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In response to media enquiries, a spokesman for the Government Logistics Department (GLD) said today (October 25) that the batch of Volkswagen Phaeton 3.2L saloon cars procured through an open tendering exercise fully complied with the emission and fuel efficiency standards for environment friendly cars proposed by the Environmental Protection Department.
The standards were set to implement the environmental initiative introduced in the Chief Executive's Policy Address this year. Through this initiative, owners of vehicles with low emissions and high fuel efficiency will benefit from a reduction in the first registration tax for their cars.
The spokesman said the batch of 36 Volkswagen Phaeton 3.2L saloon cars was a replacement for those large saloon cars (grade A) in the Government fleet reaching the end of their economic life. Commencing an open tendering exercise in April, 2006, the GLD then stipulated in the tender document that the most stringent prevailing environmental standards, i.e. Euro IV emission standard, had to be fully complied with.
To encourage the use of environment friendly vehicles, the Policy Address has recently recommended tax concession for people buying saloon cars with environmental standards better than the existing regulatory requirements. This new set of environmental standards was only determined in September and not yet in place in April when GLD invited tenders. Therefore, there was no requirement for suppliers to provide green vehicles meeting the environmental standards better than the then regulatory requirements.
However, in view of public concerns over the issue, the Government has recently requested Volkswagen to conduct another test to ascertain the modelˇ¦s latest enhancement in emission performance. According to the latest test report submitted by Volkswagen yesterday (October 24), the new generation Phaeton 3.2L saloon cars to be delivered to the Government will be installed with a more effective emission control system. Therefore, the vehicles have no problem fully meeting the emission and fuel efficiency standards proposed by the Environmental Protection Department for environment friendly cars. Earlier, Volkswagen had submitted to the Government data on the emission and fuel efficiency of the Phaeton 3.2L model, based on result of tests conducted in 2003.
The spokesman clarified that the model procured by the Government was Volkswagen Phaeton 3.2L, an entry model fitted with a 3.2-litre engine. It is not the Phaeton models 4.2L or 6.0L as mentioned in some press reports. Neither is it the Phaeton model featured in the "Lowest Fuel Economy" list promulgated by the US Environmental Protection Agency (EPA).
According to data released by the US EPA, the Phaeton models it had tested only included cars with 4.2-litre and 6.0-litre engines. The Agency has not conducted tests on the Volkswagen Phaeton 3.2L model. The Volkswagen Phaeton model that appears on the agencyˇ¦s "Lowest Fuel Economy" list is the model with a 6.0-litre engine. Therefore, it is inappropriate to apply the agencyˇ¦s test results of the Phaeton models to the Phaeton cars being procured by the Government. The two are entirely different classes of saloon cars with different cylinder capacities.
The spokesman explained that the GLD has adopted a set of objective criteria known as Economic Life Model (ELM) to determine the replacement need of different types of general purpose vehicles (including motorcycles, cars, buses and trucks, etc.). The department also relies on an objective marking scheme to ensure that the vehicles procured are cost-effective.
Based on the recommendations by the Audit Commission, the GLD has resorted to the ELM since 1999 to determine which vehicles have reached the end of their economic life cycle. By applying the ELM to different makes and models of Government vehicles, a set of data on the mathematical relationship among vehicle maintenance cost, vehicle age, mileage run and replacement cost is derived. Eventually, an indicator which is the accumulated maintenance cost at the end of the economic life, is worked out for individual makes and models. When the accumulated maintenance cost of a vehicle grows and hits the indicator mark, it will no longer be cost-effective to keep the vehicle running. It will then have to be replaced.
As for the procurement procedure, GLD purchases Government vehicles through open tendering. To ensure that the vehicles procured are cost-effective, the department adopts a marking scheme which evaluates not only the price of a vehicle but also elements of whole life cost, including maintenance cost, warranty period and fuel consumption.
The spokesman said that GLD coordinated all departments' and bureaux' requirements for, and procurement of, replacement and additional general purpose vehicles (including motorcycles, cars, buses and trucks etc.), which are used primarily for passengers and/or goods. Each year, the Government allocates a provision to GLD [Head 59 Subhead 691 General Purpose Vehicles (Block Vote)] for the procurement of general purpose vehicles. This provision was approved by the Legislative Council Finance Committee (LegCo FC) in the context of the annual Estimates exercise and included in the 2006-07 approved Estimates. The expenditure under Subhead 691, like other block vote subheads, is capped by the approved provision.
For 2006-07, the approved provision under Subhead 691 is $90 million. GLD plans to use the sum to procure 529 vehicles, including motorcycles, cars, buses and trucks. Similar to other general purpose vehicles, the purchase of Volkswagen Phaeton saloon cars is funded by this Subhead and is within the FC-approved provision. No separate approval by the FC is therefore required for this purchase. Nevertheless, the spending position under Subhead 691 is subject to the close scrutiny of the LegCo FC every year in the context of the examination of the annual Draft Estimates. Special FC questions raised in relation to this Subhead covered issues such as the number and types of vehicles purchased.
When the FC examined the Estimates of Expenditure 2006-07 this year, members raised four questions on the purchase of vehicles and the Government had provided the replies then.
The spokesman said that the saloon cars to be replaced were on average nearly 10 years old and had operated for an average of over 200,000 km. Their maintenance costs were high. In the past two years, the average annual maintenance cost per unit has increased from $47,000 to $59,000. Based on the objective criteria, the ELM, there was genuine need for replacement.
The spokesman pointed out that the open tender exercise was conducted in accordance with the stipulations of the Agreement on Government Procurement of the World Trade Organization. If the Government rescinds the contract unilaterally, it will be regarded as a breach of contract on our side and will incur compensation. This will also affect the image of Hong Kong.
"We consider that there is no reasonable ground to rescind the contract," he said.
Ends/Wednesday, October 25, 2006
Issued at HKT 23:47
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