PAPER NO . HA 13/2012 BC 31/2012 CPC 24/2012 FC 21/2012 SPC 22/2012 SHC 41/2012 TC 42/2012 ASC 14/2012 FMSC 7/2012

Memorandum for the Hong Kong Housing Authority and its Committees

Reports from Chairmen of Committees

Enclosed are the reports from Chairmen of the following Committees for Members’ information. Building Committee Commercial Properties Committee Finance Committee Subsidised Housing Committee Tender Committee Annie TANG Secretary, Housing Authority Tel. No.: 2761 5003 Fax No.: 2762 1110 File Ref. : HD 1-7/COMM1/HA-7 (Corporate Services Division) Date of Issue : 14 June 2012

Report by the Chairman of the Building Committee for 2011/12

INTRODUCTION The Building Committee (BC) has made commendable efforts in planning, design and construction of public housing as well as making improvements on various fronts in year 2011/12. During the year, BC has held eight regular meetings, three visits to construction sites and mock-up centre, and a visit to factories and testing laboratory in China. Altogether, BC has processed 37 discussion papers, 11 presumption papers and 41 information papers. ISSUES DISCUSSED 2. The work of BC covers the Housing Authority (HA)’s policies related to the implementation of the construction and major improvement, renovation and rehabilitation programmes and to monitor progress on these programmes, which are grouped in the following categories - (a) Endorse programme of activities including new initiatives, monitor

their performance and approve the financial targets, service standards and performance measures;

(b) Approve project budget, master layout plans and scheme designs

for public housing projects. PUBLIC HOUSING PRODUCTION Production in 2011/12 3. About 11 200 flats in seven estatesNote 1 were completed in the year 2011/12, meeting the target of flat production. BC conducted a visit to all the seven sites in October 2011 to review the construction progress and was generally satisfied. 4. 1 500 m2 of retail facilities were completed in 2011/12. The completion of 45 000 m2 of retail space Yau Tong Phase 4 (Domain) will be deferred to mid 2012 in order to carry out some layout changes due to the latest shop letting arrangement. BC also visited the Domain in March 2012 and was Note 1 The seven estates are: Hung Hom Estate Phase 2, Yau Lai Estate Phase 5, Tung Tau Phase 9 (Tung

Wui Estate), Shek Kip Mei Estate Phases 2 and Phase 5, Lower Ngau Tau Kok Estate Phase 1 and Un Chau Estate Phase 5.

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satisfied with the progress of construction. Commitment of Capital Works 5. Last year saw the commitment of capital expenditure of about $8.6 billion through our endorsement of the project budget and scheme design in three public rental housing projects, including Anderson Road Sites A & B, Tung Chung Area 56 and Ex-Au Tau Departmental Quarter site, producing about 12 000 flats. These projects are scheduled to be completed in 2015/16 and 2016/17. 6. With the rolling 5-year Public Housing Construction Programme standing at a total of around 75 000 public rental housing flats, averaging about 15 000 new flats per year, combined with existing Public Rental Housing (PRH) flats anticipated to be recovered every year, HA should be able to meet the target of maintaining the average waiting time at around three years for general PRH appliciants. New Home Ownership Scheme 7. In line with the policy for resumption of Home Ownership Scheme (HOS) promulgated by the 2011-2012 Policy Address, BC endorsed a preliminary client brief and modular flat design and provisions, so as to allow the planning and budgeting of the new HOS projects to proceed. PROGRAMME OF ACTIVITIES 2012/13 8. Further to a brainstorming session, BC endorsed the 2012/13 Programme of Activities for HA’s Development & Construction and Building Control, with an estimated construction expenditure at about $8,861.2M including direct costs and overheads. While the majority of the programmed activities are continuous efforts in meeting long term planned goals, some new initiatives are necessitated by new Government Policy in the 2011/12 Policy Address (e.g. new HOS), new regulatory requirements (e.g. Sustainable Building Design) and shortage of land (e.g. review development potential of aged estates). 9. For the year 2011/12, we have met the majority of the targets set in last year’s Programme of Activities, and all the Key Performance Indicators, except that on production of retail areaNote 2. These programmed activities are grouped into three themes: Providing quality homes, Promoting sustainable living, and Optimising and rationalising the use of public resources. The

Note 2 The completion of retail space Yau Tong Phase 4 (Domain) will be deferred to mid 2012.

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progress of some of the major activities have been reported and discussed in detail at the Building Committee. PROVIDING QUALITY HOMES Building Environmental Assessment Method Plus for Green and Healthy Living 10. Following the issue of Sustainable Building Design Guidelines and a new set of measures on Gross Floor Area (GFA) concessions under Practice Notes for Authorized Persons, Registered Structural Engineers and Registered Geotechnical Engineers promulgated by the Buildings Department (BD) in January 2011, a series of measures is introduced to foster a quality and sustainable built environment in Hong Kong. This included requirement for certification by Building Environmental Assessment Method (BEAM) Plus conferred by the Hong Kong Green Building Council as prerequisite for granting up to 10% GFA concession for certain green and amenity features in property developments. HA/Housing Department (HD) has thus drawn up an implementation plan for a series of environmental initiatives to meet the Hong Kong BEAM Plus and Chinese Green Building Evaluation Label requirements. The “green” requirements cover site aspects, energy use, water use and indoor environmental quality. The initiatives involve amendments to the model client brief, specifications, technical studies, document records, consultancy, site inspection, testing agents and pioneer projects. Additional capital works expenditure will be incurred as a result and the extra workload in implementing the new initiatives will incur extra staff resources including professional, technical and site supervisory staff. As at end March 2012, 82 professionals at HA/HD has passed the BEAM Professional Examination. Quality Management System 11. Taking the lead to foster a quality assurance culture in the construction industry, we have obtained the ISO 9001 certification in 1993 in the development and construction of public housing. Since then, we have continuously uphauled the organization management systems and were certified to ISO 14001 environmental management system in 2009, rolled out ISO 31000 for risk management and ISO 26000 for corporate social responsibility in 2010. We are working towards ISO 50001 for energy management, and towards the European Foundation for Quality Management Excellence Model for performance excellence.

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Quality Assurance of Building Materials and Components 12. Upstream quality control of building materials and components (building products) by introducing product certification at manufacturing factory will help reduce problems down the production process, such as rejection upon delivery of the building products to site revealed by subsequent procurement test failures, or even re-work on site which would cause substantial delay to the construction projects. Although some additional cost will be involved, the cost is not substantial with respect to the total construction cost. Yet the value added to the quality assurance, and hence our confidence on the quality of the supplied building products, will eventually benefit our tenants as the end users. Product quality is always of the essence to HA. To assure quality of procured building products, HA has since 1990’s been applying a string of measures, including requiring manufacturers to be ISO 9001 certified, prior sample submission with necessary support documents for approval, routine surveillance checks and laboratory tests by random sampling along supply chain, on-site delivery verifications, Performance Assessment Scoring System on selected building products, more stringent quality assurance system than statutory requirements for precast concrete structural elements, and product certification as a new initiative of assuring building product quality spearheaded for implementation by HA since 2010. We have already implemented product certification for seven building products as at end March 2012 - fire resistance timber doors, fire resistance panel wall for partitions, cement products (for architectural uses), tile adhesives, ceramic tiles, repair mortars, and aluminium windows, while three others are being on the pipeline for implementation in the second half of 2012. We will apply Radio Frequency Identification technology in four building products - timber doors, metal gatesets, aluminium windows and precast concrete facades, for authenticity and traceability along their supply chains. PROMOTING SUSTAINABLE LIVING Resident Survey 13. Resident surveys have been carried out since 2003 on newly completed estates at about 14 months after tenant intake to gauge residents’ satisfaction levels and opinion on hypothetical scenarios. In 2009/10, five estates with 13 290 flats were surveyed with 3 436 interviews conducted. The satisfaction level has risen from 84.48% in 2010 to 91.93% last year, meeting our Key Performance Indicator of 80%, which has been raised from 70% since April 2011. The rising satisfaction level reflects improvement in the public housing “hardware” provision, as well as our improved “software” services with Intake Ambassadors, efforts made by contractors to rectify defects promptly, and community engagement activities after intake. Details of the

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survey findings suggested room for improvement at flat layout, cooking bench design, laundry rack and water supply. Most tenants can accept a lower level of illumination at public area, and favour planting on the roof of canopy and refuse collection points. These survey findings formed the basis for reviewing our Model Client Brief for continuous improvement. The latest model client brief was issued in September 2011 and includes more robust aluminium window sections of 50 mm in lieu of 38 mm for better durability; increase in storey height from 2 700 mm to 2 750 mm for better natural lighting and ventilation; and additional laundry racks to front facade in family flats to cater for users’ needs. Site Safety 14. The HA Site Safety Strategy 2011 has been successfully implemented at new works sites, maintenance works sites, property services agents and cleansing contracts. We have set goal of achieving an accident rate of no more than 12 accidents per 1 000 workers. For 2011, these goals were comfortably met, with rates of 9 per 1 000 for New Works contracts and 7.3 per 1 000 for maintenance contracts. When set against the average industry accident rate of 49.7 per 1 000 workers, it is clear that our safety initiatives are highly effective. 15. The incentive scheme of Integrated Pay for Safety, Environment and Hygiene Scheme was reviewed to give further impetus to enhance management input and performance output as well as cost effectiveness. Short, medium and long term measures in terms of revised payment curve, redistribution of payment to realign the focus and resource input to improve its effectiveness have been devised for implementation in new tenders of Capital Works New Works contracts. 16. To tackle growing challenges on site, the Department has employed various measures to influence Contractors to uphold higher site safety standards. For example, we will launch a Surprise Safety Inspection Programme with focus on high risk activities on Site in Capital Works New Works construction sites. 17. Other contract enhancement measures has incorporated the Construction Industry Council (CIC) Guidelines on Safety of Lift Shaft Works (Volumes 1 & 2), CIC Guidelines on Safety of Tower Cranes, and mandatory provision of uniform for contractors’ operatives and site supervisory staff. We also employed Building Information Modelling (BIM) to identify potential hazard areas. 18. Training is another crucial tool for raising awareness about safety issues. During the year, we held training programmes for a range of personnel, while also adding new safety measures in certain areas of operations. We have

