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LCQ10: Strengthening monitoring of performance of contractors for public works

Following is a question by the Dr Hon Lau Siu-lai and a written reply by the Secretary for Development, Mr Eric Ma, in the Legislative Council today (June 14):

Question:

Last month, the Independent Commission Against Corruption (ICAC) arrested 21 staff members of a public works laboratory, who were suspected of corruption and having submitted to the Civil Engineering and Development Department (CEDD) falsified concrete compression test reports associated with the works under the Hong Kong-Zhuhai-Macao Bridge Hong Kong (HZMB) and related projects. The laboratory is operated by an outsourced service provider (the contractor concerned) engaged by the CEDD. Moreover, the CEDD suspected in July last year that the testing time recorded in some of the test reports had been tampered with by the staff of that laboratory (report-tampering incident). The contractor concerned admitted to the CEDD in September last year that the reports had been tampered with by its staff in order to make the testing time shown in the records fall within the required timeframe. However, not until the aforesaid arrest was reported did the CEDD make public the incident. In this connection, will the Government inform this Council:

(1) of the reasons why the CEDD did not make public the report-tampering incident during the period from September last year, when the incident was confirmed, to last month;

(2) of the existing mechanisms whereby the various government departments notify each other and make public those accidents, blunders and irregularities which occurred in public works projects (including alleged falsifications by contractors);

(3) whether the contractor concerned has, since 2012, been awarded any contract for conducting concrete tests for other public works projects; if so, set out by year in a table the following information of each contract: (i) contract number, (ii) project title, (iii) tender acceptance date, (iv) works commencement date, (v) anticipated works completion date, (vi) costs involved, and (vii) government department(s) awarding the contract;

(4) whether the authorities will immediately conduct (i) visual inspections, (ii) non-destructive concrete strength tests (commonly known as "Schmidt Hammer Tests"), and (iii) core tests on the structures built under the projects mentioned in (3), so as to allay public concern; if so, of the details; if not, the reasons for that;

(5) how the authorities will handle the uncompleted contracts of the contractor concerned; and

(6) given that after the report-tampering incident had been confirmed, the CEDD did not impose any punishment on the contractor concerned other than the issuance of an adverse Quarterly Consultants' Performance Appraisal Report to it, and the CEDD has not suspended the contractor concerned from tendering for public works and, instead, awarded it a new contract for public works in March this year, whether the authorities will (i) tighten the mechanisms for selecting contractors for public works and evaluating their performance and (ii) increase the penalties for malpractice/default by contractors, so as to enhance the deterrent effect; if so, of the details; if not, the reasons for that?

Reply:

President,

The Government always accords top priority to the safety and quality of infrastructure projects. We will not tolerate any act that puts the safety and quality of works at risk. Indeed, the Government has all along attached great importance to quality assurance in public works projects, including the testing work in laboratories, and has required strict compliance with internationally recognised quality management procedures to ensure the works quality.

The aforementioned quality management procedures were proved effective in the incident as anomalies in the testing records had been identified by the Civil Engineering and Development Department (CEDD). Upon discovery of suspected tampering of testing time in the testing records of the concerned laboratory in mid-2016, the CEDD has taken follow-up actions proactively, including comprehensive review and upgrading of the system of the laboratories under its purview to prevent recurrence of similar incidents. Also, the CEDD has reported the case to the Independent Commission Against Corruption (ICAC) and rendered full assistance to and co-operation with the ICAC during its investigation.

At the Special Meeting of the Panel on Transport held on June 5, 2017, we explained the quality assurance system for use of concrete in the public works projects and reported the latest developments of the follow-up actions by the CEDD into the alleged falsification of concrete test reports in respect of the works under the Hong Kong-Zhuhai-Macao Bridge Hong Kong Section and related projects.

My reply to the Dr Hon Lau Siu-lai's questions is as follows:

(1) and (6) Upon discovery of the suspected tampering of testing time in some concrete testing records of the concerned laboratory in mid-2016, the CEDD immediately commenced an investigation to review and assess the relevant testing records of the concerned laboratory. Its findings revealed that the delays in conducting the tests were relatively short and the rate of gain in compressive strength of concrete would have slowed down and become stable beyond the age of 28 days. As such, the CEDD considered that the effect of the testing time adjustments was insignificant.

