The government has decided not to award one of the city's top honours to a former logistics director whose department was at the centre of a bottled water procurement scandal last year, as a probe has concluded that three officers from the unit had underperformed.

Announcing the results of an investigation on Tuesday, authorities said the trio from the Government Logistics Department were found to have lacked alertness and judgement, and delayed reporting potential issues to the upper levels.

Civil service chief Ingrid Yeung said two of them, including a directorate grade employee, will face disciplinary hearings and possible punishment.

The remaining officer, who had reported to superiors during the incident, will be given a written reprimand over a lack of vigilance and analytical skills.

"Our decisions in conducting disciplinary actions against certain officers in reflecting their performances in their performance appraisals, have to be commensurate with the shortcomings revealed in the investigation report," Yeung said.

"Everything is based on facts. We seek to take actions that are commensurate with the responsibilities of the officers concerned."

She said former department head Carlson Chan was not found to have been negligent, but lacked the ability to improve the quality of his colleagues' work.

"This procurement of drinking water has drawn extensive attention from the public and brought serious disrepute to the government," Yeung said.

"In this light, after consulting the Honours and Non-official Justices of the Peace Selection Committee, the government has decided to reverse the previously announced decision to award the Silver Bauhinia Star to Mr Chan, and Mr Chan has been informed."

The government's decision is not a punishment for the former department head, Yeung added.

The incident came to light in August, when Xin Ding Xin – a company that was awarded a HK$52 million contract to provide bottled drinking water to certain government offices – was accused of lying about how it sourced the water from the mainland.

Treasury minister Christopher Hui said a task force he led to review the government's procurement regime drew up improvement measures, such as introducing financial audit arrangements for purchase contracts worth over HK$15 million.

He added that officials have updated terms and conditions for government procurement contracts, allowing termination with immediate effect on the basis of public interest.