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been working closely with CIC and in partnership with stakeholders in promoting good practices in the industry. We also helped publish a safety-focused booklet: “Practical Guide to Working at Height – Ensuring Safe Work Practices”. We also continued to organize the Site Safety Forum for Works Contracts and Property Services Contracts in 2011, inviting professionals from the construction, maintenance, property management and cleansing services sectors to share their insights into best practices for improving safety. Site safety workshops and seminars on safety topical issues were also convened to propagate safety awareness and foster a safety culture among the industry stakeholders. About 1 300 people attended the forum and workshops held in 2011/12. Energy Saving Measure in Existing Estates and New Estates 19. Electricity expenditure is one of the major expenses in a PRH estate, with major communal building services installations consuming the most energy in the order of lighting, lifts and water pumps. HA has been employing a series of measures to reduce energy consumption. During the past three years, 80 800 sets of T8 exit signs were retrofitted with T5 tubes and electronic ballast. Lighting circuits are modified so that corridors with daylight will have lamps switched off in daytime, while timers to control circuits are adjusted every two months to make the most use of sunlight round the year. Older lifts are also retrofitted at a rate of 75 lifts a year to the ‘variable voltage variable frequency’ motors, which is 38% more efficient. While the annual electricity consumption of communal area per flat at HA’s estates is lower than that of the private sector estates, the Building Committee has endorsed further improvements at existing estates such as retrofitting light fittings with electronic ballasts and adding photovoltaic panels for educational purpose. 20. For all new projects, HA has rolled out in December 2011 an energy management system modelled on ISO 50001. An energy baseline is set at an average energy consumption of 30 kWh/m2 for building services installations in communal area of PRH blocks. A set of energy performance indicators are then set for the coming three years (2012-14), ranging from 30 to 27 kWh/m2. At design stage, the communal energy consumption of each block will be estimated and compared against the baseline, and necessary design adjustments made. The actual energy consumption after occupation of the block will then be measured and checked against the estimated figures. The systematic approach and annual certification will be a driving force for effective energy management in future PRH blocks Carbon Emission Estimation 21. Buildings in Hong Kong consume about 90% of total electricity generated, which accounts for about 60% of total Greenhouse Gases emission.

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To meet the Administration’s target of reducing carbon intensity of at lease 50%-60% by 2020 with 2005 as the base year, the HA is committed to a series of green design to reduce the carbon footprint of PRH blocks. As most measurement models are complex and not exactly suitable to the local environment, the HA devised a more user-friendly ‘carbon emission estimation’ methodology, adopting the ‘cradle to grave’ approach. Major construction materials and building operations are covered for a life of 100 years. Six aspects are considered, namely (i) materials consumed during construction, (ii) materials for building structure, (iii) communal building services installations, (iv) renewable energy, (v) trees plantation and (vi) demolition. As a start, the method does not take account of tenants’ energy consumption data as these are out of our control. By verifying new projects at design stage against the benchmark at block level and estate level, we can then make design adjustments and optimize systems to gauge the carbon emission of the future estates. The method provides a basis for driving for low-carbon public housing developments. The HA has been applying the carbon emission estimation to all new development projects with domestic buildings since February 2011. Up to March 2012, 12 new development projects have been applied with carbon emission estimation. The methodology will be refined when more data from the industry is available. Research and Development 22. Taking a project-driven approach, we undertake Research and Development (R&D) works as part of our design and project management work. Over the years, we have joined hands with academia, industry, experts, business partners and many other stakeholders in conducting our R&D works. Many of our R&D results are well recognised within the industry and have evolved into useful and practical applications with examples including “green treatment of marine mud (cement stabilization prior to backfilling)” and use of ground granulated blastfurnace slag in concrete. Up to the current moment, a total of 131 R&D projects have been completed and another 52 R&D projects are under exploring or piloting, covering all aspects of building development and construction. All in all, contiuous improvement through R&D is part of our business culture and we are committed to working hand in hand with the industry to advance knowledge to sustain quality improvements for our public housing. OPTIMISING AND RATIONALISING THE USE OF PUBLIC RESOURCES Cost Yardsticks and Project Budgets

23. Construction Cost Yardsticks are updated annually at June each

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year to serve as a reference for preparing Project Construction Cost Ceilings, Project Budgets, annual capital expenditure budgets and five-year forecasts for projects under planning. Half-yearly review is also carried out to track cost trends with better accuracy. The June 2011 cost yardsticks of average $6,808 per square metre Construction Floor Area for the superstructure construction cost of HA’s rental domestic buildings showed a more significant rise of 17% over the June 2010 yardsticks, as the relatively high inflation in both Hong Kong and the Mainland and the continuous appreciation of Renminbi had driven a greater increase in the costs of construction materials and labour since the second half of 2010. The half-yearly review at December 2011 reflected a further rise in tender price level, with notable increase in labour cost largely due to greater demand for labour following the commencement of more major infrastructure projects. 24. We have closely monitored the adequacy of the project budgets from time to time. During the past year, BC has approved the updating of project budgets for nine capital works new works projects to align with June 2011 Construction Costs Yardsticks. We shall closely monitor cost trends and manage our project budgets in a timely manner to ensure smooth delivery of the public housing programme. Bench-marking of Construction Cost 25. The average construction cost of superstructure of HA’s rental domestic buildings is at about 31% lower than that of private sector’s residential buildings with ordinary quality. This is attributed to economies of scale, mechanized construction methods, optimized structural design and a lean specification on finishes and fittings with emphasis on quality being fitness for purpose. Quality of design and construction, however, is strictly maintained for long term durability. Dispute Resolution Advisor System 26. Since 2004, a Dispute Resolution Advisor is employed for each capital works foundation or building contract including the associated nominated sub-contracts for building services installations. Up to March 2012, 100 appointments have been made. The Dispute Resolution Advisor for each contract is employed jointly by the Authority and the Contractor with fees shared equally. Throughout these years, all the stakeholders have confirmed the value of the system in promoting joint problem-solving, preventing disputes from escalating and resolving disputes in a cost-effective and expeditious manner. 27. The Authority has regular meetings with Dispute Resolution Advisors, contractors, project teams and other government departments

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employing the system to exchange views and explore ways to improve the system. The Dispute Resolution Advisors also provide interim and final reports for each contract on the disputes dissolved or resolved and their suggestions on further improving contract administration and documentation. Through sharing of the experiences gained and the enhanced contract documents, the system helps achieve continuous improvements and avoid disputes from happening. Building Control 28. The Independent Checking Unit (ICU) under the office of the Permanent Secretary for Transport and Housing (Housing) carries out building control functions on HA’s existing and new buildings in accordance with BD’s standard of requirements and procedures to provide public assurance of the built quality and safety of public housing. A Memorandum of Understanding between HA/HD and BD was signed to provide proper documentation to the independent checking mechanism, and the alignment of practices between ICU and BD. Work carried out by ICU is reported to BC at mid-year and year-end review of the Programme of Activities, as well as to the Director of Buildings at half-yearly intervals. AWARDS RECEIVED 29. During the past year, HA is honoured to have received a number of awards for her New Works projects as well as Estate Improvement Works projects - Local Awards Hong Kong Green Management Awards 2011 - Silver

Demolition of Lower Ngau Tau Kok Estate

Hong Kong Institution of Engineers - Structural Excellence Award - Commendation

Choi Wan Road Site 2

Lighthouse Club & Construction Industry Council - Safety Leadership Award - Golden Helmet Award

Ms Ada Fung, Deputy Director of Housing

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Autodesk HK BIM Award 2011

Tai Pak Tin Street, Demolition of Lower Ngau Tai Kok and So Uk

Civil Service Outstanding Service Award 2011 - Gold - Gold - Meritorious

- interdepartmental cooperative water saving - marine mud green process pioneer - use of BIM

HKQSS-HSBC CSR Advocate Mark

Development and Construction Division

Environmental Wastesi$e Labels - Class of excellence - 10 consecutive cycles

HKHA waste reduction

International Awards

FINANCIAL PERFORMANCE

Asia-Pacific Federation of Project Management Awards 2011, cum HKIPM Project Management Achievement Award 2011

