21 February 2002
West Rail, Phase I, and the East Rail Extensions single source tendering
In the light of increasing media and public interest on the subject of single source tendering, a spokesman for the Kowloon-Canton Railway Corporation (KCRC) made the following statement today (21 February 2002).
KCRC, as a Government-owned corporation, is an entity under (i.e. it is bound by) the World Trade Organisation’s Agreement on Government Procurement (WTO-GPA). KCRC’s own Procurement Rules must therefore conform with the provisions of the WTO-GPA.
Both the WTO-GPA and the Corporation’s Procurement Rules make it clear that KCRC should seek to procure goods, construction and services as far as possible through open competitive tendering.
Circumstances demanding single source tendering should, as far as possible, be avoided, and single source tendering may only be adopted when circumstances do not permit competitive tendering. Some examples of such circumstances are given below –
(a)     where there is extreme urgency brought about by unforeseeable events, and where the delay that would arise as a result of open tendering or restricted tendering would seriously harm KCRC’s interests;
(b)     where, for the protection of copyright or other technical reasons, the products and services can only be supplied by a particular supplier, and where no reasonable alternative or substitute exists;
(c)     where, following open tendering, no conforming tender has been forthcoming;
(d)       where equipment, products or services to be purchased must be compatible with existing equipment or interchangeable with existing equipment or services;>
(e)     where it can be demonstrated that patent or proprietary items are the only items which can meet the KCRC’s specifications;
(f)       where the required services can only be provided by the utility companies or Government Departments;
(g)     where maintenance is to be executed on patent or specialized equipment, and where the warranty of the equipment gives the supplier of the equipment the exclusive right to carry out the maintenance service;
(h)     where lease terms require that work must be executed by a particular firm.
It follows from this that single source tendering, being an exceptional method of procurement, requires careful handling. In the KCRC, the authority to approve single source tendering is the KCRC’s CEO acting on the advice of Directors and the Corporate Tender Board. Equally, the methods to be used in evaluating the single tender, and of entering into negotiations with the potential single supplier, have to be approved at each stage by Directors or the Corporate Tender Board. Given that the value of most major capital projects exceed the limit of powers delegated to the CEO by the KCRC’s Managing Board, the final outcome of the negotiations are almost invariably reported to the Managing Board for it to decide whether or not the negotiated contract –
(a)     falls within the circumstances which would justify procurement by single source tendering; and
(b)     represents value for money.
If the Managing Board is satisfied on both counts, the contract is awarded accordingly and KCRC would routinely publish the details of such contracts in the Government Gazette in accordance with Article XVIII of the WTO-GPA.
Over the past five years (1997 to 2001), KCRC has been heavily engaged in building West Rail, Phase I, and the three East Rail Extensions. To this end KCRC has been procuring civil construction (in the form of tunnels, viaducts and stations) and plant and equipment (in the form of rolling stock, trackwork, signalling, overhead power supplies, telecommunications, automatic revenue collection, signage, etc.). A total of 75 such works contracts have been awarded, of which –
(a)     70 contracts were awarded after open competitive tendering, representing 97.88% of total contract values; and
(b)     5 contracts were awarded by way of single source tendering, representing 2.12% of total contract values.
In respect of the 5 contracts awarded on the basis of single source tendering, the following paragraphs provide the reasons why this method of procurement was adopted.
In the case of West Rail, Phase I, only one (1) contract, valued at $11 million, was awarded by way of single source tendering. The award was made to Creative Star Ltd. for the supply of Octopus smart card readers, which will be inserted into West Rail’s automatic ticket gates. The award had to go to Creative Star mainly because Creative Star provides the most convenient means by which the travelling public could use virtually all forms of public transport and partly because it uses proprietary software..
In the case of the East Rail Extensions, four (4) contracts, valued at $778 million, were awarded by way of single source tendering. These contracts and the reasons for awarding them in this way are –





DB 1350

Extension of existing signalling and train control system to the three extensions


Extension of Alstom technology and equipment to the TST Extension, the LMC Spur Line and MOS Rail, to make their system compatible with that of East Rail.

DB 1550

Integrated control and communication systems (ICCS)


Modification and enhancement of the existing East Rail ICCS to cover all three East Rail extensions, using the technology supplied by Foxboro for the existing ICCS.

DB 1551

Integrated radio system


To ensure that the radio system for the East Rail Extensions would be compatible with that installed by Mitsui for the existing East Rail.


Station signs and advertising boxes


To ensure compatibility of signage throughout West Rail, East Rail and the ER Extensions.  In future, West Rail, East Rail and the ER Extensions will become a single integrated network.  To achieve inter-changeability of equipment and to reduce design and production costs.

It will be seen that KCRC adopts single source tendering sparingly, and then only with good reason. It should be stressed that, in all five cases, the Corporate Tender Board and KCRC’s Managing Board were satisfied that this method of procurement was both appropriate and cost effective.