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West Kowloon Cultural District

West Kowloon Cultural District Authority fires main contractor on Hong Kong’s M+ Museum over financial settlement controversy

Authority’s CEO Duncan Pescod said Hsin Chong Construction failed to manage its contract

PUBLISHED : Friday, 17 August, 2018, 8:18pm
UPDATED : Friday, 17 August, 2018, 11:48pm

The authority managing Hong Kong’s multibillion-dollar arts hub has finally fired its cash-strapped main contractor following a protracted financial settlement controversy, raising uncertainty over further delays and cost overruns at its museum project.

The West Kowloon Cultural District Authority on Friday said it had terminated the HK$5.9 billion (US$750 million) contract for the M+ visual culture museum with Hsin Chong Construction due to the company’s insolvency.

It said the problem was caused by “severe financial troubles” faced by the parent company Hsin Chong Group.

The authority had helped Hsin Chong Construction pay about HK$1.5 billion to 17 or 18 subcontractors from February 2017 to June 2018.

The authority’s CEO, Duncan Pescod, said the company had failed to manage its contract.

“This is not a sudden decision. We have been aware of the financial difficulty facing the parent company and the construction company for a number of months,” he said.

The authority said poor management at the firm had led to “significant delays”on site.

Pescod rejected suggestions it was too late to tell the public, saying he had been expressing concerns in board meetings and addressed the issue in the Legislative Council.

“I have not, anytime, tried to hide my concerns about this problem,” he said.

He said the authority had no concerns over the quality of the work because on-site staff, independent contract administrators and architects had been monitoring the project.

The authority would start tendering for a new contractor on Monday and predicted the process would take six to eight weeks.

During this period, the site would be closed down and only essential maintenance and safety management will be carried out.

It said it would try to keep the existing subcontractors of the M+ project, which was about 60 per cent complete.

Pescod said the move would cause delays, but he believed there was a chance to catch up.

“We believe it’s still possible to deliver the museum, as we announced previously, by 2020 and that is our intention,” he said.

The M+ Museum, which occupies more than 645,800 sq ft, is the centrepiece of the arts hub.

Hsin Chong Group has been in financial trouble for the past two years or so. According to its annual report last year, it was burdened with HK$13.86 billion debts but had cash resources of HK$784 million. While losing HK$774 million last year, the company failed to repay HK$3 billion in overdue debts.

DAB Lawmaker Edward Lau Kwok-fan, who chairs the Legco subcommittee that monitors the cultural district project, said he did not expect the decision would come so suddenly. He questioned how much the authority knew about the financial information of the main contractor.

Civic Party lawmaker Tanya Chan, who is the deputy chairwoman of the subcommittee, said the authority’s handling of the controversy has been “very messy” and urged it to explain its decision-making process clearly.

“If it wanted to terminate the contract, it should have terminated it earlier,” she said.

She also questioned whether the government had reviewed its list of approved contractors for public works because Hsin Chong Construction was still on the list.