Redevelopment of Upper Ngau Tau Kok Estate Ph 2&3

Asia Pacific Business Excellence STandard - Grand Award - BEST property developer - APBEST leader of the year - APBEST partnership driver

of the year - APBEST key result driver

of the year

- Development & Construction Division - Development & Construction Division - Ms Ada Fung, Deputy Director - Mr Martin Cheung, Assistant Director - Ms Theresa Yim, Chief Architect and the Project Team at Kai Tak Site 1A

Construction Expenditure and Budget

30. The provisional construction expenditure for 2011/12 was $7,620.9M which was close to the Revised Budget of $7,698.1M. The

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percentage of provisional expenditure spent had reached 99% of the 2011/12 Revised Budget. 31. The approved capital budget for 2012/13 is $8,861.2M. The average estimated budget for the coming four years up to March 2016 is $10,434.4M per annum. Building Control (by Independent Checking Unit) 32. The provisional expenditure of Building Control for the year ended 31 March 2012 was $109.6M which was close to the Revised Budget of $113.6M. The percentage of provisional expenditure spent had reached 96.5% of the 2011/12 Revised Budget. THE WAY FORWARD 33. To meet the HA’s target of maintaining the Average Waiting Time of PRH applicants at around three years, we shall make the best use of all available sites including those which require higher development cost to overcome site constraints such as noise, topography, less economic size and additional demand on pedestrian, community and welfare facilities. In line with the Administration’s new measures on sustainable development and new assessment systems such as BEAM Plus, we shall review our planning and design parameters and processes with an aim of spending our resources wisely and effectively while achieving the quantum of flat production and the most sustainable environment in our estates. CONCLUSION 34. Upholding the core values of HA, the caring, committed, customer-focused and creative efforts by the Department bear fruit, as attested by the local and international recognitions gained during the year. However we are not complacent and we shall continue to collaborate with stakeholders on all fronts to seek further progress and innovation in the delivery of public housing estates. We shall continue to focus our attention towards caring for the community, striving for innovations and making effective use of resources in an environment-friendly manner.

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35. Finally, I would like to express my sincere thanks to all Members of BC and my deepest appreciation to staff of the Department for their valuable contributions and unfailing support to the work of BC during the past year. Bernard Vincent LIM Wan-fung Chairman, Building Committee

Report by the Chairman of the Commercial Properties Committee for 2011/12

INTRODUCTION The Commercial Properties Committee (CPC) held four meetings during the year. Two separate meetings were held with concern groups. In June 2011, Members paid a visit to the Housing Authority (HA)’s largest shopping centre, Domain (大 本 型), a new development under construction and scheduled for completion in mid-2012. With the appointment of the leasing advisor and private estate agent, private sector experience was tapped in formulating trade mix, management, marketing and leasing strategies for the Domain. Efforts were also made to optimise the use of the HA’s retail and carparking facilities under a five-year rolling programme which was formulated for asset enhancement based on the strengths, weaknesses, opportunities and threats (SWOT) analysis. Every means was tried to explore possible conversion of unpopular retail premises and surplus carparks into other beneficial uses. ISSUES CONSIDERED New Developments 2. Retail facilities at Yan On, Kwai Luen, Shin Ming and Shatin Pass Estates were completed in the year, providing a total of additional retail space of about 600 m2 Internal Floor Area (IFA) for letting purpose. As a result, the total retail stock stands at around 177 000 m2 IFA. 3. To tie in with the anticipated completion of retail facilities at Redevelopment of Shek Kip Mei Estate (Phases 2 and 5) and Lower Ngau Tau Kok Estate in the second quarter of 2012, the Department had advanced the letting of these premises to cater for the needs of local residents prior to their intake. Since the new retail facilities are situated in strategic locations, in particular the shop premises in Shek Kip Mei and Lower Ngau Tau Kok Estates, there were overwhelming responses from potential tenants. In this regard, a package-letting approach was adopted with the grouping of both new shop premises and less attractive vacant shops in older estates for the same trade under a combined letting to one tenant. This approach had facilitated the leasing of all new shop premises and most of the less popular shops in one go. Such successful marketing strategy has not only yielded an encouraging rental income to HA, but also drawn in more shopping choices for the tenants of older estates.

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4. The Domain, HA’s mega project with an IFA of about 23 000 m2, would be positioned as a trendy and chic shopping centre designed to pitch at district mall level. The consultants had been closely collaborated on the implementation of leasing and marketing plans to secure appropriate tenants of different trades and brands in batches to match with the positioning and theme of this shopping centre. A signing ceremony with the first two anchor tenants was held in September 2011 to bloom the popularity of the Domain and draw the awareness and interest of small and medium retailers in it. 5. Aiming at recruiting creative youths and small operators to set up their business in a trendy style, a small retail zone comprising 23 small and open units would be set up in the Domain with active marketing and leasing actions now in good progress. By March 2012, some 60% of the lettable area in the Domain had been leased out. 6. Given Domain’s market positioning as a regional shopping hot spot, operating Domain successfully is a new venture for the Department and CPC. A public relations consultancy firm has been engaged to assist the drawing up of a publicity plan which includes a series of advertising campaigns and media workshops leading up to the soft launch and grand opening of the Domain, to be followed by a series of sustainable promotional activities to maintain the momentum. With a view to optimizing the business development potential of the Domain, a dedicated Steering Group was formed under CPC to timely consider important issues related to the key strategies and operation, for the initial run-in period and until the operation of the Domain is smoothly on track. The development of business and operational plans for pioneering a successful launch of the Domain would benefit from the advice of the Steering Group comprising CPC Members with extensive management experience in the business sector. Existing Retail Facilities Asset Enhancement Works 7. On Kay Court Commercial Centre was earmarked by CPC for asset enhancement through major improvement works and re-designation of trade mix. Its improvement scheme was approved by CPC in February 2012 and its project budget by the Building Committee in April 2012. The project will be carried out by phases with scheduled completion in 2015. As for asset enhancement works on the shopping centres in Pok Hong and Wah Fu Estates, the improvement proposals were under detailed planning or technical studies.

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8. The Department continued to take strategic measures to enhance the attractiveness of commercial properties. In this connection, a five-year rolling programme was formulated for prioritizing asset enhancement in accordance with the SWOT analysis of HA’s retail facilities. Under the rolling programme, the retail facilities in Lung Poon Court and Ping Shek Estate which were identified as suitable for asset enhancement were shortlisted for conducting feasibility studies on the scope of improvement works, trade mix, conversion of use, etc. during the year. Marketing Initiatives 9. In order to optimise trade profiles and provide a wider range of shopping and eatery choices to our residents of older estates, the Department had implemented various marketing initiatives to facilitate the leasing of long standing vacant premises and re-ordering of existing premises in HA’s markets. It is encouraging to note that two long vacant premises in Wah Fu (II) Estate were successfully let to a pizza shop and Residential Care Home for the Elderly (RCHE) while those in Chak On Estate and Lai Yiu Estate were finally let to a Japanese food premises and a RCHE respectively. Market reordering programmes were completed in Siu Hong Shopping Centre, Lai Yiu Estate and Kwai Shing West Estate. The 19 vacant shopstalls in Siu Hong Shopping Centre were combined and let as a hamburger fast food shop while letting of grouped shopstalls in the other two estates was in progress. Creation of New Retail Space 10. To increase trade varieties and retail ambience in existing shopping centres, the ex-management office of Lung Poon Court Commercial Centre was converted to three shop premises, of which two were successfully let as a medical clinic and laundromat. Additional retail space created in the common areas of Tin Yan, Hoi Lai and Yau Lai Shopping Centres and Choi Fook Estate were let or being let. Promoting Better Shopping Experience 11. To bring better shopping experience to residents, the Department had introduced free Wi-Fi service in major HA’s shopping centres with the installation of free Wi-Fi hotspots completed in December 2011. Moreover, around 400 water saving devices were installed in 21 shopping centres’ toilets for water conservation and users’ convenience.

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12. HA is committed to providing customer-focused facilities and services to ensure a barrier free environment for its tenants and customers. It had made a great deal of efforts in recent years to improve barrier-free facilities of its estates and shopping centres to facilitate the physically impaired to be integrated into the community. I am delighted to appreciate that our Yau Lai Shopping Centre was honoured with the Grand Award in the “Hong Kong Barrier Free Shopping Malls Appreciation Award” organised by Hong Kong Rehabilitation Power in 2011. Enhancing Management of Retail Facilities 13. Members were informed of the details put under Chapter 7 of the Value-for-Money Audit Report No. 56 on management of commercial properties. With full support from Members, a series of management actions and improvement measures had been implemented by the Department to enhance the management of commercial properties. These included new policy initiatives of putting the mal-practice of playing mahjong, Tin Kau and card games with gambling elements inside the leased premises as a misdeed under the Marking Scheme with allotment of five demerit points and imposing restrictions on ex-commercial tenants with tenancies terminated by HA for leasing our premises again. Vacancy 14. During the year, the retail operation recorded successful lettings of about 8 000 m2 IFA of the commercial premises through negotiation, while about 2 300 m2 IFA were let by open tender. Since the introduction of the policy of extra rent free period for letting of long standing vacant shop premises, 69 shopstalls and 37 shops with vacancy period of over two years had been successfully let. Together with the conversion/re-ordering initiatives in some markets and the application of package-letting strategy for popular and unpopular premises, the vacancy rate for retail premises was significantly reduced from 4.9% in last year to 4.3%, at end March 2012 which was well within the performance target of below 5%. Rent Arrears 15. The average rent arrears rate was maintained at about 2.3% (as at 31 January 2012) in the year which was well below the performance target at less than 3%.