In the light of the information obtained at that time, the CEDD immediately gave an adverse report to the consultant concerned in its quarterly performance appraisal and requested the consultant to undertake improvement measures. Such measures included replacing the consultant's staff in charge of the laboratory concerned, deploying additional supervisory staff and upgrading the testing equipment to prevent unauthorised resetting of testing times as well as arranging refresher training on concrete testing for the consultant's staff and reminding them on the essence of integrity management. Under the prevailing mechanism, works departments would consider the information in hand and the seriousness of incidents in determining any appropriate regulating action(s) to take. Having reviewed the overall situation, including the consultant's improvement measures undertaken, the CEDD considered that it was not necessary to take further regulating action (including suspension of the consultant from tendering) since no evidence showing other suspected falsification malpractices of the consultant was revealed at that time. For the sake of prudence, the CEDD subsequently reported the case to the ICAC for further investigation. During the process, the CEDD had to comply with the internal guidelines on confidentiality requirement and refrain from making public the incident to avoid compromising the investigation.

Having been notified by the ICAC about the discovery of suspected falsification malpractice of the consultant involving replacement of test samples during its investigation in May this year, and with the information provided by the ICAC, the CEDD immediately conducted a follow-up investigation to examine the raw data of the concrete testing records of the laboratory concerned for the period from January 2015 to June 2016. About 0.1 per cent of the test records were found to involve suspected falsification by replacement of test samples. In the light of its latest findings, the CEDD immediately issued to the consultant a performance report with an "unacceptable" rating. With the endorsements of the Architectural and Associated Consultants Selection Board and the Engineering and Associated Consultants Selection Board, the CEDD suspended the consultant from tendering for all categories of architectural and engineering consultancy agreements within the jurisdiction of the two Boards for a period of twelve months with effect from June 2, 2017. Depending on the future development of the case, the Government may consider extending the suspension period or taking further regulating action(s) against the consultant when appropriate. In other words, the current regulating mechanism has already empowered the Government to take regulating actions with deterrent effect where necessary. Furthermore, the Development Bureau (DEVB) is conducting a review, with a view to further enhancing the management of architectural and engineering consultants.

(2) In case of major emergency incidents or industrial accidents occurring in public works projects, works departments would notify the government departments concerned and the Works Branch of the DEVB in accordance with the relevant works technical circular (Note 1) and the Construction Site Safety Manual (Note 2).  Works departments would upload or access the information about the regulating actions taken against contractors or consultants for public works projects in relation to their contract performance, including suspension from tendering, through the computer systems for the management of contractors and consultants.

In case of any instance of crime or alleged crime, works departments concerned would report it to the appropriate enforcement authority directly in accordance with their internal guidelines. Generally, works departments would not make public these instances after making referral to the enforcement authorities for investigation to avoid hindering or affecting their investigation.

In general, the DEVB and works departments would take into account the seriousness of individual incidents and whether they involve public interest or cause serious impact on the public and possible judicial procedures in considering whether to make them public timely.

(3) to (5)

Since 2012, the consultant concerned has been awarded another two consultancy agreements from the CEDD for management and operation of laboratories.  Details are as follows:
 

  Award date Service commencement date Expected service completion date Lump sum fee at award
($ million)
Consultancy Agreement 1
 
June 2014 July 2014 August 2018 57
Consultancy Agreement 2
 
March 2015 April 2015 July 2019 44


In addition to the laboratory concerned (Note 3), the CEDD has examined the concrete compression test results of other regional laboratories (including the two laboratories in operation as mentioned in the table above) and no anomaly was found. Therefore, there is no need to conduct inspection and testing again for the public works projects served by these two laboratories.

The CEDD has also immediately implemented further improvement measures in all the laboratories under its purview (including the two laboratories in operation as mentioned in the table above). The measures included deployment of additional government staff to monitor the outsourced laboratories, arranging different laboratories to carry out concrete tests for public works projects on a rotational basis, increasing the number of parallel testing which testifies the consistency of the testing performance of different laboratories, strengthening routine auditing check on test records, and arranging installation of additional closed circuit televisions for monitoring concrete tests in detail. The CEDD is currently reviewing its procedures for testing concrete cubes and will introduce other improvement measures as and when necessary.

In addition to the above improvement measures, the DEVB issued a circular memorandum in May this year requesting the works departments to review and step up the monitoring of the performance of the architectural and engineering consultants engaged by them, particularly from the integrity management and quality assurance perspectives. The works departments will continue to closely monitor the services delivered by the consultant concerned and will conduct the necessary technical audits.

Note 1: For the Technical Circular (Works) No. 20/2005 (English version only), please refer to the link below:
www.devb.gov.hk/filemanager/technicalcirculars/en/upload/21/1/C-2005-20-0-1.pdf
 
Note 2: For the Construction Site Safety Manual (English version only), please refer to the link below:
www.devb.gov.hk/en/publications_and_press_releases/publications/construction_site_safety_manual/index.html

Note 3: The laboratory concerned ceased operation in March 2017.
 
Ends/Wednesday, June 14, 2017
Issued at HKT 17:35

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