Since taking the helm of the owners’ corporation at her Hong Kong housing estate 12 years ago, Chan Wai-ling has received numerous reports of falling concrete, water leakage and other problems that should have been fixed during multimillion-dollar renovations a decade ago.
“Whenever there is a typhoon, water leaks into our homes and damages the walls ... We cannot sleep as we have to look out for the leakage,” said Chan, 63, referring to Grandway Garden, a subsidised housing estate in Tai Wai where flat owners paid HK$91 million (US$11.7 million) for renovations.
The 864-flat, three-block estate recently hired a contractor to carry out additional repairs costing each household at least HK$10,000. That was on top of the HK$70,000 to HK$110,000 that owners each paid for major works conducted between 2013 and 2016.
“It’s as if the renovation never took place,” said Chan, chairwoman of the owners’ corporation management committee.
The initial project, initiated by the previous management committee, was approved in 2013 even though the contract amount was not made available and there was opposition from some owners, Chan said. Some owners suspected collusion and reported the matter to the Independent Commission Against Corruption (ICAC), which said it would only investigate when there was evidence.
They also sought a meeting for more project details, but the then chairman failed to address residents’ corruption allegations, and eventually resigned after at least 5 per cent of the owners called for a re-election, Chan said.
The meeting – which under the law should have been held within 45 days – failed to proceed for months in 2013. Owners sought help from the Home Affairs Department, but were told to resolve the dispute in court.
Corruption in building maintenance projects has plagued the city for decades, but the deep-rooted problem returned to the spotlight following a devastating blaze at a Tai Po housing estate last November that claimed 168 lives.
Central to the issue is bid-rigging, where competitors collude to allow cartel members to secure maintenance contracts at inflated prices.
The prosecution rate for bid-rigging in building maintenance projects is nearly zero, official figures show, although more than 30 corruption complaints were lodged for the 2018-22 period.
Experts said recent government proposals failed to address legal challenges and close loopholes. They urged the government to criminalise bid-rigging as soon as possible to prevent the problem from worsening, and to disclose bidding prices for maintenance projects so the public could make informed decisions.
How syndicates operate
Chiu Yan-loy, founder of the Property Owners’ Anti-Bid Rigging Alliance, said malpractice became widespread after the implementation of a building inspection scheme in 2012.
The Mandatory Building Inspection Scheme was triggered by safety concerns following the collapse of a 55-year-old tenement building in To Kwa Wan.
Under the scheme, buildings that reach 30 years of age are subject to inspection orders based on risk assessments. As of this month, around 9,000 buildings had received mandatory inspection orders.
Chiu said the most common corrupt practice involved a consultancy securing a building inspection contract at a low price and tendering the project to a related contractor at a significantly higher price.
He said the contractor would claim it was using complicated methods and expensive materials to justify inflated maintenance costs, but then switched to basic means and inferior materials to pocket the difference, while the consultancy – responsible for supervision – concealed such malpractice.
“The syndicates have evolved, packaging themselves as professionals with years of experience and presenting themselves in exquisite promotional materials. The related contractor will also secure high scores under the consultant’s marking scheme,” Chiu added.
Syndicates also involve individual owners and the owners’ corporation, so they vote for their favoured consultant and contractor during general meetings.
Chiu said middlemen – sometimes community representatives and triad members – would seek proxies from owners to ensure a winning bid.
The authorisation document requires the owner’s name, address and signature, the authorised person’s name, and the seal of the owners’ corporation.
He said allegedly fake documents were often reported, as they were rarely verified and usually collected in a box. In most cases, a corporation only verifies the owners’ identities.
Property management companies can also be part of a syndicate. Although they do not have voting rights, their professional advice can influence owners.
Currently, bid-rigging is classified as “serious anticompetitive conduct” under the Competition Ordinance – enforced by the Competition Commission – and is punishable by fines only.
In cases where corruption is suspected alongside anticompetitive conduct, the ICAC may collaborate with the commission to conduct large-scale investigations.
A 2015 court case involving Garden Vista, a private housing estate in Sha Tin, shed light on corrupt practices in the renovation industry and resulted in Hong Kong’s first bid-rigging conviction.
The court heard that a consultant, a contractor and a member of the owners’ corporation conspired to manipulate the tender process to secure renovation contracts for three estates, including Garden Vista.
Evidence showed that they devised their scheme during a dinner in Shenzhen and used “shadow companies” to submit so-called dummy bids to create the illusion of competition.
The case came to light after a middleman with a background in the industry turned himself in and was later sentenced to 35 months’ jail for conspiracy to offer bribes totalling about HK$45 million.
‘Closed circle’
A local think tank, PoD Research Institute, reviewed several major bid-rigging cases and found that syndicates often used consultants as intermediaries to manipulate both the criteria and the final results of a tender.
A contractor who requested anonymity described the building maintenance sector as a “closed circle”.
“Consultancy firms usually demand referral fees from contractors, and the tenders are typically dominated by a specific group,” the insider said.
He said that certain consultancies consistently recommended a specific group of contractors to owners’ corporations. “I am not sure these recommendations stem from undisclosed partnerships or collusive arrangements that undermine fair competition,” he said.
The lack of a competitive environment had pushed many contractors to leave the maintenance sector entirely.
Widespread bid-rigging allegations, covering both private and subsidised residential developments, underscore the complexity of the problem.
Carrie Chan*, a former owners’ representative, raised concerns over possible bid-rigging at her private housing estate in Tseung Kwan O.