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Carparks Management Services of Carparks 16. Currently, there are 118 HA’s carparks providing some 27 000 parking spaces with an average occupancy rate of about 79%. In mid-2011, the management contracts for some 90 HA’s carparks expired. The Department had successfully appointed two carpark operators to manage these carparks under four management contracts, with the management mode changed from revenue sharing to reimbursement basis. Moreover, installation of the carpark automation and electronic payment system equipment was completed in these carparks as part of the contract requirements. The implementation of carpark automation and electronic payment system will not only enhance the delivery of management services for carparks, but also achieve operational efficiency. Maximising the Usage of Carparks 17. To improve the letting position of the HA’s carpark facilities, 28 surplus parking spaces and vacant areas in suitable carparks were converted in the year into 62 motor cycle parking spaces at Choi Fook, Choi Ying, Kwai Shing West, Lei Muk Shue (II) and Yue Wan Estates, Chun Shing Factory and Shun Chi Court. To boost the patronage of the HA’s carparks, both the ‘24-hour pass’ hourly parking scheme and the 20% discount for bulk purchase of parking coupons offered to shop tenants under the parking coupon discount scheme were continued. 18. For better utilization of carparking resources, carparks in Nam Shan, Shek Pai Wan and Ping Shek Estates had been earmarked for conversion into other uses to reducing their high vacancy rates. The surplus parking spaces in Nam Shan Carpark were converted into an educational institution with the tenancy commenced in April 2012. The converted premises in Shek Pai Wan Carpark were taken up by two non-government organizations by end of 2011 for provision of social services to local residents. The conversion proposal for Ping Shek Estate has been firmed up to be integrated into the estate revitalization programme with tender process for the conversion work under way. 19. In addition, 11 HA’s carparks with conversion potential were identified and a five-year rolling programme was compiled for prioritizing asset enhancement through conversion of uses. Under the rolling programme, carparks in Choi Hung and Wah Fu Estates were shortlisted for conducting

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feasibility studies on appropriate conversion proposals during the year. Provision of Electric Vehicle Charging Facilities 20. As a green initiative, four carparks in Choi Tak, Yau Lai, Kwai Chung and Shui Pin Wai Estates were identified for installation of electric vehicle charging facilities by the China Light & Power Company Limited, with installation works scheduled for completion by mid-2012. The carpark in Yue Wan Estate on Hong Kong Island was identified by the Power Assets Holdings Limited for such purpose, with installation works to be completed in the latter half of 2012. To further promote the use of electric vehicles alongside the Government’s pledge to improve air quality, the Department will provide a maximum of two hours free parking for electric vehicles during electricity charging in HA’s carparks. Factory Estates 21. Following the announcement of clearance of Chai Wan Factory Estate with tentative evacuation in September 2012, most of the affected tenants had opted for the ex-gratia allowance, tendering for other HA premises and moving to private properties. In order to smoothen the clearance operation, the Department had expedited necessary actions to identify suitable units in other HA’s factory estates and convert some larger units into smaller units so that more re-provisioning opportunities could be given to those interested tenants through open and restricted tender exercises. Storerooms 22. In line with the established review mechanism, CPC approved to adjust the monthly standard rate of licence fee of minor storerooms for the three-year period from 1 January 2012 to 31 December 2014. Since the implementation of the re-aligned letting policy of storerooms approved by CPC in October 2010, the Department had recovered about 300 storerooms from the concerned licensees by offering all possible assistance to tenants in need of storage areas in public housing estates. Telecommunications Installations 23. With the increasing number of subscribers to telecommunications services, installation of base stations at HA’s premises had a rise of 3.2 % which contributed an annual income at approximately $120.8 M for the year. In line with the market changes, CPC approved to increase the existing charges ranging

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from 3.8% to 7.1% for different types of telecommunications installations in HA properties with effect from 1 April 2012. The annual income from telecommunications installations will be increased to around $127.9 M in the coming year. Rates Concession Exercise for Non-domestic Premises 24. To align with the Government’s mitigation measures to waive the rates for 2012/13, subject to a ceiling of $2,500 per quarter for each rateable property, CPC approved to pass on the rates concession to HA’s non-domestic tenants/licensees on a “no-gain-no-loss” basis by offsetting an equivalent amount of monthly rent/licence fees payable by them. 25. In view of the small amount of rates concession for individual carpark users but a significant administrative cost involved for its distribution, carparks were excluded from the exercise as was the case in all the previous rebate exercises. The rates concession received by HA would be invested on enhancing HA’s carpark facilities, such as installation of electric vehicle charging facilities in suitable sites, replacement of energy-efficient lighting to promote environmental protection and upgrading of security system. Review of Ex-gratia Allowance for Commercial Tenants Affected by Redevelopment/Clearance 26. The review on the rates of ex-gratia allowance and lump sum payment in lieu of restricted tender opportunity for commercial tenants affected by redevelopment/clearance was concluded which would be valid for the two-year period from 1 January 2012 to 31 December 2013. The new rates would be applicable to Pak Tin Estate Redevelopment Phases 7 and 8 as re-affirmed at the joint meeting with the Subsidised Housing Committee in April 2012. Promotional Activities 27. Promotion programmes of different types and scales were launched throughout the year, aiming to sustain the attraction and competitiveness of the HA’s commercial properties. The Department had organised 57 promotional events including variety shows, mini-performance and carnivals in major shopping centres. In addition, packaged promotion activities and centrally-planned seasonal decorations had been provided for smaller shopping centres to strengthen the shopping atmosphere and to attract customers. A total expenditure of some $6.7M was incurred on centrally arranged shopping centre

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promotion activities and events for the year, representing about 1% of the total income of the retail premises. These promotional events and festive decorations had enhanced the corporate image and brought an average increase of some 50% in patronage and were generally welcomed by the commercial tenants. WAY FORWARD 28. Enhancing the attractiveness of commercial properties has been endorsed by CPC as the theme of the 2012/13 programme of activities. In accordance with the five-year rolling programme, we will get ourselves focused in the coming years on improving the selected shopping centres and carparks. In enhancing the shopping environment and management services of commercial properties and maximizing the usage of carparks, we will reinforce the existing leasing and property management strengths. More conversion and upgrading works will be carried out and more popular promotional activities will be arranged. 29. Driving synergies in HA’s existing portfolio, exceptional service and shopping delight of the Domain will be delivered to tenants and the community with a wide variety of eateries and retail shops. It will be well supported by a tailor-made promotion programme to boost its publicity and sales prior to and after its opening. We and the staff of the Department will play a more proactive role to support the community building through sponsoring suitable venues in HA’s shopping centres for communal services and launching events for charity, civic, cultural and environmental protection education programmes. CONCLUSION 30. In the past year, we had worked in the same direction diligently to tackle the new challenges and meeting the targets set in HA’s commercial operations. For the coming year, we shall continue our efforts in the commercial properties management and asset enhancement to maximise the potential of our properties. We have confidence that with our commitment and endeavour, we will turn challenges into opportunities and that our commercial facilities, old and new, large and small, will continue to best suit the service needs of our public housing tenants and customers.

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31. As the new Chairman of CPC, I would like to express heartfelt thanks to Dr Andrew CHAN Ping-chiu, the outgoing Chairman for his leadership in the past years and Members of the Committee for their dedicated support and advice. I would also take the opportunity to welcome new Members to the Committee and I count on all Members for their continued support in the years to come. Finally, I would like to express my sincere thanks to all CPC Members and my deepest appreciation to staff of the Department for their valuable contributions and unfailing support to the work of CPC. Michael CHOI Ngai-min Chairman, Commercial Properties Committee

Report by the Chairman of the Finance Committee for 2011/12

INTRODUCTION

The main responsibilities of the Finance Committee (FC) in

2011/12 included examination and review of the Housing Authority (HA)’s financial performance, budgets and forecasts, provision of advice on the HA’s financial and investment policies, as well as overseeing the funds management, human resources and information technology functions. ISSUES DISCUSSED 2. A total of four FC meetings were held during the year 2011/12. The major issues examined by FC included –

(a) HA’s Budgets and Forecasts for 2011/12 to 2015/16;

(b) Revision of HA’s Strategic Asset Allocation;

(c) Annual Salary Adjustment for HA Contract Staff for 2011/12;

(d) Launch of the Consultancy Study to Review the Remuneration Package of HA Contract Staff;

(e) Programme of Activities for Corporate Services 2012/13.

