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Following is a question by the Hon Sin Chung Kai and the written reply by the Secretary for Commerce, Industry and Technology, Mr Joseph WP Wong, in the Legislative Council today (February 8):
Question:
Regarding the disbursement of contractual payments to contractors of information technology (IT) projects, will the Government inform this Council:
(a) of the criteria adopted by government departments for deciding whether payment is to be disbursed in stages or upon completion of the entire project; differences between these two disbursement arrangements in terms of administrative procedure and the number of government departments involved; and provide a breakdown by the disbursement arrangement on the number of contracts for IT projects awarded by government departments in the past three years;
(b) of the time usually taken for full settlement of contractual payments after completion of a project; and
(c) whether it will draw up measures to expedite the disbursement of payments to the contractors to avoid small and medium-sized enterprises from abandoning the projects due to cash flow problems; if it will, of the details of the measures; if not, the reasons for that?
Reply:
Madam President:
(a) Government bureaux and departments (B/Ds) determine the type of payment arrangement based on the length of contract period, the contract value and project delivery plan proposed by the contractor. In the past three years, staged payments were adopted most often for information technology (IT) contracts with contract period over 10 months or contract value above HK$500,000.
Before the start of each project, B/D and the contractors agree on the project plan and quality plan, which specify the quality and quantity of services and deliverables of each project phase and their methods of acceptance. During each project phase, B/D would then base on the agreed plans to accept the services and deliverables delivered by the contractor. Upon acceptance of its services and deliverables of a project phase by the Government, the contractor would produce the invoice for the accepted part of the contract to the Government for arranging payment.
The procuring departments will send to the Treasury the certified invoices for arranging payments. This procedure applies to all types of payment irrespective of whether it is a staged payment or completion-of-work payment.
During the past three years (i.e. 2003 to 2005), B/Ds awarded 1,042 IT contracts, of which 666 adopted staged payments and 376 adopted completion-of-work payments.
(b) The Government settles payment within 30 days upon receipt of invoice. We do not have information on the time taken from completion of a project to full settlement of payments by individual departments.
(c) To facilitate the cash flow of contractors including small and medium enterprises, different types of payment arrangement are provided in the Standing Offer Agreements for Quality Professional Services awarded in December 2005. In addition to completion-of-work payments and staged payments, departments can also make monthly or regular payments for contractor's human resources spent on the project.
Ends/Wednesday, February 8, 2006
Issued at HKT 15:10
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