Government Revamps Accounting Regime with New Contracts, But Delays and Costs Rise

Strategic Insights -

The government's plans to shift its accounting regime to an accrual-based system have made progress with the award of new contracts to PCCW subsidiary Unihub and Fujitsu Hong Kong. However, months after terminating IBM's contract, the costs involved in the Treasury's move have increased due to Fujitsu's re-involvement. The new contracts, worth almost $450 million, were awarded despite delays and concerns over the previous contractor's performance. Unihub will design, build, and implement the Government Financial Management Information System, while Fujitsu will supply a new mainframe computer and maintain the infrastructure for five years.

Key Takeaways:

  • The government's accounting regime revamp, which aims to switch from a cash-based to an accrual-based system, has encountered delays and cost increases, with the award of new contracts to Unihub and Fujitsu.
  • The new contracts, worth almost $450 million, were awarded despite concerns over delays and the previous contractor's performance.
  • Unihub was awarded a $192 million contract to design, build, and implement the Government Financial Management Information System, while Fujitsu will receive nearly $96 million for supplying a new mainframe computer and maintaining the infrastructure for five years.
  • The new system, expected to be completed in 2008, will connect about 5,400 users across all government departments and provide more comprehensive financial information on the government's position and performance.
  • The government has been prudent in the technical evaluation of Unihub's bid, considering various aspects including the proposed team composition, implementation plan, and solutions to meet technical and functional requirements.
  • The new financial management information system is critical for Hong Kong's move from cash-based to an accrual accounting regime, used by businesses and many western governments.

Statistics:

  • Total value of new contracts awarded: almost $450 million ($192 million for Unihub + $96 million for Fujitsu + $162 million for other services)
  • Number of users the new system will connect: 5,400
  • Timeframe for completing the new system: 2008
  • Timeframe for Fujitsu's maintenance contract: five years
  • Total value of IBM's original contract: almost $350 million (signed in 2003)
  • Net assets under the accrual regime (2004-05 financial year): $861 billion
  • Net assets under the cash-based accounts (2004-05 financial year): $296 billion

Sources:

  • "Treasury spokeswoman"
  • "A government spokesman"
  • "Legislator Sin Chung-kai"
  • "George Fok Yiu-cheung, managing director at Unihub"
  • The Hong Kong Government's Financial Management Information System project documents (no specific date mentioned)
  • The Hong Kong Government's press releases and statements (no specific date mentioned)