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Hong Kong economy

Study reveals seven cleaning firms’ hold on 60 per cent of public housing contracts in Hong Kong

The companies won 30 contracts involving cleaning services for residents of 30 public housing estates in deals worth HK$367 million in total

PUBLISHED : Wednesday, 17 January, 2018, 6:25pm
UPDATED : Thursday, 18 January, 2018, 3:44pm

Close to 60 per cent of the 51 public estates directly managed by the Hong Kong Housing Authority are dominated by seven management companies that have earned millions providing cleaning services over the past two years.

The findings, revealed in a study by the Labour Party and Confederation of Trade Unions, showed that these seven companies obtained 30 contracts involving cleaning services for 161,700 residents in 30 public estates from 2016 to 2017. The deals involved HK$366.79 million in total, or 70.5 per cent of the HK$520 million worth of contracts granted for all 51 estates.

By tracking the firms’ bidding history, researchers also found that over the past decade the seven companies appeared to have formed three alliances, and that the two to three members of each grouping kept winning contracts for certain public estates.

Researchers suspected the allied companies were affiliated because they had related directors or shared offices and contact numbers.

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However according to the definition of “related parties” adopted by the Housing Authority in its guide to contractors, only companies controlled by family members, or companies in relationships of parent and subsidiary or of joint venture partners, were considered related and barred from competing for the same tender. Family members meant spouses, or parents and children.

“The government has been the biggest winner behind its outsourcing system which incentivised the contractors to lower their bids and maintain their market dominance by exploiting cleaning workers,” said Samuel Wong Kit-yip, secretary general of the Hong Kong General Union of Security and Property Management Industry Employees, an organisational member of the confederation.

The study was prompted by the most prominent strike of public estate cleaners in recent times, which started on December 27 last year in Hoi Lai Estate, West Kowloon, and succeeded on January 5.

The 30 protesting workers said their former employer, Man Shun Hong Kong & Kln Cleaning Company, tricked them into signing a “voluntary resignation letter” last October and avoided a million-dollar dismissal wage payment, while Hong Kong Commercial Cleaning Services, the succeeding contractor, offered a monthly salary increase of just HK$11.

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The ensuing media investigation exposed the close relations between the two companies – including a shared commercial address – and aroused public concerns over worker exploitation generated through public services outsourcing and bidding systems.

The researchers identified Man Shun and Commercial Cleaning as being in the largest alliance, which also included a third member, Chun Wui Kee Company.

The three companies provided cleaning services for 17 of the 30 public estates in question, and had secured contracts for at least seven estates in the past 10 years.

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The second largest alliance was formed by Yee Tai Cleaning Co and Yee Hop Cleaning Co, which provided services for six of the 30 estates over the past two years, and had been winning contracts in relay for at least eight estates over the past decade.

The third major alliance consisted of Sunny Cleansing Co and Sun Lee Cleansing Company, which had neighbouring registered offices and shared the same fax number. A Sun Lee shareholder reportedly admitted that he was the nephew of one of Sunny Cleansing’s shareholders.

The Sunny and Sun Lee group took six of the 30 public estates, and the two companies had been the constant contractors for at least six estates in the past 10 years.

Chiu Yan-loy, spokesman of the Property Owners Anti-bid Rigging Alliance and community officer of the Labour Party, said the alliances built up and maintained their dominance by keeping labour costs low with the Hoi Lai Estate janitors protesting against the measures.

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“While the outgoing contractor would force or trick the cleaning workers to sign a ‘voluntary resignation letter’, the incoming ally would threaten the workers through their new jobs,” Chiu said.

The janitors were often given an entry-level offer by the succeeding employer because their years of service in the previous company would not be recognised, Chiu said.

“Janitors providing outsourced services were on average paid HK$8,600 per month, while those working for Tenants Purchase Scheme estates could be paid HK$10,000 per month,” Chiu said.

The Tenants Purchase Scheme estates had their owners’ corporations decide on the hiring of cleaning companies.

The labour rights groups behind the study called on the Housing Authority to add terms stipulating workers’ wages should be sufficient for living a decent life and the companies should have financial reserves for dismissal payments in the invitations for bids.

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In the long run, the groups suggested labour laws included definitions and regulations on “joint employers” so that both the official departments outsourcing their public services and the contractors would be liable for omitting an employer’s responsibilities.

The Housing Authority declined to give a response on the bid-rigging investigation or outsourcing system improvements, saying that its tender committee would discuss the matters on Thursday.

A Competition Commission spokeswoman said it was aware of public concerns over the tendering system of outsourced cleaning services and had been in touch with the Housing Authority over the issue. Under the commission’s guidance, the authority, as a service procurer, was recommended to require bidders to make a non-collusion declaration and supply information about their shareholding structure, the spokeswoman said.

The Post also contacted the management companies for a response.