fraud awareness. Moreover, the GLD is arranging training courses to brief staff thoroughly on the newly issued internal operational guidelines to assist them to grasp the implementation details; and
(6) Build a culture of ownership at work: While procurement work requires adherence to rules, proper execution by staff is of the utmost importance. In working out and implementing the various measures, the GLD encouraged staff to offer their views through multiple channels, including two staff engagement sessions held in September to gauge feedback on due diligence work and the relevant procedures to foster a greater sense of involvement and commitment in the enhancement measures among staff and build a culture of ownership at work. The GLD will continue to instil the ownership mindset of "procuring for the people with due diligence and dedication" in the work culture through induction training, regular training activities and staff engagement sessions, etc, such that staff will take ownership of government procurement and be more proactive and prudent.
The Task Force is considering other proposals involving a broader scope, and expects to publish a review report before the end of this year to put forward solutions that address both symptoms and root causes, with a view to further enhancing the Government's procurement work.
Separately, the GLD is reviewing in detail the tender requirements of the contract for the supply of bottled drinking water to government offices. In order to keep tabs on the market pulse prior to tendering, the GLD published a market research notice on its website today, inviting interested suppliers to submit responses in a month's time. The GLD aims to launch the tender exercise for the supply of bottled drinking water to government offices on Hong Kong Island and parts of the outlying islands, with the relevant responses taken into account, by the end of this year.
Mr Hui also released today the management letter (at Annex) submitted by the Audit Commission on its review of the tender exercise for the procurement of bottled drinking water. He thanked the Audit Commission for providing numerous recommendations, the directions of which align with the six quick-win measures aforementioned and the long-term enhancement measures being explored by the Task Force. The Task Force will examine the management letter in detail to refine the long-term enhancement measures for announcement before the end of the year.
Mr Hui also announced that Ms Alice Lau, Administrative Officer Staff Grade A1, had been invited to conduct a disciplinary investigation on the human errors identified in the management letter.
The Task Force on Review of Government Procurement Regime was established in August to review the existing government procurement regime and procedures arising from the incident on the Government's procurement of bottled drinking water under a cross-bureau and cross-departmental approach. The Task Force is chaired by Mr Hui, with members that include the Permanent Secretary for Financial Services and the Treasury (Treasury), the Director of Government Logistics, and representatives from the Civil Service Bureau, the Commerce and Economic Development Bureau, the Development Bureau and the Department of Justice.
