LCQ13: Combating bid-rigging
8.2.2023

Following is a question by the Hon Lai Tung-kwok and a written reply by the Secretary for Development, Ms Bernadette Linn, in the Legislative Council today (February 8): Question: Early last month, the Independent Commission Against Corruption (ICAC) arrested dozens of members of a suspected bid-rigging syndicate. It is learnt that the syndicate had used various tactics to manipulate the bidding processes for building maintenance works contracts that involved a number of works projects for housing courts, industrial buildings and commercial buildings located in Hong Kong, Kowloon and the New Territories. The case has aroused public concern. In this connection, will the Government inform this Council: (1) as it has been reported that some of the aforesaid works projects involved had received subsidies from the Government, of the government subsidy schemes concerned, and whether the authorities have plans to enhance the vetting and approval procedures for such subsidy schemes through stepping up the due diligence check, etc; (2) of (i) the respective numbers of reports/complaints about suspected bid-rigging in building maintenance works received, and (ii) among such reports/complaints, the respective numbers of cases in respect of which investigations were conducted and prosecutions were instituted (and the amount involved in the works of each of such cases) by the ICAC, the Hong Kong Police Force and the Competition Commission, in the past five years (set out in a table); (3) given the public concern about corruption and bid-rigging relating to building maintenance works, whether the ICAC cooperated with government departments, such as exchanging information, in the past five years, so as to prevent and combat such acts; whether it knows if the ICAC, during the same period, conducted any direct investigation into relevant cases; and (4) whether, apart from carrying out publicity and public education, the Government will explore taking more active measures to combat bid-rigging; if so, of the details; if not, the reasons for that? Reply: President, Having consulted the Commerce and Economic Development Bureau, the Hong Kong Police Force (the Police), the Independent Commission Against Corruption (ICAC) and the Urban Renewal Authority (URA), my reply is as follows: (1) As mentioned in the question, the ICAC carried out an enforcement operation against suspected manipulation of bidding processes for building maintenance contracts in January this year, involving 10 projects. Among them, two projects applied to the URA under the Government-funded "Operation Building Bright 2.0" (Note 1) and the Building Drainage System Repair Subsidy Scheme (Note 2). The URA has not approved nor disbursed any subsidy to these two projects. For the building maintenance subsidy scheme funded by the Government and administered by the URA, appropriate safeguards and support measures have been put in place by the URA to reduce the risk of manipulation and interference during the tender process, including: (a) requiring buildings participating in the scheme to use the URA's "Smart Tender" Building Rehabilitation Facilitation Services to invite tenders through the electronic tendering platform for the appointment of project consultants and contractors; (b) only qualified project consultants and contractors (Note 3) may register and submit tenders on the electronic tendering platform of Smart Tender. Those being prosecuted or removed from the relevant registers will have their accounts suspended and be barred from submitting tenders; (c) Smart Tender creates a fair and impartial setting which attracts more project consultants and contractors to submit tenders. In addition, tenderers remains anonymous until tender opening, effectively reducing the risk of manipulation or interference of the tender process; and (d) under Smart Tender, the URA arranges independent professionals to provide technical advice and independent cost estimates for owners' reference. With regard to the ICAC's enforcement operation referred to in the question, as investigation is still underway, the URA will find out from the ICAC at an appropriate juncture whether the suspected contraventions in question are related to the approval process of the above-mentioned subsidy schemes, and explore the need and means for enhancement. (2) In relation to bid-rigging (Note 4) in building maintenance projects, the number of corruption complaints received by the ICAC and the number of prosecutions and convictions in the past five years (2018 to 2022) are set out in the table below (the ICAC does not compile a breakdown of the contract sum involved): Year Corruption Complaints Pursuable Complaints (Note 5) No. of Prosecutions (Note 6) No. of Convictions (Note 7) 2018 8 5 1 1 2019 5 3 0 0 2020 3 3 0 0 2021 10 3 0 0 2022 5 4 0 0 The Police and Competition Commission do not compile a breakdown involving bid-rigging in building