A recent devastating fire in Hong Kong has shed light on a dark and controversial aspect of the city's building renovation industry. The blaze, which claimed over 150 lives, has exposed a rotten core within the industry, plagued by collusion, bid-rigging, and skyrocketing costs.
Experts and industry insiders are calling for urgent action and a complete overhaul of the system. They highlight Hong Kong's aging high-rise properties as a goldmine for unscrupulous syndicates, preying on the vulnerable and exploiting the city's aging infrastructure.
The impetus for renovation at Wang Fuk Court, the site of the deadly fire, came from an official order. The estate was mandated to hire consultants and contractors for necessary repairs, but what followed was a perfect storm of corruption and greed.
Internal documents reveal a shocking increase in the renovation budget, from an initial estimate of HK$152 million to a final cost of HK$336 million. This included unnecessary and costly work, such as complete removal and repaving of external wall mosaics, and added expenses for drainage and fire safety upgrades.
But here's where it gets controversial: a common malpractice involves consultants securing contracts at low prices, only to collude with related contractors to win the renovation project at significantly higher costs. This allows syndicates to profit by using low-quality materials while charging exorbitant fees.
And this is the part most people miss: property management companies and owners' corporations often play a role in facilitating this collusive setup. They are responsible for communication with consultants and contractors, and their involvement can lead to manipulated votes and sealed deals.
The Urban Renewal Authority (URA) launched the "Smart Tender" services in 2016 to combat bid-rigging, but its advisory role has limitations. The fatal flaw, as one expert puts it, is that final approval rests with the owners' corporation, which can be manipulated, leading to deals being sealed through vote-buying.
"It has become a structural problem. Bad money drives out good. We need to restore public confidence so that proper companies can return to the market," says Ricky Wong, chief executive of King Value Realty Investment Consultant.
With Hong Kong's aging housing stock, many buildings are reaching 40 to 50 years of age, making them prime targets for major renovations. This has created a lucrative market that unscrupulous contractors view as a huge opportunity for profit.
"Many contractors see this market as a piece of 'fat pork'. They are desperate to get a slice of the work, and profits can be enormous," Wong adds.
Despite efforts to anonymize tenders, tactics to manipulate outcomes persist. Multiple companies with the same bosses may bid for the same project, creating a complex web of collusion.
Chau Lin-kin, chairman of the Hong Kong Renovation Practitioners Union, warns of contractors using predatory pricing to seize business. "They bid cheap, then add costs here and there. It's a race to the bottom, compromising safety and quality. The whole market is rotten," he says.
Chau urges the government to step up regulation and public education to help owners identify pricing red flags. He emphasizes the need for a review and a wake-up call to address this systemic issue.
Experts agree that stamping out collusive practices requires stronger deterrence measures, higher penalties, and a regulatory overhaul with closer government supervision. A statutory body to manage mandatory inspections and maintenance projects, based on owners' endorsement, could be a step towards breaking the chain of vested interests.
"It is time for a review. This tragedy is a wake-up call. We need to establish a mechanism to crush these syndicates and restore public confidence in the industry," says Vincent Ho Kui-yip, veteran surveyor and president of the Hong Kong Institute of Building Safety.
The recent fire has exposed a rotten underbelly within Hong Kong's building renovation industry, and it's time for action to ensure such tragedies never happen again.