A SUMMARY OF MAJOR WORKS Financial Planning and Budgeting Process 3. FC endorsed in May 2009 that HA adopted a more centralized budgeting approach in resource allocation to enhance deployment of resources. Divisions/budget holders were invited to submit bids for additional resources above the expenditure baselines in July each year for consideration of the Senior Officials Meeting (SOM) chaired by the Director of Housing. 4. In addition, to promote cost consciousness and to channel savings from existing services to fund some of the new and improved services, a threshold of 1% of the respective divisional expenditure baseline or $3M

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(whichever is the less) was set. Only bids (on a per bid basis) above the threshold were submitted to SOM for resource allocation. 5. The Financial Planning and Budgeting Process are reviewed regularly, and an updated Financial Instruction promulgating the main budgetary process and promoting cost consciousness was issued by the Housing Department. The HA Budgets and Forecasts for 2011/12 to 2015/16 was reviewed and endorsed by FC; these were submitted to HA and the Chief Executive in January 2012 as planned. Investment Strategy 6. The aims of HA’s investment strategy are to ensure that there is sufficient liquidity to meet the operational need of HA, and to put the rest of HA’s funds into longer-term investments in a prudent and diversified manner to enhance long term returns. Under the HA’s Statement of Investment Policies and Objectives, an annual risk budgeting health check should be conducted to assess the latest portfolio risk level, to identify sources of increased risk, and to analyse the opportunities in the range of approved asset classes with a view to considering any appropriate adjustment to the investment strategy to diversify away from sources of increased risk and/or to enhance return within approved risk budget. Accordingly, one of the actions under the Programme of Activities for Corporate Services for 2011/12 was to conduct the annual health check on Strategic Asset Allocation (SAA) taking into account the latest financial markets situation and risks. 7. With reference to the independent professional investment consultant’s recommendations in the annual health check on HA’s SAA and after further consideration by the Funds Management Sub-Committee (FMSC), FC agreed at its meeting in August 2011 to make adjustments to the HA’s SAA by injecting an additional $10 billion (on top of the current $20 billion) to the principal protection placement (PPP) with the Exchange Fund to seek a more stable investment return for HA, moderately increasing equity allocation for long term investment within HA’s acceptable risk tolerance level, and reducing correspondingly the allocation to global bonds. The revised SAA is to allocate around 50% of HA’s funds to PPPs with the Exchange Fund (i.e. $30 billion), 20.5% to equities, 19.5% to global bonds, and 10% to liquid investments (mainly bank deposits) to cater for the liquidity requirements to meet the operational need of HA. After obtaining the necessary approval of the Financial Secretary, the revised SAA was implemented in early November 2011 in accordance with FMSC’s advice.

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Human Resources Implementation of the Long Term Manpower Strategy 8. To continue implementing the long-term manpower strategy as endorsed by FC in October 2008, a total of 833 HA contract posts to be staffed by civil servants in the long run would be converted into civil service (CS) posts in phases subject to the availability of CS posts quota provided by the Government. In this connection, 67 HA contract posts were converted into CS posts in 2011/12. Together with 292 HA contract posts converted since 2009/10, the total establishment of CS posts has increased by 4.7%. Given the same number of HA contract posts were deleted to offset the creation of the corresponding CS posts, there was no net effect on the overall establishment of the Housing Department. Review the Remuneration Package of HA Contract Staff 9. To ensure the remuneration package of HA contract staff is broadly comparable with that in the market for attracting and retaining the required talent, FC endorsed in August 2011 for the Department to launch a consultancy study to comprehensively review the contract staff’s remuneration package (including the pay levels and fringe benefits). The Department will submit the findings and recommendations of the consultancy study to FC for consideration in the third quarter of 2012.

Staff Engagement Initiatives 10. With the endorsement of FC, the Department has launched a new phase of initiatives to enhance staff engagement since late 2010. In 2011/12, apart from the targeted training programmes, work improvement teams, etc., the Department has also launched a new series of activities on the theme of “Protecting Staff from Physical and Verbal Abuse” including an in-house slogan competition as well as the production of publicity materials to promote mutual respect and co-operation between housing staff and members of the public. Information Technology 11. As endorsed by FC in July 2008, the Enterprise Resources Planning (ERP) Implementation Project commenced in April 2010. Phase I of the ERP system was successfully rolled out into service in September of 2011 replacing the outdated finance and procurement systems. Phase II of ERP is targeted for completion in the fourth quarter 2012 to replace those estate

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maintenance systems which have been in use for over 10 years. The greater integration of functions and information within ERP streamlines business processes and enables easier data sharing and analysis thus enhancing operational efficiency and decision-making. 12. The Department completed an IT Strategy Consultancy Study in the first quarter of 2012. The study maps out the strategic directions for IT development to match with HA’s business plans in the next 5 to 10 years. The study has recommended 10 specific IT programmes comprising 6 on-going programmes and 4 new initiatives. The FC will consider the recommendations in its meeting in May 2012. 13. The HA/HD website has been revamped since November 2011 with a new look and many new features such as the use of task-oriented navigation which streamlines the organization of contents for a more coherent site structure. The new website provides content in ethnic minority languages and links to public housing information on the Facebook. Its visual appeal and search performance have also been enhanced. 14. The cross-divisional Drawing Management System for storing more than 2.8 million drawings and serving over 1,000 users was released into full production use in February 2012. The system is built on a common technical platform which facilitates the sharing of development and maintenance drawings among Divisions and covers the life cycle of housing development from planning, design, construction to building maintenance. 15. Last but not least, Green IT continues in various areas. For example, the use of e-reports to reduce printing on paper is becoming a common practice in business operations. IT equipment from desktop PCs to servers in the data centre are switched off when not in use or after office hours to avoid unnecessary consumption of electricity.

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FINANCIAL HIGHLIGHTS 16. The key figures for HA’s 2011/12 financial performance are summarised below –

2011/12Provisional

Result Note 1

2011/12 Revised Budget

Variance

<A> <B> <A> - <B>

$M $M $M Operating Surplus/(Deficit) Rental Housing (575.0) (993.6) 418.6Commercial 711.1 645.8 65.3Home Ownership Assistance 1,446.4 1,930.6 (484.2)

Operating Surplus before exceptional and special items

1,582.5 1,582.8 (0.3)

Exceptional Items Note 2 (99.7) (121.0) 21.3Special Items Note 3 (143.5) (149.3) 5.8

Operating Surplus before accounting provision written back

1,339.3 1,312.5 26.8

Accounting provision written back Note 4 64.7 - 64.7Funds Management Account Surplus 3,077.2 2,139.7 937.5Agency Account Surplus 5.9 43.5 (37.6)

Total Surplus before appropriation 4,487.1 3,495.7 991.4Appropriation to the Government (305.7) (262.4) (43.3)

Net surplus after appropriation 4,181.4 3,233.3 948.1

Capital Expenditure 8,474.7 8,636.5 (161.8)

Cash and Investment Balance at year-end 69,388.0 67,933.6 1,454.4

Note 1 These are provisional figures which may be subject to year-end and audit adjustments upon finalization of the 2011/12 annual accounts.

Note 2 Exceptional items represent expenditure incurred on Government Non-reimbursable items, and demolition and clearance costs charged to the Commercial Operating Account.

Note 3 Special items mainly represent the write-off of the development cost arising from aborting the development of five sites already auctioned or turned into other uses, and residual expenditure on divestment of retail and carparking facilities, offset partly by the income from Urban Renewal Authority for the rental flats allocated to affected tenants.

Note 4 The provision written back represents the reduction in future liabilities on interest for loans sold to Hong Kong Mortgage Corporation Limited. The provision written back was credited to the Home Ownership Assistance Operating Account. This year-end accounting adjustment was made in accordance with the Hong Kong Accounting Standards and the HA’s Accounting Policies and did not have any cash flow implications.

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17. The provisional operating deficit for the rental housing operations in 2011/12 was lower than the Revised Budget by $418.6 million, mainly due to lower than budgeted spending on maintenance and improvements expenditure and other recurrent expenditure. The provisional operating surplus (before exceptional items) for the commercial operations was higher than the Revised Budget by $65.3 million, also mainly due to lower than budgeted spending on maintenance and improvements expenditure and other recurrent expenditure. The provisional operating surplus (before accounting provision written back) for the home ownership assistance operations was lower than the Revised Budget by $484.2 million, mainly due to lower income from alienation premium as a result of smaller number of cases processed for removal of alienation restriction in the year. 18. The funds management operations had a provisional net surplus of $3,077.2 million in 2011/12, which was $937.5 million higher than the Revised Budget surplus of $2,139.7 million, mainly due to the higher than budgeted return on global bond portfolio. The gross return for HA’s total funds in 2011/12 was 4.7%, (as compared to the Revised Budget return of 3.4%). 19. Taking into account the accounting provisions written back at year end, the Agency Account surplus and the appropriation to the Government, the provisional net surplus in 2011/12 was $4,181.4 million, as compared to the projected net surplus of $3,233.3 million in the Revised Budget. 20. The capital expenditure in 2011/12 was $8,474.7 million, which was close to the Revised Budget of $8,636.5 million. 21. As at 31 March 2012, HA had a provisional cash and investment balance of $69.4 billion, which was $1.5 billion higher than the Revised Budget of $67.9 billion. THE WAY FORWARD 22. In 2012/13, FC with the assistance of FMSC will continue to closely monitor the performance of HA’s fund managers and review its investment strategy, taking into account the latest financial markets situation and risks. 23. FC will examine the findings and recommendations of the consultancy study on contract staff’s renumeration package in the third quarter of 2012 and will continue to provide policy steer to enable HA to maintain and enhance human resources management services that are commensurate with

