West Kowloon Cultural District

Hong Kong lawmakers want answers on why West Kowloon Cultural District Authority took over payments to subcontractors for work on museum

Authority said it had been aware of difficult financial position facing main contractor since 2016 and that arrangement was ‘unusual but not exceptional’

PUBLISHED : Monday, 16 July, 2018, 6:22pm
UPDATED : Monday, 16 July, 2018, 11:36pm

Lawmakers in Hong Kong on Monday urged the authority running a multibillion-dollar arts hub being built in the city to explain why it paid subcontractors on behalf of a financially troubled main contractor without first consulting the legislature, warning that the arrangement could lead to confusion over project accountability.

However, the West Kowloon Cultural District Authority, which described the arrangement as “unusual but not exceptional”, said the “positive risk mitigation plan” was important to sustain steady progress with construction of M+, a visual culture museum in the arts hub.

“The arrangement has been successful in moving the M+ project forward. It has also ensured stable employment and payment of wages for over 1,600 workers currently on the site,” an authority statement said, adding that its board had approved the move.

The authority said it had been aware of the difficult financial position facing main contractor Hsin Chong Construction (HCC) and its parent company, Hsin Chong Group, since late 2016. Trading in the group’s shares and debt securities was suspended on April 3, 2017.

The payments were deducted from the contract sum payable to HCC, and the amount to be paid each month was vetted and approved by the third-party contract administrator, the authority said.

HCC won the contract to build the HK$4.9 billion M+ museum, scheduled for completion in 2019, in September 2015.

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In another statement late on Monday, the authority confirmed that it had been paying subcontractors directly from February 2017 and the arrangement “would be terminated at an appropriate time”.

“HCC, as the main works contractor of the M+ project, continues to be held accountable for the quality of the works under the contract signed with the West Kowloon Cultural District Authority,” the statement said, adding that the M+ building would top out later this year under the current rate of progress.

Construction was scheduled to be completed in 2019 and the building’s opening a year later had not been affected, it said.

The issue came to light after Chinese-language media on Monday published internal letters dated February 2017 from HCC to subcontractors saying that the authority would pay them directly.

At least 14 subcontractors working on M+ were reportedly being paid on behalf of HCC.

The authority’s statements did not say how much money was involved.

A source who worked on the site told the Post that at least three subcontractors had not been paid by HCC, with some outstanding bills going back more than 60 days. For previous payments, he said he received cheques directly from the company, not the authority.

Lawmaker Edward Lau Kwok-fan called on the government and the authority to explain the situation in the Legislative Council, which although in summer recess could hold a special meeting on the issue.

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“Was this a short-term interim arrangement? Or are the subcontractors still being paid directly?” he asked, adding that the authority’s ambiguous statement raised many questions.

Lau, who chairs the Legco subcommittee that monitors the cultural district project, accused the government of setting a bad precedent and blurring the role of the main contractor, which could lead to liability issues, adding that the normal practice was to relaunch the tendering phase.

The Civic Party’s Tanya Chan, deputy chairwoman of the subcommittee, questioned whether the authority had the right to make such payments.

“It is like lending money to Hsin Chong. How does the arrangement work?” Chan asked. She slammed the authority for not only failing to consult or notify Legco but even misleading lawmakers.

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In a meeting on December 8 last year, her party colleague Jeremy Tam Man-ho asked authority chief executive Duncan Pescod whether the main contractor or subcontractors had a healthy financial status, after receiving complaints from three workers over pay delays.

“They are all the original contractors and they continue to be working … we have a dialogue with them to make sure they have the resources to allow them to pay their subcontractors and their staff,” Pescod told Legco.

In a response late Monday, a government spokesman echoed the authority’s statements, saying the WKCDA had been aware of the difficult financial position facing HCC and its parent company and to ensure continuity of the construction of the M+ project had taken measures including paying key sub-contractors directly to ensure they received payment for certified work done.