The hearings into the Wang Fuk Court fire in the Tai Po district of Hong Kong have exposed far more than a catalog of individual failures. They have revealed how responsibility can disappear within the way Hong Kong’s convoluted building industry obtains, divides and supervises work.

The fire killed 168 people. Criminal proceedings are under way, and the Independent Committee in relation to the fire at Wang Fuk Court has not yet released its final findings. It is therefore important not to prejudge liability.

But the evidence presented to the committee already raises questions: What happens to safety when a contract passes through multiple hands, with money deducted at each stage and responsibility dispersed among consultants, main contractors and subcontractors?

Much public attention has understandably focused on possible bid-rigging. The committee’s lead counsel said evidence from enforcement agencies indicated bid-rigging in building maintenance was not occasional but had become normal market behavior.

The Competition Commission described WhatsApp groups in which contractors exchanged bidding “homework”. There were cases in which contractors unwilling to cooperate were allegedly assaulted by people with triad backgrounds.

The Independent Commission Against Corruption told the committee that some property management companies received commissions of 3 to 5 percent from contractors.

At Wang Fuk Court, owners appeared to be choosing among 57 bids for a renovation contract worth more than HK$300 million ($38.25 million). Yet the hearing was told at least five tendering companies were connected to the director of the successful contractor, and there appeared to be two coordinated bidding groups.  

The owners also relied on a tender analysis stating the winning contractor had a clean litigation record and giving it full marks on that criterion. The hearing heard that an earlier draft had given it zero. The contractor had occupational safety convictions, had recently been prohibited by the Buildings Department from undertaking minor works for four months and was associated with 108 litigation search results.

The consultant had first secured a statutory inspection role for HK$222,000 and later the engineering consultancy for HK$308,000. The committee heard that more than 65 percent of consultancy bids examined in an earlier Competition Commission market study were below basic operating cost. The commercial logic deserves attention. Why would a professional firm accept work at a loss unless its position allowed it to influence the much larger contract that followed?

The initial estimate for necessary repairs at Wang Fuk Court was about HK$102 million. By the pre-tender stage, after the works had expanded, it exceeded HK$224 million. The eventual contract was worth more than HK$300 million. Yet no one regarded it as their responsibility to determine whether the expanded scope was necessary or the pricing reasonable.

This illustrates how bid-rigging can take money from owners before work begins. Excessive subcontracting can hollow out the contract afterward. Subcontracting is not inherently improper. Modern construction requires scaffolders, electricians, plumbers and many other specialists. A main contractor cannot employ every trade permanently. The problem is non-value-adding subcontracting: A company wins a contract, retains a margin and passes the work to another company for less. That company may do the same. By the time the work reaches those buying materials and employing workers, the available budget may be very different from the price paid by owners.

The lesson of Wang Fuk Court is not merely that some contractors may be dishonest or negligent. ... The city should adopt a simple rule: Responsibility cannot be subcontracted. It requires the ICAC, Competition Commission, and the government to get it sorted with determination

This is not a new concern. In 2001, the Construction Industry Review Committee warned that non-value-adding multilayer subcontracting reduced the margins of those performing the actual work, inducing them to cut corners and compromise quality. It recommended such subcontracting be eradicated, and total subletting be prohibited. A quarter of a century later, this warning has yet to be dealt with. The Wang Fuk Court evidence makes that warning tangible.

Different companies carried out external wall work on different blocks. Subcontractors testified that openings were made in staircase windows every five floors, reportedly following instructions from the main contractor, to give workers access to the scaffolding. Some openings were covered with aluminum composite panels and later, when these broke, with wooden boards. On the day of the fire, smoke entered the escape staircases through these openings.

One subcontractor described receiving only a few minutes of safety instruction. He could not remember smoking, scaffolding access or the staircase openings being properly explained. Asked whom he should contact at the main contractor if problems arose, he initially said there was no designated person: He dealt principally with his own boss. This is the danger of fragmented responsibility.

The owners believe they have engaged a substantial contractor. The contractor relies on subcontractors. Workers answer to smaller bosses. The consultant is supposed to supervise the main contractor but may itself be financially compromised or inadequately staffed. Government bodies check documents and samples but may not know who is doing the work. Everyone has a contractual role, yet no one exercises effective control over the whole site.

Hong Kong therefore needs to examine the money chain as closely as the technical failures. For major building maintenance, owners should receive a complete, continuously updated register of every contractor and subcontractor, the work each performs, the value of each subcontract and the individuals who ultimately control the companies.

There must be control of undisclosed subcontracting and total subletting. The main contractor must retain a non-delegable duty to supervise the work, with named, qualified managers physically present. Safety-critical expenditure should be separately priced and ring-fenced so it cannot become the margin sacrificed at the bottom of the chain. Independent supervision must also be genuinely independent. The same consultant should not be able to shape the scope, evaluate tenders, supervise the winner and approve completion without strong external checks.

For large projects, an independent public agency or approved professional panel should verify the scope of work, market cost, relationships among bidders and subcontracting arrangements.

Finally, enforcement must follow people as well as companies. Criminalizing serious bid-rigging, imposing licensing consequences, and debarring controlling individuals would make it harder for offenders to close one company and reappear under another name.

The lesson of Wang Fuk Court is not merely that some contractors may be dishonest or negligent. It is that Hong Kong has tolerated a system in which the party receiving the owners’ money may be separated by several layers from the party doing the work, and in which every layer can take a share while accountability becomes progressively thinner. The city should adopt a simple rule: Responsibility cannot be subcontracted. It requires the ICAC, Competition Commission, and the government to get it sorted with determination.

Let’s see if Hong Kong can finally stop a notorious but longstanding bad practice — this is the true test of good governance.

The author is chief development strategist at the Institute for the Environment at the Hong Kong University of Science and Technology.

The views do not necessarily reflect those of China Daily.