maintenance works. (3) The ICAC has been making concerted efforts with relevant Government departments and stakeholders in the industry to combat corruption, including maintaining regular liaison with the Home Affairs Department, the Buildings Department, the Hong Kong Fire Services Department, the Police, the Competition Commission, the Property Management Services Authority, the URA and owners' corporations for the common goal of preventing and combating corruption in the building management sector. The ICAC adopts a proactive investigation approach as appropriate in corruption investigation, seeking to frustrate the secretive crime of corruption at an early stage by gathering intelligence through different channels, conducting various studies and analyses, as well as taking early intervention action. The number of investigations initiated by the ICAC in connection with the building management sector in the past five years (2018 to 2022) are set out in the table below: Year Investigations initiated by the ICAC in connection with the building management sector 2018 5 2019 8 2020 7 2021 5 2022 6 (4) Relevant law enforcement agencies and organisations have been taking multi-pronged measures to combat bid rigging, including strengthening law enforcement, publicity and education, and providing support to property owners. The ICAC will continue to detect as early as possible potential corruption through strategies comprising effective law enforcement, early intervention and proactive investigation. The ICAC also provides advice on corruption prevention measures in various maintenance subsidy schemes and the Codes of Conduct and related guides compiled by the Property Management Services Authority, and continues to optimise them. In addition, the Police has rolled out the RenoSafe Scheme and maintains close liaison with relevant Government departments and stakeholders to exchange information on trends and intelligence of building maintenance-related crimes. The Police also carries out timely intelligence-led joint operations with relevant law enforcement agencies to combat illegal activities affecting building management, tendering and works projects. In addition, bid-rigging is serious anti-competitive conduct under the Competition Ordinance (Cap.619) (CO), to which the Competition Commission accords priority in handling. The Commission may conduct investigation if it has reasonable cause to suspect that bid-rigging or other anti-competitive conduct has taken place. Where a contravention of the CO is proven, the Competition Tribunal may levy sanctions against a contravening party, including pecuniary penalty (Note 8), director disqualification, damages or other orders. In terms of support for owners, the URA established a new "Open E-Tendering Platform" in April 2021, allowing owners of residential, commercial and industrial buildings which have not participated in building maintenance subsidy schemes to make use of the E-Tendering Platform to appoint project consultants and contractors for carrying out building maintenance works in a fair and impartial manner. This is conducive to increasing the number of tenders, competitiveness of tender prices, while reducing the risk of bid rigging. Note 1: "Operation Building Bright 2.0" assists eligible owner occupiers to carry out prescribed inspection and repair under the Mandatory Building Inspection Scheme. Note 2: The Building Drainage System Repair Subsidy Scheme assists eligible owners to conduct investigation, repair, rectification and/or improvement works for drains of the building. Note 3: Including Authorized Persons, Registered General Building Contractors, Registered Inspectors, etc on the relevant registers maintained by the Building Authority. Note 4: "Bid-rigging" is defined in Section 2(2) of the Competition Ordinance, Cap. 619. Corruption complaints involving bid-rigging refer to complaints in which the complainants either specifically alleged bid-rigging or provided information falling within the meaning of bid-rigging. Note 5: Some corruption complaints were classified as non-pursuable as the information provided was too nebulous or tenuous and the complainants in the cases remained anonymous which rendered clarification not possible. Note 6: The figures refer to the number of prosecutions in the year. The number of prosecution does not necessarily originate from the complaints received in the same year as it takes time to proceed from investigation to prosecution. Note 7: The figures refer to the number of convictions in the year. The number of conviction does not necessarily originate from the complaints received or prosecution instituted in the same year as it takes time to proceed from investigation to prosecution and completion of court proceedings. Note 8: The pecuniary penalty could be up to 10 per cent of the Hong Kong turnover of the undertaking for each year in which the contravention occurred, for up to three years.