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benchmarked and best practices of other public sector organisations in Hong Kong. 24. FC will examine the report on IT Strategy Consultancy Study in May 2012 and will continue to monitor the implementation of IT in HA to enhance business efficiency and support business initiatives. CONCLUSION 25. Finally, I would like to take this opportunity to thank the Members of FC and FMSC for their most valuable advice during the past year. I am extending my appreciation to the dedicated and hard working staff of HA. I am confident that Members of FC will continue to contribute positively and effectively to the mission and goals of HA. Raymond SO Wai-Man Chairman, Finance Committee

Report by the Chairman of the Subsidised Housing Committee for 2011/12

INTRODUCTION The Subsidised Housing Committee (SHC) held five meetings with 72 papers issued in the year. Four separate meetings were held with concern groups. 2. The subsidised housing operation continued to focus on the allocation, management and maintenance of the rental housing stock of the Housing Authority (HA) to address the public needs. On-going measures to optimise and rationalise the use of public resources have been adopted. We had implemented various activities on the allocation and management of public rental housing (PRH) in providing quality homes as well as promoting sustainable living. OPTIMISING AND RATIONALISING THE USE OF PUBLIC RESOURCES Meeting Housing Needs 3. In 2011/12, about 19 800 Waiting List (WL) applicants were rehoused to PRH units. In addition, 1 200 WL applicants had also been allocated with newly completed flats pending intake. As at December 2011, the average waiting time (AWT) for PRH was 2.5 years for general WL applicants. For elderly one-person applicants, AWT was 1.2 years. The New Home Ownership Scheme 4. In response to the aspirations of low and middle-income families to buy their own homes, the Chief Executive has put forward a new policy for the resumption of the Home Ownership Scheme (HOS) in the 2011-12 Policy Address. HA is responsible for formulating the implementation details of the New HOS. We have begun discussion on the price-setting mechanism, premium payment arrangement and other implementation details including allocation ratio between Green Form and White Form (WF) applicants, domestic property restriction as well as income and asset limits for WF applicants, priority of applicants, resale restrictions and buyback arrangements, etc.

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Territory-wide Overcrowding Relief Exercise and Living Space Improvement Transfer Scheme

5. About 810 overcrowded households were transferred to larger accommodations through the Territory-wide Overcrowding Relief Exercise. In addition, around 1 380 households were rehoused through the Living Space Improvement Transfer Scheme which provided transfer opportunities for non-overcrowded households. As at end March 2012, the number of overcrowded families dropped to about 3 190, or 0.45% of the total PRH households. Express Flat Allocation Scheme 6. Flat selection under the Express Flat Allocation Scheme exercise was launched in July 2011 to allow fast-track access to PRH by WL applicants who need to be re-housed promptly, and to improve the letting rate of the less popular flats. Around 1 800 PRH flats were successfully let to eligible applicants by end March 2012. Estate Clearance Projects 7. The Clearance of Tung Tau (I) Estate and So Uk Estate Phase 2 with scheduled completion date in September and October 2012 respectively are in good progress. Implementation of Statutory Minimum Wage 8. We had reviewed the service contracts for property management, cleansing and security services to tie in with the implementation of Statutory Minimum Wage (SMW) to take effect from May 2011. In line with the Administration’s arrangements, HA had provided top-up payments, on ex-gratia basis, to all existing service contracts straddling 1 May 2011 until their expiry for meeting the increase in wage costs of non-skilled workers, arising solely and directly from meeting the initial SMW rate and the provision of one paid rest day in every period of seven days for both the initial and extendable periods. Intensified Action against Abuses of Public Housing Resources 9. We continued the three-pronged approach, including prevention, investigation and education through publicity, to tackle suspected tenancy abuse. In addition to the biennial flat inspections, we conducted rigorous checks to some 8 500 occupancy-related cases in the year. We also carried out regular checks to all income and assets declarations and intensive checks to 5 800 cases.

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10. To enlist community support and promote public awareness on cherishing public housing resources, an Estate Management Advisory Committee (EMAC) Seminar was held in March 2012. On-going publicity through estate newsletters, posters, leaflets, banners, promotional video, the HA/HD Website, Housing Channel and bus-side panel advertisement would continue.

BUILDING QUALITY HOMES Total Maintenance Scheme 11. The first 5-year cycle of in-flat inspection programme of the Total Maintenance Scheme (TMS) in 177 estates was successfully completed by end March 2011. The second 5-year cycle was launched in early 2011. In March 2012, the in-flat inspection programme was successfully rolled out in 28 estates and completed in 14 estates amongst them. Responsive In-flat Maintenance Services 12. With reference to the successful experience gained from TMS, we have implemented the Responsive In-flat Maintenance Services (RIMS) in all targeted estates to provide prompt response to repair requests made by tenants with the aid of PDAs and enhanced communication technology. In early March 2012, RIMS had been successfully rolled out in all existing estates and would be implemented in all newly completed estates. Favourable comments were received from the public. Our RIMS Team also won the Winner in the “Project Management Team of the Year” category and received a Merit award in the “Best Project Team of the Year” category at the Royal Institution of Chartered Surveyors (RICS) Hong Kong Property Awards 2012. Comprehensive Structural Investigation Programme in Aged PRH Estates 13. Surveys and testing under the Comprehensive Structural Investigation Programme were completed for 18 aged PRH estates. To ensure our aged public housing stock be sustained in terms of safety, building quality, quality of accommodation, lifestyle and living standard, we would continue the Estate Improvement/Revitalisation Programme to those estates to be sustained.

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Barrier Free Access

14. A retrofitting programme to improve accessibility of our premises/facilities to the standards of the Design Manual: Barrier Free Access 2008 has been devised. As at end March 2012, about 80% of the improvement works had been completed. To minimize service interruption and nuisances to tenants, some improvement works have been scheduled for completion by mid-2014 while a small portion of works would be completed by 2016/17 to tie in with other estate improvement programmes. Addition of Lifts Programme 15. Considering the need of the elderly and people with various forms of physical infirmities or limitations such as pregnant women and families with young children, we launched a programme to enhance the pedestrian circulation for our residents through addition of lift towers, escalators and footbridges in 29 PRH estates with 35 projects. Since the inception of this programme, 10 lift addition projects had been completed with two projects in 2011/2012. Construction works of the remaining 25 projects would be completed in 2012. Our project team also received a Merit award in the “Project Management Team of the Year” category at the RICS Hong Kong Property Awards 2012. Lift Modernization Programme 16. Lift modernization was continued in PRH estates. The condition of all lifts over 25 years of age would be evaluated and prioritized in the rolling programme. Where the structure permits, lift openings would also be added for every floor. During the year, 90 lifts in 16 estates were replaced. Building Environmental Assessment Method Plus Scheme 17. The Building Environmental Assessment Method (BEAM) Plus has been increasingly recognized as an environmental performance label to demonstrate the overall qualities of a building. Two estates were selected for a pilot study to evaluate whether the levels of environmental performance prescribed under the BEAM Plus could be achieved. ISO 14001 Environmental Management System Certification 18. The ISO 14001 Environmental Management System (EMS) for planned maintenance and improvement works has been implemented in all PRH estates since its certification in May 2011.

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19. In view of the encouraging result of obtaining certification to ISO 14001 in property management for three selected estates, we extended the certification to all the remaining PRH estates by three batches. EMS has been implemented in the first batch of 40 estates since September 2011 and certification would be obtained in mid-2012. Enhanced Security Measures in Estate Offices and Work Places 20. Enhancement works in estate offices started in early 2011. As at end March 2012, improvement works were completed in 166 offices and in progress/under planning in 16 offices. All remaining works were scheduled for completion before September 2012. PROMOTING SUSTAINABLE LIVING Review of Waiting List Income and Asset Limits

21. A review of the WL income and asset limits for 2012/13 following the established mechanism was conducted. When comparing the income limits calculated using the established methodology (which included a 5% contingency provision on household expenditure) with the income limits for 2011/12 (which included a special one-off provision of an additional 10% contingency provision on household expenditure), there should be a decrease in the income limits for 1-person and 2-person households. In light of the current economic situation, and in order to continue to provide an additional buffer for 1-person and 2-person households, we decided to give special consideration to freeze their income limits at the existing levels. For 3-person households and above, we effected the changes in accordance with the established formula. The WL income and asset limits for 2012/13 increased by an average of 7.7% and 5.3% respectively when compared with the limits for 2011/12.

Housing Arrangements for Fostering Harmonious Families 22. To foster harmonious homes and strengthen ties within families, we have implemented a series of enhancement initiatives geared towards this policy objective for the allocation and management of PRH via Harmonious Families Priority Scheme, Harmonious Families Transfer Scheme, Harmonious Families Addition Scheme and Harmonious Families Amalgamation Scheme.

