When the staff at the Administration Procurement Department (APD) of Hong Kong Young Women’s Christian Association (YWCA) was reviewing returned tender proposals, they noticed a curious thing. The four bids that were submitted, although under the names of four different companies, contained the same information down to misspellings and grammatical errors – except for the bid amounts.
The staff alerted Director of Finance and Administration Gary Sze Yan, who is also in charge of the procurement unit. Sze conferred with his chief executive and the decision was made to refer the matter to Competition Commission.
History was made in March when the regulatory body commenced proceedings against five IT companies, four of which had submitted bids. It was the anti-trust regulator’s first legal action since Hong Kong’s Competition Law came into effect in 2015, also the first in the local IT industry.
“It is an ethical issue,” said Daniel Lai, former head of IT at MTR Corporation. “Similar anti-competitive arrangements were found in the construction industry, where multiple parties are often involved in a tender, but it’s the first time this is revealed in the IT industry.”
Also Professor of Practice (Computing) at The Hong Kong Polytechnic University, Lai noted that the current IT procurement ecosystem—involving IT vendors, distributors and resellers—makes it quite easy for anti-competitive arrangements to happen.
With increased investment in technology and the enactment of the Competition Ordinance, Charles Mok, LegCo member representing the IT functional constituency said local IT and business executives “must be more vigilant about potential liabilities and legal consequences.”
“The best practices should be enforced on the procuring side,” he said. “For the bidding side, it is rather simple, just don't collude and fix prices.”
Procurement best practices
In this case, the best practices at YWCA appear to be working.
“Procurement by its nature is prone to malpractices and manipulation, such as favoritism in sourcing and selection of suppliers and leakage of information,” Sze told Computerworld Hong Kong. “We have stringent policy and procedures governing our procurement.”
Sze cannot discuss the case in detail because the legal proceedings are still on-going. But the procurement practices and policies at YWCA are useful for many Hong Kong organizations that are facing a higher level of scrutiny from anti-trust regulators.
He noted that at YWCA, the procurement policy is comparable and similar to many government departments. It includes a separation of functions and different approval processes, depending on the procurement value.
Regular procurement processes are handled by an independent department—APD—separates from the user departments, including the finance department, service centers and IT department. The APD reviews bidding documents and prepares reports and seeks approvals from relevant committees and the independent Tender Board.
Sze heads both procurement and finance, but he is careful to keep his two hats separate. For high-value transactions, an additional approval process is required by an independent tender board.