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LCQ1: Combating bid-rigging in building maintenance works

Following is a question by the Hon Chan Han-pan and a reply by the Acting Secretary for Development, Mr Eric Ma, in the Legislative Council today (November 25):

Question:

Some flat owners of private residential buildings have relayed to me that the problem of bid-rigging in relation to building maintenance works has become serious in recent years.  They have pointed out that as most flat owners lack the professional knowledge in maintenance works, it is difficult for them to judge whether the tender prices of various maintenance works are reasonable.  Moreover, there are loopholes in the process for implementing building maintenance works pursuant to statutory orders, which have been exploited by bid-rigging syndicates.  For instance, flat owners are required to hire authorised persons as project consultants to co-ordinate and supervise maintenance works, and yet the independence of the authorised persons is in doubt as they may have intricate connections with the works companies submitting bids.  Furthermore, members of owners' corporations (OCs) are subject to individual flat owners' queries from time to time as to whether they have handled the tendering exercises for maintenance works in an impartial manner, and consequently neighbourhood relationship is strained.  In this connection, will the Government inform this Council:

(1) of the number of reports and complaints received by the Government in each of the past five years about suspected bid-rigging in relation to residential building maintenance works (with a breakdown by District Council district); the number of substantiated cases and the names of the housing estates involved, and whether the authorities have instituted prosecutions in respect of such cases; if they have, of the details; if not, the reasons for that;

(2) given that some members of the public have criticised that the Government has failed to take the initiative to combat bid-rigging and its combating efforts are ineffective, whether the Government will consider taking measures, which are more effective, to combat bid-rigging; if it will, of the details; if not, the reasons for that; and

(3) given that a political party has recommended the Government to improve the process for implementing building maintenance works pursuant to statutory orders, establish an independent supervising institution which will appoint authorised persons as advance works consultants to take charge of tendering matters in collaboration with independent accountants, and then let OCs appoint at the same time the works companies and authorised persons responsible for monitoring the works, with a view to combating bid-rigging activities, whether the authorities will take on board such recommendations; if they will, of the details; if not, the reasons for that?

Reply:

President,

The Government is very concerned about suspected bid-rigging in building maintenance works.  Bid-rigging is a complex problem, which may involve problems such as a few building owners colluding with OCs, management companies and maintenance works consultants in order to manipulate maintenance decisions, etc., or even corruption and triad involvement.  Relevant government departments and related organisations work closely in taking a multi-pronged approach to combat and prevent bid-rigging in building maintenance works.

On the three parts of the question, the information provided by relevant bureaux and departments are consolidated in my reply as follows:

(1) According to the statistics compiled by the Home Affairs Department since last year, six complaints by building owners alleging bid-rigging practices were received in 2014, including one from Yau Tsim Mong district, one from Kowloon City district, two from Tsuen Wan district, and two from Sha Tin district; and the Department received no such complaints from January to October 2015.  Since these complaints were only made by individual owners and the Department has no power to conduct investigation, it is not possible to ascertain whether the complaints are substantiated.  If the complaints suspect the involvement of improper means, the Department will advise owners to report to law enforcement agencies (LEAs).

On enforcement, the Independent Commission Against Corruption (ICAC) received some 3 800 corruption complaints involving building management and maintenance from 2011 to September 2015.  121 and 106 persons were prosecuted and convicted respectively during that period as a result of such types of complaints.

The Organised Crime and Triad Bureau of the Hong Kong Police Force launched the "RenoSafe Scheme" to encourage the public to provide intelligence more proactively by educating them about crimes that may arise from building maintenance works.  As at October 2015, the Police hotlines have received 41 reports, of which 28 involved problems concerning tender prices.  Relevant cases have already been referred to respective units or other departments for follow-up.

To protect the interests of the relevant building owners, and in view of LEAs' need to maintain confidentiality, we will not disclose the names of the buildings concerned or other information on the cases.

(2) On the second part of the question, as I mentioned just now, relevant government departments and related agencies work closely in taking a multi-pronged approach to strengthen the combat against and prevention of bid-rigging in building maintenance works.

