The built quality problems uncovered in four public housing projects in 1999 compromised public confidence in public housing.

We find this distressing and regrettable. Criminality in pursuit of personal gains at the expense of public safety lied at the heart of these incidents.

Nonetheless, these incidents also reflected problems in the process of public housing production.

These problems included lack of well co-ordinated construction planning, the heavy workload of the Housing Authority's Building Committee, over-emphasis on tender prices, inadequate project supervision and deficiencies in manpower deployment.

Coupled with a lack of independent audit, prevailing sub-contracting practices and a lack of a 'quality culture' in the construction industry, these shortcomings in project management provided opportunities for foul play.

Remedial Measures

As a responsible Government, we have taken remedial actions immediately after the incidents.

In the light of these incidents, we implemented a number of long-term reform measures covering public housing, public works and even the whole construction industry to uplift built quality and prevent recurrence of such incidents.

After the incidents, the Housing Department promptly conducted inspections on the foundations of all public housing projects under construction at the time in order to ensure their structural integrity.

Regarding the sites at Tin Chung Court and Yuen Chau Kok, the Housing Authority demolished the two blocks on short piles at Yuen Chau Kok.

Foundation strengthening works for the two blocks at Tin Chung Court will be completed in April as scheduled.

The use of non-compliant materials discovered at Tung Chung and Shek Yam Estate was fully rectified prior to project completion.

All the other public housing projects comply with stipulated standards and specifications.

Long-term Reforms

As for long-term reforms, in the past three years we have implemented a series of measures in different areas with a view to enhancing the built quality of public housing comprehensively and effectively.

a. Housing Production Target

Against the backdrop of soaring property prices in the nineties, coupled with large number of applicants queuing for public housing at 160,000 and long waiting time of eight to nine years, the Government, in response to the expectations of the public and legislators, embarked on a programme to build more public housing to meet the then pressing needs of the community.

Despite that the Government and the Housing Authority had taken steps to cope with the huge production anticipated for the late nineties, including outsourcing of work, streamlining of procedures and increasing manpower, the production peak had put immense pressure on the Housing Department and even the whole construction industry.

This had increased project risks and created opportunities for unscrupulous persons to take advantage of the situation.

With the benefit of hindsight, there was room for improvement in these measures.

In fact, as I said in my statement in November last year, in future the housing policy will be based on the following three major principles:

* First, the thrust of the Government's subsidised housing policy should be to assist low-income families which cannot afford private-sector accommodation.

* Second, the production of private housing should be determined by market demand. The Government should minimise its intervention in the private property market.

* Third, the Government should ensure adequate supply of land and provide supporting infrastructure so as to maintain a fair and stable operating environment for the healthy development of the private property market.

Based on these principles, we will closely monitor and regularly assess the demand for public rental housing in order to maintain the average waiting time at three years.

Besides, the Housing Department will formulate a year-on-year rolling public housing production programme having regard to changes in demand.

As for private housing, we will ensure adequate land supply to meet anticipated demand. We will also assess regularly the overall long-term housing demand for better land supply planning and provision of supporting infrastructure.

Moreover, we will seek to improve the monitoring mechanism and alert system for private housing production, and from time to time review and adjust land supply.

b. Institutional Framework

The Committee on Review of the Institutional Framework for Public Housing chaired by the Chief Secretary for Administration has come up with 20 recommendations to improve the institutional framework for public housing.

Based on these recommendations, we have streamlined the institutional framework for public housing, with clear delineation of work and responsibilities to enhance accountability.

The former Housing Bureau and the Housing Department have been re-organised into a new Housing Department tasked with integrated policy formulation and implementation functions.

We are reviewing the roles and structure of the Housing Authority and its committees, and will consider the merit of transferring executive functions to the Housing Department so as to enable the Housing Authority and its committees to focus on strategic issues and enhance the effectiveness in delivering the public housing programme.

In driving our change programme, we will carefully plan the pace of reform and strengthen our communication with staff so as to make the reform a success.

c. Project Supervision

Since 2000, we have strengthened site supervisory resources for all projects in terms of both staff number and expertise and have deployed resident engineers to all piling sites.

We have also clarified the duties of all site staff to avoid excessive delegation of power and responsibilities.

Besides, we have streamlined the inspection system and allowed more flexibility for project teams in their documentation work. We have reinforced the risk awareness among staff through training and strengthened monitoring to enable earlier identification of potential problems that may arise on site.

We have also intensified the induction and refresher training for site staff and enhanced their professional skills to ensure that they possess adequate skills and experience to effectively monitor the work of contractors.

As regards public works, the Government has implemented various initiatives in the past two years to reinforce site supervision and the monitoring of contractors and consultants.

These include new requirements in respect of integrity, the shortening of time for disciplinary action against non-performers, and the revision of eligibility criteria for retention on the approved lists.

Through these regulatory measures, the construction industry will gradually develop a quality culture.

d. Third Party Control

In November 2000, we have set up an Independent Checking Unit reporting directly to the Director of Housing to audit the design, safety and built quality of Housing Authority projects to parallel the Buildings Department's regulatory practices on private buildings.

All projects audited by the Independent Checking Unit meet the technical standards and safety requirements of the Buildings Ordinance.

