LCQ13: IT service contracts

Following is a question by the Hon Sin Chung-kai and a written reply by the Secretary for Commerce, Industry and Technology, Mr Henry Tang, in the Legislative Council today (October 30): (Translation)

Question:

Regarding the service contracts of government information technology (IT) projects, including outsourcing contracts, will the Government inform this Council:

(a) of the statistics on the service contracts outsourced to local small and medium enterprises in each of the past three years, including the number of contracts, the contract sums and the ratio of contracts outsourced to foreign companies in Hong Kong;

(b) (i) of the average percentage of the manufacturing processes performed outside Hong Kong (including the Mainland) among all the manufacturing processes stipulated in the service contracts concerned in each of the past three years;

(ii) whether it will consider stipulating the ratio of the manufacturing processes to be performed outside Hong Kong; if so, of the details; if not, the reasons for that; and

(iii) whether it has formulated measures to ensure that the bulk of the manufacturing processes stipulated in the service contracts are performed in Hong Kong, so as to improve the employment situation of the local IT industry and ensure that local IT companies can truly benefit from the government expenditure on IT projects; and

(c) whether it has stipulated entry requirements for employees of service contractors, such as requiring that some positions in the contracts can only be filled by degree holders and not by non-degree (such as higher diploma) holders, even if the latter have received relevant professional training in post-secondary institutions and have had many years of relevant working experience; if so, of the details of such entry requirements and the reasons for stipulating such requirements; and whether it has considered if the stipulation will deprive non-degree holders of employment opportunities?

Reply:

Madam President,

(a) Up to June 2002, outsourced Government information technology (IT) projects were mainly implemented under two service contracts previously signed by the Information Technology Services Department (ITSD). The contracts were awarded by open tender to two foreign multi-national companies registered in Hong Kong. Over the past three years (from October 1999 to June 2002), the two contractors have undertaken 700 IT projects for the Government with total contract sums of about $483 million. Six local small and medium enterprises (SMEs), as sub-contractors, have worked with the two contractors on the IT projects. Since the actual division of work between the contractors and their sub-contractors on individual projects is a matter of their own business co-operation arrangement, we do not have detailed information.

ITSD introduced the Information Technology Professional Services Arrangement (ITPSA) in late June 2002 to replace the two previous service contracts. Under the ITPSA, ITSD awarded a total of 23 service contracts to 12 companies which can bid for various Government IT projects during the contract periods of 30 to 48 months. Of these agreements, eight were awarded to local SMEs, three to a local and large enterprise and 12 to foreign multi-national companies registered in Hong Kong. The ratio of local SMEs to foreign multi-national companies is 1:1.5.

Under the ITPSA, seven Government IT contracts with total contract sums of about $2.6 million were awarded to local SME contractors, and 18 contracts with total contract sums of about $21 million were awarded to foreign multi-national companies registered in Hong Kong during the period from June 27 to September 30, 2002. In terms of the number of contracts awarded and contract sums, the ratios of local SMEs to foreign multi-national companies are 1:2.6 and 1:8 respectively.

(b) (i) The information provided by the contractors shows that during the period from October 1999 to September 2002, the manufacturing processes of all the 726 IT projects awarded either under the two previous ITSD service contracts or the ITPSA were conducted locally in Hong Kong.

(ii) & (iii) According to the information provided in (i) above, all the manufacturing processes of Government IT projects outsourced under the abovementioned contracts have been conducted locally in Hong Kong. For the time being, the Government has no intention to impose any restriction on the proportion of manufacturing processes to be conducted outside Hong Kong. However, depending on the actual needs of individual projects, we may require the contractors to station staff in Hong Kong to manage the projects and provide related professional services. In such cases, the related work will be carried out locally in Hong Kong.

(c) The requirements in respect of employees of Government IT contractors as stipulated by us in the abovementioned service contracts depend on the needs of individual projects, and the requirements are set on the basis of relevant skills and working experience rather than the academic qualifications of the employees.

Wednesday, October 30, 2002

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