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Council question: Procurement policy for information technology products and services
2017-11-22

 Following is a question by the Hon Charles Mok and a reply by the Secretary for Innovation and Technology, Mr Nicholas W Yang, in the Legislative Council today (November 22):

Question:

Some practitioners of the information technology (IT) sector have relayed to me that in the latest round of tender exercises for IT products and services projects conducted by the Government, the situation that “the lowest bid wins” has not improved, and contractors are also required to bear unlimited legal liability, resulting in quite a number of IT companies not participating in the bidding for such projects. On the other hand, the Chief Executive has indicated in the Policy Address recently delivered by her that the Government will explore the inclusion of innovation and technology as a tender requirement in the procurement arrangements of government departments and will not award contract only by reference to the lowest bid, so as to encourage local technological innovation. In this connection, will the Government inform this Council:

(1) of the concrete measures for effecting the policy direction of not awarding contract only by reference to the lowest bid in procurement arrangements, and whether it will review the requirement in IT procurement contracts regarding the legal liability to be borne by contractors, with a view to attracting more IT companies to participate in the bidding; whether, in order to enhance the transparency of tender exercises, it will consult members of the sector and stakeholders before conducting tender exercises for larger-scale or complicated IT projects;

(2) whether it will introduce measures to encourage local small and medium enterprises as well as start-up enterprises to bid for government IT projects, and set a target ratio of participation in the bidding by such enterprises; and

(3) of the measures in place to encourage policy bureaux and government departments to collaboratively develop commonly needed IT projects, adopt the Agile Software Development Methodology in taking forward IT projects, and put into application technologies such as artificial intelligence, big data analytics and machine learning, with a view to enhancing the daily operation of government departments, improving the quality of public services, as well as enhancing information security and privacy protection?

Reply:

President,

Having consulted the Financial Services and the Treasury Bureau (FSTB), the reply to the three parts of the question is as follows:

(1) Currently, the Government encourages procuring departments to specify outcome- or performance-based requirements when drawing up tender specifications. Unless it is absolutely necessary, no restriction on technical specifications of products and services should be imposed. The intention of this approach is to avoid hindering tenderers from proposing innovative technologies or products. Having regard to the recommendations in the Policy Address, the Innovation and Technology Bureau will study jointly with the FSTB on how to adjust the evaluation criteria to incorporate requirements in relation to innovation and technology (I&T) and research and development in addition to the price factor, in order to promote local technological innovation. Based on the results of the study, we will revise the procurement policy accordingly. The study is expected to be completed in the second quarter of 2018.

Currently, to protect public interest, all government contracts would generally include tender provisions on unlimited liability of contractors, which require them to be liable for the losses incurred by the Government or third parties arising from their products or services during a specified period. We understand the concern of the IT industry about this requirement and their wish to reduce the risks involved in undertaking government IT contracts. To strike a proper balance between facilitation of industry development and protection of public interest, the Office of the Government Chief Information Officer (OGCIO) reviewed the liability provisions in tender documents in 2016. Having consulted the FSTB, the OGCIO provided guidelines to bureaux and departments (B/Ds) in July 2016 which suggest that except under certain specific circumstances (e.g. projects of higher risks or with extensive and far-reaching impact), B/Ds may set an appropriate cap on the contractor’s liability for indirect or consequential damages after considering the associated risks.

The OGCIO will upload information on the government IT projects which will go for tendering onto its website for reference and timely preparation by the industry. Before tender invitation for larger-scale or complex IT projects, the B/Ds concerned will collect the latest information of the related goods or services to be procured (including the related technological trends) in order to procure suitable goods or services. Procuring departments may also, under appropriate circumstances, specify in the tender provisions that alternative proposals which could better meet the requirements may be offered by the tenderers for consideration.

(2) The Government’s procurement policy is to obtain goods and services at the best value for money through open and fair competition. The Government has been encouraging local small and medium enterprises (SMEs), including start-ups, through various measures to bid for government IT projects. In the Standing Offer Agreement for Quality Professional Services (SOA-QPS), a minor group was set up to enable local SMEs to provide IT services to departments. In the new round of SOA-QPS, we have raised the contract value limit of this minor group to $3 million, which is more than double the original limit of $1.43 million, so that SMEs can participate in government projects of higher contract values. In the current SOA-QPS, there are 16 participating SMEs bidding for government IT projects, which is six SMEs more than the last agreement. The Government will continue to implement measures to encourage local SMEs and start-ups to undertake government IT projects, in order to foster the development of the local IT industry.

(3) The OGCIO has been encouraging B/Ds to work together to develop commonly needed IT projects, and taking the lead to develop common shared services, including e-procurement, electronic information management and government human resources management, etc. In addition, the OGCIO has developed the Practice Guide for Agile Software Development, provided training courses and organised regular briefings and experience sharing sessions for B/Ds to facilitate their adoption of the Agile Methodology for IT project development.

With the rapid development of big data analytics, artificial intelligence (AI) and machine learning, the Government has started to adopt these I&T to enhance the quality of public services, assist in formulating and implementing policies, and improve operational efficiency, information security and privacy protection. The OGCIO will continue to promote the adoption of these latest technologies and provide training and support to B/Ds, such as facilitating B/Ds to share data and jointly develop big data applications through the pilot big data analytics platform.

To promote further adoption of big data, we plan to launch a big data analytics platform with AI application in 2020 to assist B/Ds in expediting the development of big data systems and reducing the development and operating costs through economies of scale and resources sharing.

Office Of Hon. Charles Mok, Legislative Councillor (IT)