As regards introduction of legislative amendments to bring Housing Authority projects into the purview of the Buildings Ordinance, the proposal carries legal, administrative, staffing and resource implications, which require detailed examination by the parties concerned.

A steering committee was set up in September 2002 to follow up the matter.

e. Project Procurement

The Housing Authority launched in April 2000 the "Quality Housing Reform" and one of the key reforms is the formulation of quality focused procurement strategy.

The Housing Authority has been improving the contract procurement system. In selection of consultants, primary consideration is given to technical aspect under the enhanced two-envelop system. Only contractors with good track record will be invited to tender.

Since September 1999, a Preferential Tender Award System has been adopted for tender assessment to examine tenderers' performance and capability in a more systematic manner, together with the exclusion of exceptionally low bids.

These initiatives have been well-received and supported by the industry since implementation.

Since April 2000, six out of 35 building contracts awarded by the Housing Authority have not been awarded to the lowest bidders.

The Housing Authority will continue to improve, with a view to striking a balance between optimising the use of public funds and assuring quality.

Apart from Housing Authority projects, the Government has reformed the procurement and tendering systems of other public works.

As in the case of Housing Authority projects, the tendering system for public works aims to achieve cost effectiveness and maintaining open and fair competition instead of simply accepting the lowest bids.

In order to further increase the weighting of quality and past performance of contractors in assessing tenders for public works, a scoring system has been adopted across the board since last November.

For the management of public works consultants, we have also introduced a number of initiatives, including the incorporation of past performance in the selection criteria and the enhancement on performance assessment with a more objective assessment report.

With a view to enhancing transparency of assessment and fostering a culture of continuous improvement in the construction industry, the Government has also implemented new procedures for providing complete set of performance assessment report to consultants and contractors of public works, as well as explaining to unsuccessful tenderers why they are not selected.

f. Culture of the Construction Industry

Besides the above problems, prevailing malpractices of the construction industry also contributed to the sub-standard construction in public and private housing in recent years. Fostering a quality culture in the construction industry is thus the focus of our reform.

The Construction Industry Review Committee chaired by the Honourable Henry Tang has made 109 recommendations in order to eradicate malpractices of the industry, to enhance the sense of belonging among construction workers and to promote a quality culture.

The reform is now in progress with concerted efforts of the Government and the industry.

In September 2001, the Provisional Construction Industry Co-ordination Board was set up with members from major stakeholders of the industry. Before the establishment of a statutory industry co-ordinating body, the Board will play a pioneering role in the implementation of the reform programmes championed by the Construction Industry Review Committee.

With close co-operation between the Government and the Board, notable progress has been achieved on some 80 reform initiatives, covering major areas such as quality culture, contract procurement, manpower development, efficiency and productivity, site safety and environmental protection.

The Government will continue its concerted efforts with the Board in promoting continuous improvement in the industry so as to uplift local built quality to achieve the highest international standards.

We will consider the Select Committee's recommendations in detail for possible enhancements of our on-going reform measures.

We will also carefully consider how to follow up the other recommendations and views put forward by the Select Committee and other Members who have spoken so as to refine the system for the planning and production of public housing.

Responsibilities

Similar to the public, the Government attaches much importance to civil service discipline and has high expectations towards the performance of civil servants.

We will not tolerate negligence or malpractices of civil servants when they discharge their duties.

On the other hand, we must handle each disciplinary case in a fair and impartial manner.

Immediately after the incidents, we appointed an independent panel led by Stephen Selby to look into the responsibilities of individual civil servants comprehensively and objectively.

Having considered relevant evidence, we have initiated disciplinary actions against the civil servants who had been negligent in carrying out their duties in accordance with the established civil service disciplinary mechanism. We are liaising closely with the Civil Service Bureau to ensure prompt completion of all outstanding cases.

The Select Committee's report pointed out that the causes of the public housing quality incidents are complex and accepted that criminality did play a significant part. In fact, staff members of contractors or consultants who committed fraudulent acts have been prosecuted.

Up to now seven of them had been convicted, with punishment of up to 12 years imprisonment.

We have also taken list disciplinary actions against contractors and consultants who had failed to discharge their contractual responsibilities.

Punitive measures include warning, suspension from tendering for Housing Authority projects and delisting.

The Government will carefully examine all the information and evidence provided in the Select Committee's report, and consider all the cases in a fair manner in accordance with established civil service disciplinary arrangements.

Conclusion

Since the occurrence of building problems in the four public housing projects more than three years ago, the Government has conducted a thorough review in accordance with the findings and recommendations of various independent investigations.

In the light of experience and lessons from these incidents, we have implemented a series of reform measures to prevent their recurrence. In fact, notwithstanding these unfortunate incidents, the Government's efforts in the provision of public housing in the past years has improved the living environment of many needy families.

We have substantially reduced the waiting time for public rental housing from nine years in the early nineties to less than three years at present. The number of applicants on the Waiting List has also reduced significantly, and the average living space of public housing tenants has also increased.

We will build on these achievements, and will work in close partnership with the construction industry to strive for continuous improvements to ensure quality housing for the Hong Kong populace.

(This is a summary translation of Michael Suen's speech at the motion debate on on Report of Select Committee on Building Problems of Public Housing Units in the Legislative Council on February 13.)