In particular, the Home Affairs Department, through its "Building Management Professional Advisory Service Scheme", engages professional property management companies to assist owners of old buildings, especially the "three-nil" buildings, in forming OCs, applying for subsidies, commencing maintenance works and following up on the tendering, etc.  159 OCs have been assisted so far to apply for subsidies to commence maintenance works.  The Department has implemented since April 2014 the two-year pilot "'AP Easy' Building Maintenance Advisory Service Scheme" in collaboration with three professional bodies, which provide OCs intending to carry out building maintenance works with professional advice in respect of the selection of appropriate consultant to commence works.  Of the 73 eligible OCs joining the Scheme so far, the Department has arranged 72 OCs to meet the expert team and is arranging a meeting for the remaining one.

The ICAC provides advice on effective corruption prevention measures, checklists on points-to-note and templates of documents for the reference of owners; and conducts district seminars to elaborate on the corruption risks in building maintenance and the related preventive measures.  On law enforcement, as bid-rigging has aroused extensive public concern, the ICAC, in addition to its permanent dedicated group, established a special task force in April this year that investigated and detected several inter-related complaints involving building renovation contracts.

Moreover, the Police are concerned about illegal acts that may arise from building maintenance works, and will mount intelligence-led enforcement operations to stop infiltration by triads or criminal syndicates in building maintenance works through unlawful means in order to make profits.  The Police, through its "RenoSafe Scheme", also educate the public to be aware of anyone employing unlawful means to influence the tendering and implementation of maintenance works.  The Police distribute information packages, posters and banners to step up the promotion of related messages.

As executive agencies for the Operation Building Bright, the Urban Renewal Authority (URA) and the Hong Kong Housing Society (HKHS) have adopted new tendering arrangements since 2013 to ensure that the tendering procedures of the participating buildings are open, fair and competitive.  Moreover, the Integrated Building Maintenance Assistance Scheme currently run by the URA, apart from offering financial support, engages independent consultant to provide third-party professional advice and estimate the market costs of the required repair and maintenance works for owners' reference.  We are now taking stock with the URA of the experience from various assistance schemes, and will devise measures to strengthen the technical support offered to building owners in general, and reduce the risks of bid-rigging in their building maintenance works.  We will make further announcements in due course.

Furthermore, the Competition Ordinance will come into full operation on December 14, 2015.  To facilitate the understanding and compliance of the competition law, including provisions related to bid-rigging, within the construction industry, the Construction Industry Council has drawn up the "Reference Materials - Competition Law for the Construction Industry" for reference by the industry.

(3) For the third part of the question, the proposal to establish an independent body to regulate building maintenance matters involves considerations on multiple fronts.  First, as owners are responsible for selecting appropriate consultants for their buildings, it is inappropriate for an independent body to appoint Authorised Persons as advance works consultants on their behalf.

As I mentioned earlier, bid-rigging often involves different aspects of improper or illegal conducts.  At present, the Police, the ICAC and the Competition Commission are already handling the relevant investigation and enforcement work.  Instead of setting up another independent body, we consider it more direct and effective for these LEAs to tackle the matters in accordance with their statutory powers under relevant legislation.  This also avoids problems such as overlap of functions.  Moreover, as building maintenance often involves building management issues, setting up an independent body would not make it easier to intervene in owners' disputes on maintenance issues or other building management matters.

Another consideration is the administrative expenses inevitably entailed from setting up such an independent body, which may have to be covered by levies from the industry.  This would very likely be passed on to building owners resulting in higher costs of maintenance works.  We ought to consider such implication carefully.

Due to the foregoing considerations, the Government has no plan to set up an independent regulatory body on building maintenance matters.  We wish to stress that the responsibility to maintain and repair private buildings, including undertaking the required tendering work for appointment of consultants and contractors, rests with the owners.  Proper building maintenance and prevention of bid-rigging require all owners' active participation and proactive monitoring of the work of OCs, management companies, and maintenance works consultants, etc.

Ends/Wednesday, November 25, 2015
Issued at HKT 13:17


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