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23. As at end March 2012, 20 900 households had benefited from these initiatives since policy implementation. These households included 10 700 families applying for PRH, 1 060 through transfer, 8 680 for addition and 460 for amalgamation of tenancies. Enhanced Partnering Arrangements among Estate Management Advisory Committees and Non-Government Organisations 24. Since the implementation of the above arrangements in October 2009, some 900 partnering functions had been held as at end of March 2012. The functions were well received by various stakeholders and found to be effective in fostering neighbourliness, care to the elderly, healthy living and the sense of belonging among residents. Cessation of the Housing Advisory and Service Team Scheme 25. In a review of the Housing Advisory and Service Team (HAST) Scheme for Tin Shui Wai, Tuen Mun, Yuen Long and Tung Chung Districts, it was found that after some four years of active service, HAST had successfully strengthened the support services for the PRH tenants in these Districts. 26. As HAST was only intended to be a temporary scheme and that it had fully completed its original mission, SHC endorsed to cease the HAST scheme upon expiry of the service contract term in April 2012. We will continue to encourage EMACs to partner with Non-Government Organisations to reach out to the target tenants in the PRH estates therein. Rent Assistance to Needy Tenants 27. The Rent Assistance Scheme (RAS) provides PRH tenants facing temporary financial hardship with relief. As at end March 2012, around 12 000 families were receiving assistance under the scheme through rent reduction of 50% or 25%. We had stepped up publicity of RAS through radio broadcast, Housing Channel, estate newsletters, leaflets and posters. Implementing the Government’s Initiative to Assist Lower Income Families 28. To help ease the pressure of inflation on the general public, the Government announced to waive the rates for 2011/12. HA passed on the amount to PRH tenants/licensees on a monthly basis by offsetting an equivalent amount of monthly rent/licence fees payable by them. Under the Government’s mitigation measures to pay two months’ rent for domestic tenants living in PRH flats, including those paying extra rents, our tenants were not

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required to pay all or part of the rent/licence fees in August and September 2011. Free Wi-Fi Service 29. Free Wi-Fi service had been extended to all 158 existing PRH estates and 26 shopping centres in 2011/12. Up to March 2012, over 1 500 hotspots had been set up and more new hotspots would be installed. ENHANCING HYGIENE AND GREENING Marking Scheme for Estate Management Enforcement 30. The Marking Scheme for Estate Management Enforcement has been well received and supported by tenants since its implementation in 2003. Up to March 2012, some 18 500 point-allotment cases were recorded. Enhanced Enforcement Measures 31. Under the Fixed Penalty (Smoking Offences) Ordinance which came into effect in September 2009, residents who were found smoking in statutory no-smoking areas in PRH estates would be allotted points under the Marking Scheme and issued with Fixed Penalty Notices (FPNs). We had issued 780 FPNs to offenders on top of allotting penalty points of the Marking Scheme to around 3 200 households since its implementation. 32. In order to maintain a clean living environment in PRH estates, we implemented a series of enhanced measures to tackle unauthorised dog keeping, including more stringent control on dog licence renewal required under the Temporary Permission Rule, intensified patrol and enforcement actions by staff at estate level and the Special Operation Teams at Regional Headquarters level, and enhanced publicity through posters and leaflets. Strengthening of Tree Management in PRH Estates 33. To ensure tree safety, we have conducted tree risk assessment and taken remedial measures for about 100 000 trees in PRH estates. The surveillance on tree safety was further strengthened by routine tree inspection by frontline estate management staff. A centralized electronic tree database operated on Geographic Information System was being developed to enhance tree management.

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WAY FORWARD

34. In 2012/13, we will continue to focus on the themes of providing quality homes, promoting sustainable living, optimising and rationalising the use of public resources through delivering high quality services to our customers vide allocation, management and maintenance business. We maintain a sustainable PRH stock through proactive improvement programmes and safeguarding the rational and efficient use of public housing resources. To address the policy on resumption of HOS in the 2011-12 Policy Address, we will continue to discuss the implementation details of the New HOS in details. Exploring effective and wider application of information technology, we will also roll out the computerised Customer Service Management System in estate offices to enhance our business efficiency. CONCLUSION 35. As the Chairman of SHC, I would like to extend my heartfelt thanks to the outgoing Members for their valuable contribution and a warm welcome to new Committee Members. I count on all Members for their continual support and advice in the years ahead. I would also like to extend my appreciation to the staff of HD for their exemplary and dedicated support and look forward to working with all of you in the coming year. Anthony CHEUNG Bing-leung Chairman, Subsidised Housing Committee

Report by the Chairman of the Tender Committee for 2011/12

INTRODUCTION I have pleasure in presenting the ninth report of the Tender Committee (TC), which was established in April 2003. 2. In year 2011/12, TC has held 11 regular meetings, one brainstorming session, three visits to construction and demolition sites as well as estates undergoing improvement works. Altogether, TC has processed 63 discussion papers, 14 presumption papers and 33 information papers. ISSUES DISCUSSED 3. The work of TC covers a comprehensive range of activities relating to the Housing Authority (HA)’s procurement, tenders and quotations exceeding the limits of delegated authority of the Chairman of the Housing Department Tender BoardNote 1 as well as HA’s list management regime which is an integrated part of HA’s procurement policy as follows – (a) scrutinizing tenders and awarding contracts; (b) reviewing and enhancing tender guidelines; (c) reviewing and drawing up procurement strategies and policies; (d) endorsing policy relating to the management of HA’s list of

contractors, service providers and consultants, and considering appeals and/or objections against actions concerning status of contractors, service providers and consultants on such lists; and

(e) endorsing programmes of activities (POA) and monitoring of their

performance. 4. Various topics which have substantial impact in the industry have been discussed and endorsed by TC e.g. arrangement for HA service contracts following the implementation of the Statutory Minimum Wage, review and adoption of Integrated Procurement Approach (IPA) in Anderson Road Development, review of Integrated Pay for Safety, Environment and Hygiene Note 1 In accordance with the current Delegated Financial Authority, all works and works related services contracts, property services contracts, goods and general services contracts over $50 million and all Consultancy or Professional Advisory Services Contracts over $25 million.

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Scheme (IPSEHS) and compilation of standard conditions of contract for HA’s Capital Works contracts. SCRUTINIZING TENDERS AND AWARDING CONTRACTS 5. For the period between April 2011 and March 2012, TC awarded 44 contracts, including five building (New Works) contracts, six foundation contracts, one building services (electrical) nominated sub-contract, eight district term contracts for maintenance works, 13 property services contracts, one property management agency service contract, four security service contracts, four carpark management contracts, one cleansing service contract, and one air-conditioning and ventilation term maintenance contract. REVIEWING AND ENHANCING TENDER GUIDELINES; PROCUREMENT STRATEGIES AND POLICIES 6. While adhering to the Government Procurement Agreement under the World Trade Organisation, Government and HA’s procurement policies and instructions, we have continued to review and enhance our procurement system to maintain a fair, open and equitable policy to ensure that we can procure products with best value for money. Capital Works New Works Contracts – Review on Selection of Tenderers and Evaluation of Tenders for Capital Works Contracts 7. On selection of tenderers for Capital Works New Works contracts, we have maintained the banding system and the minimum score threshold at 75 marks for Performance Assessment Scoring System (PASS) score league for Building (New Works) Contractors and BSPASS score league for Building Services Subcontractors. 8. On evaluation of tenders, we have maintained the weighting of 75:25 for price to non-price scoreNote 2. Performance on Wage Monitoring in the Corporate Score has been assessed in existing HA contracts for active contractors, or in other public or private sector projects for wildcard contractors. Since March 2009, new works piling contracts have adopted a tender evaluation system on the basis of 95:5 price to corporate score. We shall continue to put low bid tenders with low Corporate Score into “quarantine”. As a matter of policy, unrealistically low bids shall not be accepted. We will put low bid

Note 2 For lift and escalator tenders, the price to non-price weighting is 70 : 30.

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tenders with low corporate score or tenderers involved in fatal accident, dangerous incident, serious/suspected misconduct cases and workers’ wages in arrears which come to light in the course of tender assessment into “quarantine” and critically examine contractor’s deficiency during tender assessment before making recommendation on the award of contracts. 9. In order to identify more capable and resourceful tenderers during tender assessment, instead of merely adopting Preferential Tender Award System as a norm, we have endorsed the enhancement proposal to classify Capital Works Building Contracts involving, but not limited to, slope works or foundation works as Complex Contracts and Capital Works Piling Contracts involving, but not limited to, Slope Works, Deep Excavation, Roads and Drainage Works or Demolition works as Complex Contracts, to be determined by the Chairperson of Procurement Review and List Management Board (PRLMB) on advice of PRLMB on a case by case basis. Technical submission will be required in various types of Complex Contracts. A two-envelope tendering systemNote 3 together with a two-staged and two-tier tender evaluation mechanism shall then apply to the Complex Contracts. Integrated Procurement Approach 10. IPA tendering and contracting model aims at earlier and better integration of design and construction expertise from designers, builders and manufacturers to achieve a holistic design solution. Featuring a three-envelope tendering system, this procurement system enables HA to procure for innovations with good value for money. The Integrated Contract of Kai Tak Site 1B commenced in November 2009 and is now under construction. An interim review of the IPA procurement system and the operation of the Integrated Contract in Kai Tak Site 1BNote 4 has been conducted and reported to TC in May 2011. In order to reap the benefits of IPA in forging quality and high reliability in the project delivery with good value of money, we have reaffirmed that only those projects with sizeable site, low planning risk, low technical risk and suitable scope for design and innovation are suitable. We have prudently considered the above pre-requisites for the selection of projects for the application of IPA, and we will apply IPA to the Public Housing Development at Anderson Road Site A

Note 3 For Two-envelope tendering system, the price to non-price ratio is as follows – Building Contract 65 : 35 Piling Contract 80 : 20 Integrated Procurement Approach 55 : 45 Note 4 Kai Tak Site 1B comprises construction of nine domestic blocks, producing 8 164 flats and is scheduled for completion between May and August 2013.