Chan, a finance worker in her thirties, equipped herself with surveying knowledge and grew suspicious when a former owner representative introduced a cleaning contractor with close personal ties.
Her concern deepened when she discovered that the same representative was allegedly also serving concurrently as a member of the owners’ corporation at the fire-hit Wang Fuk Court in Tai Po.
“We were very worried that bid-rigging could occur at our building, given that contracts for the clubhouse and cleaning services were slated for change without valid reasons,” Chan said.
Chan noted that four major service contracts at her estate involved expenditure of more than HK$200 million over a two- to three-year period.
Her suspicions grew when the estate switched lift maintenance contractors from the original manufacturer in 2022.
Driven by these grievances, she sought to join the owners’ committee but became the target of a vicious online smear campaign.
“The only way to resolve such issues is to encourage young people to participate and voice their opinions,” she said.
The greater the participation of the younger generation within the owners’ committee, the less reliance there would be on proxy voting, she said.
Sole conviction
According to the ICAC, only one conviction for bid-rigging in building maintenance was recorded between 2018 and 2022. It came from a pool of 31 corruption complaints, 18 of which were deemed pursuable. Meanwhile, the agency launched 31 investigations into the building management sector in the 2018-22 period.
In January 2023, the ICAC arrested 49 people in its largest operation against building maintenance corruption, involving contracts worth around HK$520 million. A trial involving some of the 23 people charged in the case will be held in late 2026.
A former ICAC officer told the Post that prosecuting bid-rigging was exceptionally difficult. Prosecutors had to definitively prove the exchange of benefits, a process that required extensive investigations. If a stakeholder suddenly received a large sum of money without a direct link to the briber, it remained difficult to prosecute, he said.
Thomas Cheng Kin-hon, a competition law expert at the University of Hong Kong, said there was an urgent need to criminalise bid-rigging and pair it with enforcement as a deterrent.
“The profits they stand to make are just huge,” he said.
Cheng said that the current requirement of proving guilt “beyond a reasonable doubt” was an “impossibly high standard” to meet, suggesting a shift to the less onerous civil standard.
“Beyond a reasonable doubt” is the highest standard required in any court of law. A prosecutor must present evidence so convincing that there is no reasonable question in the jurors’ minds as to the guilt of the defendant. The civil standard requires a judge to assess all the evidence and determine which account appears more probable.
Other Asian jurisdictions, including South Korea, Japan and the Philippines, had already criminalised bid-rigging, Cheng noted.
Quick fixes
To combat bid-rigging, owners receiving government subsidies must use the Urban Renewal Authority’s “Smart Tender” service.
Chiu, of the anti-bid-rigging alliance, said the service could prevent the old tactic where triad members blocked some contractors from filing their bids in person, but it could not stop syndicates from cutting corners in repairs. He urged the authority to step up checks on consultants and contractors listed in its registration scheme.
“The authority has a responsibility to ensure public money is put to good use,” he said.
Chiu also accused the Home Affairs Department of being too passive and suggested that it consider issuing penalty tickets to owners’ representatives for obvious breaches of the ordinance, such as refusing to disclose financial accounts.
Former Competition Commission CEO Brent Snyder, a partner at law firm Wilson Sonsini, said a public database of information such as typical bidding prices would be instrumental in identifying suspicious patterns.
“If the commission has not yet reached the threshold necessary to exercise its compulsory powers, access to bid data may allow the Competition Commission to observe bidding behaviour that could inform its pre-investigation intelligence gathering,” said Snyder, an antitrust and competition lawyer.
He said that, for instance, it could begin inviting those with knowledge about suspect bidding to speak voluntarily to gather sufficient evidence to eventually exercise its compulsory investigative power.
He described the rise of artificial intelligence (AI), such as pricing algorithms, as both a “blessing and a curse” for competition enforcement. He noted AI could help authorities detect complex cartels but also allow syndicates to coordinate prices more discreetly.
Felix Ng, head of the antitrust and competition law practice at law firm Haldanes, said that while bid-rigging also occurred in the IT sector, the construction industry remained a more traditional field where these practices were especially entrenched.
Dominic Wai Siu-chung, a lawyer who specialises in commercial litigation and compliance, said he was in favour of an independent statutory body to monitor maintenance.
“Laypeople like you and me often lack technical knowledge of construction,” he said, suggesting a statutory fiduciary duty on registered professionals to monitor project integrity as authorised persons.
Ultimate responsibility
The Commerce and Economic Development Bureau told the Post that the government was reviewing the competition regime to strengthen effectiveness against bid-rigging.
But residents remain the primary line of defence.
Chan Wai-ling of Grandway Garden urged owners to be more active, having led a team of 22 to directly handle estate affairs and cut costs of hiring a property management company.
“I won’t be the chairwoman forever. I won’t watch over the estate forever,” Chan said.
“It is your property; it is your responsibility to watch over it. If you don’t care about it, you are just letting people take it.”
Chiu, who is fighting to hire an independent third-party supervisor for about HK$50,000 a month at Allway Gardens in Tsuen Wan where he is secretary of the owners’ corporation, echoed this sentiment.
“Owners are always advised not to authorise others. The fewer owners who participate, the higher the chance of being exploited,” he said.
“Having the same party inspect, write the tender and monitor the work creates a high chance of trouble. We are trying to minimise these risks.”
*Name changed at interviewee’s request. -- SOUTH CHINA MORNING POST
