Hong Kong SAR to criminalise bid-rigging in building maintenance projects

Mohammed Talib and Hinson Cheung of Pinsent Masons were commenting after the administration announced plans to strengthen its response to bid-rigging following the publication of an independent committee report into the fatal Tai Po fire in November last year. The fire occurred while a residential development was undergoing major renovation works.

Under the proposed reforms, bid-rigging in building maintenance projects would become a specific criminal offence carrying penalties of up to 10 years’ imprisonment and substantial fines. Authorities would also be able to pursue criminal or civil action against those involved in the conduct.

The move reflects a broader trend towards tougher scrutiny of procurement practices and signals that enforcement authorities are prepared to take a more interventionist approach where tendering processes are suspected to have been manipulated.

Talib said: “The direction of travel is clear. Authorities are placing greater focus on conduct surrounding tendering and procurement processes, and the potential consequences for both businesses and individuals are becoming more severe.”

The proposed reforms place additional emphasis on competition law and compliance considerations at the earliest stages of a bidding process.

Talib said: “Businesses should not view competition compliance as something that is only relevant once concerns have been raised. Organisations involved in public or private sector procurement should ensure compliance considerations are built into the way tenders are prepared, priced, discussed, approved and documented.”

Cheung said: “Businesses should assess whether their policies adequately address issues such as contact with competitors, the handling of commercially sensitive information, joint bidding arrangements, subcontracting relationships and escalation procedures where concerns arise.”

“Those involved in bidding activities, including procurement professionals, estimators, commercial teams, project leaders and senior management, should understand not only the legal framework but also the practical situations in which risks can arise,” he added.

The reforms highlight the importance of maintaining clear records capable of demonstrating that tendering and pricing decisions were reached independently and on a legitimate commercial basis. 

They also underline the need for compliance and procurement governance to receive attention at senior management level.

Talib said: “Governance of tendering activities should form part of wider risk management processes and receive appropriate oversight from senior decisionmakers. It should not be treated solely as a periodic compliance exercise.”

Once implemented, the new rules will bring with them closer cooperation between regulators and enforcement agencies where concerns arise around procurement conduct.

Cheung said: “Organisations should expect increased scrutiny and potentially greater information-sharing between authorities with responsibility for competition, corruption and other enforcement matters. The most effective time to test whether compliance systems are operating as intended is before an investigation begins, rather than after concerns have already been identified.”