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Following is a question by the Hon Christopher Chung and a written reply by the Secretary for Home Affairs, Mr Lau Kong-wah, in the Legislative Council today (April 13):
Question:
The Youth Square, built by the Government at a cost of $771 million and located in Chai Wan, was completed in 2008. In March 2009, the Home Affairs Bureau (HAB) awarded, through an open tender exercise, a contract for the provision of management and operation services (the operation contract) for the newly built Youth Square to the New World Facilities Management Company Limited (New World) for a period of seven years. On March 20 last year, which was about one year before the expiry of the operation contract, HAB published a notice in the Gazette to conduct an open tender exercise for the provision of management and operation services for the Youth Square for another seven years. Upon the closure of the tender exercise on May 8 of the same year, HAB received only two bidding documents, one of which was submitted by New World. On November 27 of the same year, HAB awarded a new operation contract to New World. It has been reported that the Youth Square has incurred losses continuously for seven years since commencement of its operation, but the total management fee payable to New World has increased from $371 million under the last contract to about $510 million (with a provision for fee adjustment according to the percentage of increase/decrease of the Composite Consumer Price Index) under the new operation contract. In this connection, will the Government inform this Council:
(1) whether HAB had publicised, apart from publication of a notice in the Gazette, the tender arrangement through any other channel when it invited tenders last year for the provision of management and operation services for the Youth Square;
(2) whether HAB has explored the reasons why only two bidding documents were received; if HAB has, of the outcome and whether the reasons include inadequate publicity and the tendering period being too short;
(3) of the reasons why the authorities decided to select New World among the two bidders;
(4) as there were only two bidders, whether the authorities had considered conducting the tender exercise afresh;
(5) as the Youth Square has incurred losses continuously for the past seven years under New World's management and operation, whether the authorities had considered this factor before it decided to award the new operation contract to New World;
(6) whether it has explored (i) the reasons why the Youth Square has incurred losses continuously, and (ii) measures which may reverse such a situation;
(7) whether New World proposed, in its bidding document, measures for reversing the situation of the Youth Square incurring losses continuously and for boosting the income of the Square; if New World did, of the details; and
(8) as the Youth Square has incurred losses continuously for the past seven years under the management and operation of New World, of the justifications for the authorities' decision to significantly increase the management fees payable to New World under the new operation contract, and whether they have assessed if this practice is in line with the principle of using public money properly?
Reply:
President,
My reply to the questions raised by the Hon Christopher Chung is as follows:
An open tender for the Provision of Management and Operation Services for the Youth Square (YS) was launched between March 20, 2015 and May 8, 2015, which is about one year before expiry of the existing contract. Publicity channels included Government's Gazette, the Government's website, and advertisements on Chinese and English newspapers. During the tendering period, a total of 20 organisations/persons had collected the tender documents. Representatives from seven organisations attended the tender briefing. We considered that the publicity channels sufficient and the tendering period reasonable.
When assessing the tenders for the management and operation services contract for the YS, consideration such as full compliance with the conditions and specifications laid down in the tender documents, tender price, relevant experience, the proposed management and business plans for YS, etc. had been taken into account.
Two tenders were received at the open tender exercise. In accordance with the assessment criteria, the tenderer who received a higher total score was awarded the new contract.
The contract scope of the Provision of the Management and Operation Services for the YS is diversified and different from normal building management contracts. It covers management and operation service of a three-star hotel of 148 rooms, theatrical service for a theatre of more than 600 seats and a studio of more than 200 seats, leasing service for 38 office units and 39 retail shops, hiring service for various multi-purpose areas/facilities. The management and operation services contractor (the service contractor) is also responsible for all daily repair and maintenance works, organising large-scale activities during the contract period for promoting youth development, venue promotion and marketing, etc.
Given the diversity of the service contract and the necessary resources invested by the service contractor, as well as making reference to the operating expenses of other cultural and leisure facilities, we consider that the contract price for the Provision of the Management and Operation Services for the YS reasonable.
We must emphasise that YS is an important platform for the Government to pursue its youth development objectives. Since youth development is a long-term and ongoing process, we should not assess the effectiveness of YS from a commercial angle and just against a full-cost-recovery target. The Home Affairs Bureau completed a consultancy study on the operation and positioning of YS in 2013. It is recommended in the consultancy report that YS should continue to serve as a focal point for youth development activities in Hong Kong, set its hiring charges based on the affordability of the target users and offer larger concessionary rates to them in order to promote youth development. Therefore, the continued investment and input of resources from the Government to YS is both necessary and justifiable. Based on the consultant's financial analysis and YS' past operating experience, the consultant suggested that YS should strive to maintain a cost-recovery ratio of not less than 50%. The consultant's recommendations, which were endorsed by the Youth Square Management Advisory Committee, were reported to the Panel on Home Affairs of the Legislative Council in March 2014.
Since the opening of the YS, the utilisation rate of the facilities has been improving. At present, the utilisation rate of key facilities (e.g. Y Loft, Y Theatre, Y Studio) has reached 80% while that of office and retail shops has been close to 100%. The YS has also been maintaining a cost-recovery ratio of over 50%.
YS will continue to enhance its facilities, keep in view its financial performance (including reviewing regularly the fees and charges of its facilities) and implement suitable adjustments, where necessary, to achieve the target cost-recovery ratio.
Ends/Wednesday, April 13, 2016
Issued at HKT 17:10
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