IT is not enough that justice is done, but it must also be seen to be done. This age old adage may be adapted to explain why some people doubt if the system of awarding Government contracts by tender is completely impartial. Despite the fastidious procedures designed to ensure the fairness of the tender system (see next story), the fact remains it operates largely behind closed doors; and secrecy breeds speculation. The trouble is the secrecy rule is needed to protect commercially sensitive information contained in the bids, and that is why the tender assessment process can never be held in public like a trial, although the tender board sits like a judge. While no system can be perfect, Hong Kong has been largely free of scandals in the awarding of public contracts, many of which are worth billions. Nevertheless, despite the territory's reputation as a clean business centre, there has long been an undercurrent of feeling that British interests have had an edge over others for political reasons, although hard evidence is difficult to come by. Many overseas and Chinese construction companies have operated successfully in Hong Kong and if they have had any complaint about the system of awarding public contracts, they have not gone public with them. Yet, this has not stopped China from lashing the Government for alleged favouritism when it awarded to Jardines, among other companies, the franchise for the construction and operation of the ninth container terminal. Another decision by the Government to award to a Jardines subsidiary, Gammon Contractors, the contract for the construction of a new naval base for the People's Liberation Army at Stonecutters Island also invited queries from Beijing. China's determination to nail down Jardines, which earned the wrath of Beijing by moving its domicile to Bermuda in the early 80s when Hong Kong was reeling from political uncertainty, underlines Beijing's hardline stance. But putting politics aside, the pro-Beijing newspaper Ta Kung Pao's recent report on the bidding for the Chinese naval base contract should be cause for reflection for those interested in keeping Hong Kong's tender system free from manipulation. The Ta Kung Pao report took great care to keep politics out and merely quoted industry sources who queried the Government's decision on technical grounds. The sources admitted Gammon submitted the lowest bid, but pointed out that another bidder who had submitted the second lowest bid had also offered a cheaper alternative. However, the feasibility of the alternative proposal was not even considered by the Government, they said. A signed commentary next to the report then suggested the Government might have other considerations in mind in awarding the contract for the construction of a Chinese defence facility of national security importance to Gammon. The allegation forced the Government to reveal that it was the PLA experts who insisted on adopting the more expensive design specified in the tender and that the administration was following the usual practice of awarding the contract to the lowest conforming tender, which was Gammon. The report showed that, rightly or wrongly, some in the construction industry did not have total confidence in the tendering procedures. Officials were also understood to be alarmed by the accuracy of the price tags of the seven bids for the contract cited in the Ta Kung Pao report, when the information was privy only to selected officials who vetted them. Either some of those involved in the bidding process had conducted some highly successful industrial espionage or civil servants had misbehaved. A number of construction companies approached by the South China Morning Post declined to discuss the matter because of its sensitivity. But a source close to the industry said that by and large it had great confidence in the present tender system, which had quite tightly controlled procedures and was free of manipulation for personal benefits common in other countries in the region. 'Of course, no systems can be perfect because they are designed by people and can be manipulated,' said the source. 'But Hong Kong is, for example, free of the problems of the more closed system in Japan where the big contractors are known to have conspired to manipulate prices and some contractors are so big they can manipulate the ministers.' If one criticism could be made of the Hong Kong system, the source said, it was its lack of transparency. 'At present, we do not know how the winning bid compares with other bids,' the source said. 'If there is tender negotiation, then there is a need not to disclose the prices of the other bids. 'But after a decision has been made, I can't see any problems in revealing the prices of other bids.' Announcing the prices of all the bids would certainly help clear the air, but as the Stonecutters Island contract row shows, there are complications and a simple announcement would not be enough. At present, explained Mrs Betty Chu Fu Kam-lui, Principal Executive Officer and secretary of the Central Tendering Board, the Government only announced the price of the winning bid. She said while the rule was to accept the lowest conforming tender, there were times when a contract was awarded to bidders who submitted the next lowest tender. This was because the lowest conforming tenderer was not thought to have the ability to undertake the project or that its performance in other Government projects had not been satisfactory, she said. The reasons were not announced, but the party concerned would be told if they challenged the Government's decision. Mrs Chu assured the public of the fairness of the tender system in Hong Kong, which was a signatory to the Government Procurement Agreement under the General Agreement on Tariffs and Trade which provided for open and fair competition among domestic and foreign suppliers. In the light of calls for making the tender process more transparent, it is understood the Government is seriously considering disclosing the prices of all bids. A major hurdle which needs to be overcome, however, is how the Government should handle cases where a contract is not awarded to the lowest conforming tender, because announcing the reasons may affect the reputation of the failed bidders and open the way for litigation. If the tender system, with all its built-in procedures to ensure fairness, is opened to allegations of impropriety, then the award of contracts by private treaty is even more controversial, as evidenced by the CT9 row. The Secretary for Economic Services, Mr Gordon Siu Kwing-chue, said the private treaty grant for the CT9 franchise was aimed at fostering competition by introducing a new operator into container terminal operation. It was also argued the arrangement would mean lower charges because the premium for a privately negotiated franchise would be less than that obtained under open tender, which would have meant higher service charges. While these were valid considerations, few governments under similar circumstances could avoid charges of favouritism because the winning consortium was not chosen openly. In the case of the CT9 franchise, the Government called for expressions of interest and then decided to ask those who had done so, with the exception of a consortium headed by Taiwanese interests, to team up to jointly develop the new terminal even though they were bitter rivals. Understandably, no one was happy and the Taiwanese group alleged the whole thing was designed to keep them out.