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and Site B Phase 1 and 2Note 5 which offers the unique opportunities. Capping Limits, Tender Restriction Threshold and Tender Award Restriction on Capital Works Contractors

11. To contain HA’s exposure to concentration risks whilst ensuring effective competition for tenders, we have continued to adopt the prevailing policy of imposition of workload restrictions via various means. The Capping Limits on all five lists of works contractorsNote 6, and the Tender Restriction Threshold for three lists of contractorsNote 7 will remain. Furthermore, works contractors will be restricted to be awarded a maximum number of three contracts within any rolling 6-month period. Review of Integrated Pay for Safety, Environment and Hygiene Scheme 12. We have reviewed IPSEHS to further enhance its effectiveness through (i) revised payment curve and formulae, (ii) redistribution of payment to realign the focus in terms of resource and management, (iii) development of key performance indicators (KPIs)Note 8 and (iv) fostering continuous improvement and extra-mile spirit. The enhanced IPSEHS consists of the following contract enhancements as well as system changes –

(a) rolling out Surprise Safety Inspection Programme; (b) enriching Housing Authority Safety Auditing System scoring system

with better differentiation of premier output through stratification of “Critical Pass” score banding;

Note 5 Anderson Road Housing Site A and Site B Phases 1 and 2, which is about 5.18 ha Gross Development Site Area (4.69 ha Net Site Area), comprises 11 domestic blocks producing about 7 144 flats, and scheduled for contract commencement in 2/2013 and completion between 11/2016 and 2/2017.

Note 6 Lists of contractors include Building (new works), electrical, fire services and water pump, lift and escalator, piling.

Note 7 Lists of contractors include Building (new works), electrical, fire services and water pump. Note 8 “SMART” criteria for setting KPIs:- - Specific purpose meaningful in terms of results / output - Measurable/quantifiable - Achievable with defined norms - Relevant to success factors - Time phased for a predefined duration

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(c) mandating provisions for Environmental Manager and

Environmental Supervisor as dedicated resource to ensure a quality approach in environmental management;

(d) specifying maintenance of amenities/site cleanliness and provision

of designated cleansing workers; and

(e) extending the rewards for innovation/extra-mile efforts to Pay for Environment & Hygiene and widening innovations through use of modern technology.

Compilation of Standard Conditions of Contract for HA’s Capital Works Contracts 13. In consideration of the differences in modus operandi between HA/HD and those of the Works Departments of the Government and the need to enhance the user friendliness of the bulky conditions of contracts which comprise the general conditions of contract (GCC) and special conditions of contract (SCC), we have embarked on the compilation of a set of new standard conditions of contract for different contract types of HA’s Capital Works contractsNote 9. In carrying out the compilation work, we will review and improve the existing GCC and SCC clauses whenever necessary, and explore the practicality of importing useful features of the New Engineering Contract 3 to promote further pro-active and collaborative relationships with our contracting partners. Maintenance Contracts – Tendering Arrangement for Property Services Contracts following Outsourcing Review of Estate Management and Maintenance Services 14. In order to achieve effective competition and improved service delivery, we have tried out in small scale an alternative contract mode, namely, Property Management Agency (PMA) mode, for which the scope of contract has been modified by excluding project management services of maintenance

Note 9 The set of new standard conditions of contract for different contract types includes - - The standard GCC for HA capital works foundation contracts; - The standard GCC for HA capital works building contracts; - The standard GCC for HA capital works civil engineering works contracts; - The standard GCC for HA capital works contracts (for the remaining contract types such as

demolition, soft landscape, miscellaneous works, etc.); - The standard Sub-contract Conditions for nominated sub-contracts to the capital works building

contracts; - A library of standard SCC for HA capital works contracts; and - A library of standard SCC for nominated sub-contracts to capital works building contracts.

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and improvement works, hence bringing it closer to that of the market norm. Four PMA contracts have been awarded during the period. To increase competitiveness by having more tenderers, we have changed the quality to price score weighting to 45:55 (for Enhanced Property Services Agent Contract Mode) and 30:70 (for PMA Contract Mode) in the tender evaluation for Property Services contracts since October 2010 by putting more weighting on the price score. Including the PMA contracts, a total of 13 contracts have been awarded under this new tender evaluation system. New Maintenance Assessment Scoring System and Preferential Tendering Opportunities 15. Since its implementation from 1 January 2011, the new Maintenance Assessment Scoring System (MASS) has proven to be an objective and reliable assessment system in reflecting building maintenance contractors’ performance. We have therefore endorsed the application of MASS Scores to the implementation of the Preferential Tendering Opportunities (PTO) for District Term Contracts to be tendered out on or after 1 July 2012. The purpose of implementing PTO is to identify tenderers commensurate with their capabilities and performance. Under PTO, better performed contractors will be given more tendering opportunities than other contractors. This serves as an incentive to drive contractors to improve their performance. ENDORSING LIST MANAGEMENT POLICIES AND CONSIDERING APPEALS Premier League and Quality Maintenance Contractors 16. Besides routine management of HA’s list of contractors which covers nine lists relating to construction works and three in property services, we have carried out overall review of the following – (a) Premier League for Building (New Works) Contractors

In addition to the regular biennial review of the Premier League

Contractors (PLC) status which has been carried out in September 2011, we have approved the removal of an existing PLC and the admission of a new PLC. There are a total of five PLC on the HA List of Building Contractors.

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(b) Quality Maintenance Contractors for Building (Maintenance) Contractors

On review of the status of Quality Maintenance Contractors

(QMCs), we have endorsed the implementation of the enhanced QMC Scheme with effect from 1 July 2012. The enhanced QMC Scheme will only apply to Group M2 Maintenance Contracts. The assessments will be carried out in November each year based on the new MASS scores. The list of QMC will be valid for 12 months from January to December each year.

Two-tier system in the Imposition of Regulatory Actions and Handling of Appeals from Contractors 17. Further to the approval of the general guidelines for application of regulatory actions against various categories of defaulting contractors due to serious incidents in 2008, we have formalized a two-tier system regarding the imposition of regulatory actions and handling of appeals from contractors in last October. We have put in place an objective and transparent appeal mechanism to ensure that aggrieved contractors have the right to appeal against the regulatory action imposed by HA and that the appeals will be fairly handled and be independent of the authority that the original decision is approved. In gist, the approving authority rests with the Chairperson of the Procurement Review and List Management Board under the existing Terms of Reference whilst the reviewing authority rests with the Tender Committee. Review on the Adequacy of the Types of Housing Authority’s Permanent Lists and Number of Contractors on Such Lists 18. In order to streamline the operations and save resources in conducting prequalification of tenderers for frequent purchases, we have been maintaining HA Permanent Lists of qualified Works Contractors (WC) and Property Management Services Providers (PMSP). These HA Permanent Lists are centrally managed at the corporate level in accordance with the mechanisms promulgated publicly via “A Guide to Registration of WC and PMSP”. As at June 2010, there are altogether 12 HA Permanent Lists. In October 2010, we have endorsed a review and concluded that the existing types of HA Permanent Lists are appropriate in supporting the delivery of HA’s core business and the number of contractors on all Lists are adequate in achieving effective competition.

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Setting the Duration of List Removal Imposed on Services Contractors 19. We have conducted a thorough review of our system in setting the duration of list removal to be imposed on defaulting services contractors who have contravened HA’s policy in protecting non-skilled workers, the associated list removal arrangement and appeal mechanism. To ensure fairness and operational efficiency, we have approved the broad principles in setting the duration of list removal. Moreover, to enhance objectivity, PRLMB will co-opt one TC Member to join it to approve the duration of list removal. ENDORSING PROGRAMME OF ACTIVITIES 20. POA 2011/12 focuses on the objectives of enhancing service standard and business partners’ awareness of their corporate social responsibility; promoting partnering spirit with business partners through equitable risk sharing; promoting green procurement; enhancing safety and environmental awareness and practices in PRH estates and the HA’s workplace; maintaining an open, fair, transparent and cost effective procurement environment; enhancing value for money through procurement practices for works, services and goods; and making effective and wider application of Information Technology to enhance business efficiency and support business initiatives. For 2012/13, our work and efforts will mainly concentrate on the themes of providing quality homes, promoting sustainable living and optimizing and rationalizing the use of public resources. WAY FORWARD 21. We will continue to uphold the highest standard of integrity, for all contractors, sub-contractors, suppliers and services providers for HA. We shall keep close monitoring on the performance of our service providers, contractors and sub-contractors so that any necessary actions shall be undertaken in good time to ensure smooth delivery of our service and operation. With the concerted effort of Members and colleagues, we have met all targets and key performance indicators of the Programme of Activities. We shall keep the momentum in the coming year.

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CONCLUSION 22. Finally, I would like to express my sincere thanks to all Members of TC and staff of the Housing Department for their valuable contributions and uncompromising determination to accomplish the various tasks of TC during the year under review. Angela LEE Wai-yin Chairman, Tender Committee