The Director of the Government Logistics Department, Carlson Chan Ka-shun, has publicly apologized for a recent scandal involving the procurement of counterfeit drinking water, admitting the department bears the primary responsibility and acknowledging flaws in its supplier vetting process.
Chan, speaking on Thursday for the first time on the issue, stated that the fraud case has rightly drawn societal scrutiny to government procurement and caused unease among civil servants about water safety. He offered his apologies to the public for the incident.
He revealed that a company used “improper means” to obtain genuine documents and then submitted forged paperwork during its bid.
This sophisticated deception, he admitted, bypassed the department’s existing checks.
“Our staff could not detect the forgeries during the document scrutiny,” Chan said, pledging a comprehensive review of mechanisms to enhance vigilance and prevent fraud.
Pressed on whether the incident involved collusion or corruption, Chan did not directly respond. He also addressed why the company in question, whose director is involved in other fraud cases, was able to win the tender.
He explained that under standard government procurement rules for goods, financial checks are not typically conducted.
“This is because such contracts operate on a delivery-and-payment basis, with a 30-day payment term and a requirement for a security deposit of approximately 2 percent of the contract's value… This deposit is intended to cover any losses if a supplier fails to meet its obligations,” said Chan.
He also reaffirmed that the Logistics Department would fully cooperate with the comprehensive review to restore public confidence.
Chan’s response came after a dedicated task force reviewing government procurement rules met and addressed the media at noon.
Secretary for Financial Services Christopher Hui Ching-yu, announced that interim improvement measures, particularly concerning due diligence, would be rolled out promptly and would not wait for the task force’s full three-month review to conclude.
In a related development, the government announced last night the immediate termination of two additional contracts linked to the director of the implicated company, Xin Ding Xin. This follows the earlier termination of four other supply contracts related to the company.
The Permanent Secretary for Financial Services and the Treasury (Treasury), Andrew Lai Chi-wah, explained the delay, stating that the first four contracts were issued directly by the Logistics Department, which had the "first-hand information" to act immediately.
Terminating the further two required coordination across all government policy bureaus to cancel all contracts held by the company and its associates, he said.
When asked if these terminated contracts contained elements of fraud, Lai said the relevant departments would seriously scrutinize whether past services or goods involved deception or were suspicious, with any illegal activities discovered will be referred to law enforcement agencies for follow-up.
(Marco Lam)
