Organisation Chart of GPA
(at the time of investigation)
ICAC investigations revealed that between 1994 and 1998, a medium-sized security company had, through the strong recommendation of a Chief Property Manager, obtained from GPA:
| 1. | Pre-qualification |
| 2. | Two management contracts valued at over $100 million in total |
| 3. | Over 90% of the short-term contracts valued at some $13 million in total |
Did the company deserve to be awarded these contracts or was there a secret behind?
In August 1994, the Central Tender Board (CTB) granted approval to GPA to invite companies interested in tendering for management contracts of government properties to take part in a qualification assessment exercise. Pre-qualified companies would then have a chance to bid for eight 3-year high-value management contracts which GPA would let out later.
A Principal Valuation Surveyor of the Rating and Valuation Department, who was seconded to GPA to assume the post of Chief Property Manager (D1 rank) on 1 August was assigned to take charge of the pre-qualification process. As the head of the Building Management Division, he was responsible for overseeing the building management work of all government properties and was required to report directly to the Government Property Administrator and Deputy Government Property Administrator.
How to obtain pre-qualification
To qualify, GPA requires an applicant company to possess at least five years’ experience in property management, and will also consider the following factors in assessing eligibility:
Security company or property management company?
In October 1994, GPA received an application from a company called HighSecu, which claimed providing security and management services to some 6,000 residential units in Discovery Bay, Lantau Island.
However, the documents submitted by HighSecu showed that it was only a security company. “Security” and “mainly providing security service” were stated on its business registration certificate and auditor’s report respectively as the nature of their business and the mainstream of their business.
The Chief Property Manager suggested carrying out an on-site inspection at Discovery Bay with two Senior Property Managers. Their inspection confirmed that HighSecu employed only 80 guards for security duties in Discovery Bay. HighSecu was in fact just a medium-sized security company and not a property management company at all!
Give them a chance!
Although all information showed that HighSecu was not eligible for pre-qualification, the Chief Property Manager still requested his subordinates to give this small company a chance, saying that obtaining pre-qualification did not mean it would obtain contracts from GPA.
At the assessment panel meeting, HighSecu failed to be approved for pre-qualification for non-residential premises, but due to the Chief Property Manager’s strong recommendation, including his personal testimony that HighSecu had got highly favourable comments from their clients, HighSecu was finally granted pre-qualification for residential premises.
Along with seven other companies that obtained pre-qualification, HighSecu could now bid for major residential building management contracts from the government.
In March 1997, GPA sought to appoint a company to manage 10 former military sites through open tendering; in other words, any companies interested in the project could submit a tender. The relevant tendering exercise was supervised by the Chief Property Manager, who also drafted the Tender Notice.
Content of Tender Notice
Eligible tenderers should possess at least five years' experience in property management and be managing not less than 1,000 residential units, including at least one housing estate comprising 300 units or more, at the time of placing the tender. They are also required to submit documentary proof of their qualification and experience.
Contract secured by trickery
In May 1997, the Chief Property Manager proposed adjusting the content of the tender notice on the grounds that these former military sites would be sold or re-developed for other purposes in the near future. He contended a top-notch property management company was not required, and the contract should be awarded to the lowest conforming bidder.
In July 1997, the Chief Property Manager recommended to CTB that the contract valued at $56 million be awarded to HighSecu - the lowest conforming bidder that was excluded from the pre-qualification list by another Chief Property Manager in July 1995.
In July 1995, the said Chief Property Manager was posted to another unit in GPA. The successor met the Managing Director of HighSecu and opined that the company did not have sufficient experience in property management, thus proposed to CTB to exclude it from the pre-qualification list.
In his memorandum to CTB, the Chief Property Manager provided the following justifications in support of his recommendation:
As a result, the CTB awarded the 3-year contract to HighSecu.
Another Successful Deception
In April 1998, GPA outsourced the management of the old Kai Tak Airport site through open tendering, and this brought a new business opportunity for HighSecu.
Content of Tender Notice
Tenderers should possess at least five years’ experience in managing a housing estate and be managing not less than 2,000 residential units at that time, including at least one housing estate comprising not less than 1,000 residential units, and also non-residential sites of not less than 100,000 square metres in area.
