Subcontractors working on M+, the West Kowloon Cultural District’s contemporary art museum, have been paid by the government-appointed management authority instead of by the main contractor. Lawmakers expressed concerns that the arrangement was not properly approved, and may reflect financial trouble on the part of the main contractor.
According to a letter dated February 7, 2017 sent by the main contractor Hsin Chong Construction Company Limited, interim payments to subcontractors would be paid directly by the West Kowloon Cultural District Authority (WKCDA), the statutory body overseeing the District. The letter stated that the measure was adopted temporarily to address concerns of “unfounded” negative media coverage.
Hsin Chong was awarded the contract for the main works at M+ in September 2015 after a selective tendering process. The contract was worth HK$5.9 to HK$6 billion, and funding for the construction was approved by the Legislative Council’s Finance Committee.
In 2017, Hsin Chong was reported to be late on various payments, owing up to HK$30 million to construction workers at M+. Its parent company, Hsin Chong Group Holdings Limited, has been delisted from the stock exchange since last April.
Hsin Chong confirmed to HKFP that the payment method was altered, but did not disclose the total amount paid under the new arrangement or whether the arrangement remains in place.
Hsin Chong said WKCDA paid subcontractors in lieu “to ensure they remain confident in the project and will continue their work.” The WKCDA will then reduce its payment to Hsin Chong accordingly.
Henry Tang Ying-yen, chairman of the WKCDA Board, told Ming Pao on Monday that the change in payment method was approved by the Board and with the government’s knowledge.
“During our report to the Legislative Council last year, we already confirmed that [WKCDA] directly paid subcontractors. This was to ensure the whole M+ construction could progress smoothly,” Tang said.
WKCDA CEO Duncan Pescod defended the arrangement, but said that it was “not normal under any circumstances.”
“In this case, understanding the situation with respect to the contractor… we took a view, with the Board’s approval, that it was appropriate for us to take this approach,” Pescod said.
Arrangement ‘inappropriate,’ lawmakers claim
Lawmaker Edward Lau, chairman of the Joint Subcommittee to Monitor the Implementation of the West Kowloon Cultural District Project, said that the arrangement was “inappropriate” because it creates confusion between the parties. Since the main contractor was no longer responsible for paying subcontractors, it was unclear who should be held accountable if problems occur, he said.
Contrary to claims by Tang, Lau also said the matter was not raised during the Finance Committee meeting last December, saying the WKCDA’s version of events was “not in accordance with reality.”
“The government has no direct contract with any of the subcontractors, so it should not pay them directly. It sets a bad precedent… and may open up the government to risks and liabilities,” Lau said.
The Joint Subcommittee’s deputy chairman Tanya Chan said that the arrangement amounted to “special treatment” by the WKCDA. She added that, if the main contractor faced financial difficulties, the correct government response was to restart the tendering process.
HKFP has reached out to the WKCDA for comment.