Deal with financially troubled contractor should be in the open
The decision by the West Kowloon Cultural District Authority to pay subcontractors on behalf of the main contractor is unusual to say the least. Taxpayers are entitled to know if there are more such deals
What would you do if the contractor you paid to build a house ran out of money and failed to deliver? Most people would choose another one and perhaps sue the contractor for damages. But in the case of the M+ museum construction project, the West Kowloon Cultural District Authority chose to pay subcontractors on behalf of the financially troubled main contractor to get on with the work. Unsurprisingly, the authority has been roundly criticised after the move was exposed by the media.
The authority admitted the arrangement was “unusual, but not exceptional”. Describing it as a “positive risk mitigation plan”, the body in charge of the multibillion-dollar arts hub said it had been aware of financial problems facing Hsin Chong Construction (HCC) and its parent company since 2016. The decision to pay the workers of the subcontractors on behalf of HCC was to sustain steady progress with the construction of the M+ museum and ensure the employment of more than 1,600 workers currently on the site, it said.
Officials initially refused to disclose how much had been paid, but confirmed the arrangement began in February last year and “would be terminated at an appropriate time”. The payments were to be deducted from the contract sum payable to HCC. But without further details, it is difficult to tell whether the authority will suffer losses. The patchy response falls short of what is expected of a publicly funded statutory body. The authority later disclosed that the payments reached HK$1.5 billion, and added that the arrangement would stop from this month.
The authority has obviously put the arts hub’s progress above other considerations, hence such an unusual arrangement. It also managed to keep workers employed and avoided labour abuses and industrial action. The arrangement is no doubt bad publicity for the arts hub. But this is not a reason for it to escape public monitoring. Given it is so unusual, lawmakers and the public should have been informed.
It has to be asked whether there is any standing mechanism to deal with companies that fail to honour contractual duties. The authority has opted for tolerance, which may well be abused. How would officials handle it if other financially unstable contractors ask for such an arrangement? HCC is one of the major contractors in the city and is often involved in public works projects. Such payment is effectively financing private businesses with public money. Taxpayers are entitled to know whether there are more such deals.
We all want the arts hub to succeed. But the success must not be achieved at the expense of accountability and good governance. It is incumbent upon the authority to come clean on the financial details. The government also needs to put in place a better mechanism to deal with contractors that fail to deliver.