In July the same year, the Chief Property Manager recommended in his memorandum to CTB that the $87 million contract be awarded to HighSecu, the second lowest bidder. Justifications which he provided to convince the Panel members were:
The CTB once again awarded the contract to HighSecu on the recommendation of the Chief Property Manager.
Flow chart showing the outsourcing processes in GPA
GPA applies to CTB to outsource a property management contract.
CTB grants approval.
GPA proceeds with tender invitation and tender assessment.
GPA makes recommendation to CTB on the selection of contractor.
CTB grants approval
The Chief Property Manager had intentionally, on two separate occasions, used inaccurate information to mislead CTB into beleving that HighSecu was the right company to get the two contracts valued at over $100 million in total. What motivated the Chief Property Manager?
Between 1996 and 1998, the Chief Property Manager was also responsible for selecting contractors to undertake the management of government quarters, schools, offices and radar stations in the form of short-term contracts (of less than HK$500,000 each).
During that period of time, the Chief Property Manager repeatedly asked his subordinates to invite HighSecu or the companies owned by HighSecu’s shareholders to submit quotations. Sometimes, when it was found that no quotation had been received from HighSecu upon the deadline, he would ask his subordinates to call HighSecu requesting them to submit a quotation as soon as possible. As a result, HighSecu and the other companies associated with HighSecu were able to secure over 90% of the short-term contracts (worth a total of $13 million) from GPA.
After gaining a comprehensive understanding of the procedures leading to the outsourcing of GPA’s management contracts, ICAC investigators needed answers to the following questions:
Why was it that most of the department’s short-term contracts were awarded to the same few companies?
Why were unqualified companies awarded huge sum contracts from the government?
Why were unqualified companies eligible for pre-qualification?
Why did the Chief Property Manager strongly recommend the unqualified company again and again?
However, the ICAC could find no solid evidence to prove that the Chief Property Manager had accepted advantages. Could it be that he was truly innocent?
Subsequent ICAC investigations discovered from piles of Registration of Persons Division that the Managing Director cum major shareholder of HighSecu was the brother of the Chief Property Manager’s sister-in-law. They were in fact relatives as brothers-in-law!
Is it against the law for a civil servant to award a government contract to companies owned by relatives? There is a possibility.
Should it be alright if no acceptance of advantages is involved? Not always true.
Does it mean that companies owned by relatives cannot tender for government contracts? No.
What matters is: conflicts of interest may arise when a government servant has official dealings with relatives.
The Chief Property Manager never revealed his relationship with the contractor during the pre-qualification process or when awarding him the two management contracts worth a total of about $100 million, nor did he ever declare to his supervisor his relationship with the major shareholder of HighSecu. This appeared to be a contravention of the requirement in the CSB Circular.
In addition, ICAC investigators discovered a file containing a work progress report on HighSecu prepared by another expatriate Chief Property Manager who acted the part of Chief Property Manager when the incumbent was on leave. On the Chief Property Manager’s return, the expatriate colleague specially drew his attention to the unsatisfactory performance of HighSecu in the progress report. This written record proved that the Chief Property Manager was aware of the sub-standard performance of HighSecu!
If the Chief Property Manager was a relative of HighSecu’s boss, the reason for his intentionally not declaring their relationship and strongly recommending HighSecu in the selection process began to make sense.
A conflict of interest situation arises when the private interest of a public servant competes with or is in conflict with the interest of the government or his public duties. There are circumstances in which a tie of kinship or friendship, or some other association or loyalty which does not give rise to a financial interest, can influence the judgement of a civil servant in discharging his official duties, or may be reasonably perceived as having such an influence.
Hence, Civil Service Branch Circular No. 19/1992 on Conflict of Interest (effective on 4 December 1992) stipulates that a government officer’s duty to declare a conflict of interest should go beyond the disclosure of interests that are definable in pecuniary terms.
Government officers or decision-makers who are involved in the tendering process should declare such conflict of interest situations to their supervisors and abstain from taking part in the relevant assessment work thereafter. Those who fail to avoid or declare such conflicts of interest are liable to disciplinary actions.
