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Hong Kong scandal sparks major shake up

Suspected corruption on a series of piling projects has prompted a major rethink of construction procurement in Hong Kong. Keith Wallis reports.

A MAJOR REVAMP in Hong Kong's construction industry is likely following the latest in a series of piling scandals that have rocked the industry and shaken confidence in public housing.

The precise scope of the changes has still to be confirmed, but at the very least contractors will face stiffer fines if they are convicted of serious offences involving construction quality.

The move could also see an end, or significant reduction, to the amount of work carried out by subcontractors. More than 15 people have been arrested in the past year by anti-graft officers investigating claims of corruption and fraud at several piling sites.

The extent of the piling problems has led to fears of syndicated corruption in the construction industry because they have occurred on a raft of building sites involving several contractors.

The new proposals are being considered under four separate probes, that have either just finished or are under way.

The latest of these was launched by the Hong Kong government in April when it established a 16 member construction committee to look at ways of improving construction quality (NCE 20 April). The team includes Robin Whalley, head of Mott Connell - the local subsidiary of British consultant Mott MacDonald - together with representatives from Maunsell Consultants, academics and trade unions.

The committee is headed by Henry Tang Ying-yen who is also a member of the Executive Council, a star chamber of senior advisers who have final approval of decisions affecting Hong Kong and its residents.

The group, set up at the behest of Hong Kong chief executive Tung Chee-hwa, has nine months to report on a raft of issues including the quality, safety and monitoring of construction projects.

Anson Chan Fang On-sang, deputy chief executive, said the group's main terms of reference were to:

Examine the current state of the construction industry in respect of quality, quantity, environmental friendliness, manpower, safety and supervision Identify specific actions and good practices to improve the efficiency and cost-effectiveness of local construction in terms of quality, customer satisfaction, timeliness in delivery and value for money Advise on an order of priority for implementation Hong Kong's Association of Consulting Engineers believes the problem stems from a lack of on-site supervision - particularly on private developments - coupled with government cutbacks on supervisory staff on public works.

HKACE chairman Tony Shum is pushing for the introduction of the same levels of site supervision that exist on government projects.

He said: 'At the moment, the Buildings Department does not require full-time supervision on private developments, including public housing.'

Shum is on a working party set up by the Works Bureau, the government department responsible for all public works projects.

It is also studying the construction industry.

He said levels of supervision on private projects contrast strongly with government infrastructure schemes which have a comprehensive network of resident staff including engineers and chief engineers, inspectors of works and survey teams.

Shum added that large private developments do have on-site staff, but they are less well qualified than supervisors on public works projects.

'We're saying that the public works system should be extended to cover private projects, ' he said.

There is also concern that the standards of site supervision on public projects could fall. The HKACE and Hong Kong Institution of Engineers have also been fighting against the imposition of lower grade resident site staff on public works projects by a government anxious to cut costs.

HKACE secretary Martin Kwong, who also works for Scott Wilson, said under the new terms, salaries have been cut dramatically. At the same time, required on-site experience levels have also been reduced, in some cases from seven to four years for resident engineers.

Another member of the committee, Construction Industry Training Authority Industry executive director Albert Tong Yatchu, said an overhaul of the present subcontract system was long overdue.

He said: 'Subcontracting is normal worldwide.

However, we are not talking about contracting out two or three times, but six to seven times. It has got to stop.'

The Housing Authority, on whose sites many of the most serious piling problems were discovered, is already planning a shake-up of its contractual practices. A report compiled after an internal investigation earlier this year is believed to have recommended an end to the current 'first past the post system'.

Under this, the lowest tenderer wins the contract regardless of whether its price reflects the actual cost of the project.

Housing Authority assistant director Poon Kai-tik said the aim of its probe was to enhance quality by establishing clear standards.

Past performance will be taken into account when assessing tenders. This should 'allow more qualified bidders to compete', he said.

In a further attempt to end cutprice bidding, Poon said the Housing Authority had talked to the Mass Transit Railway Corporation and other organisations about ways to revamp the entire procurement process.

One idea is to introduce partnering where the Housing Authority would agree common objectives with contractors and subcontractors before work began. The MTR is already using this system on the construction of its Tsueng Kwan O line and contractors, including Balfour Beatty, are using it on West Rail contracts.

Poon said the investigation covered all aspects of construction by contractors and subcontractors, not just piling, although he confirmed the probe was launched in October after irregularities were found in piling work at several Housing Authority sites.

He said problems were discovered at eight sites, involving five separate contractors, after checks at all its 106 sites.

The most serious was at Sha Tin in the New Territories where a Housing Authority probe revealed that two partially-built apartment towers would have to be demolished because only four of 36 bored piles were built to the correct depth.

The main contractor, Zen Pacific Civil Contractors, which alerted anti-graft investigators to the problems in January, said it had been a victim of fraud.

It proposed a plan to repair and secure the piles but this was rejected by the Housing Authority which has instead decided to demolish and rebuild the two towers at an estimated cost of £20M.

Meanwhile, Hong Kong director of buildings Leung Chin-man is making recommendations to the government 'as soon as possible' to push through an increase in the level of fines against contractors convicted of offences.

This followed the first meeting of a Buildings Departmentsponsored working group which is studying and recommending ways to improve quality.

A magistrate also recently condemned as too low the maximum £20,000 fine he imposed on B+B Construction for failing to comply with plans approved by the Building Authority. This followed a piling scandal on part of the Airport Express property development at Hong Kong Central station.

The magistrate, Ian Candy, said fines up to £415,000 would not be excessive. The level of fines has not been changed for 20 years.

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