Insider information in tendering
A young engineer was tempted by a sub-contractor during a tendering exercise. The sub-contractor offered him a handsome financial assistance for his new flat in exchange for leaking insider information.
David worked in a construction company as a junior engineer after graduation. Through work, he became close with a subcontractor Mr. CHAN who often treated David lavish dinners and free trips to Macao. The two got along famously.
Recently, David’s company was conducting an open tendering exercise for a multi-billion project in Lantau, which Mr. CHAN was very keen. David was responsible for collecting the price quotation documents for the project. One day, Mr. CHAN invited David to a lavish dinner over which he made a proposal to David. He asked David to go through the quotations secretly and leaked him the price of the lowest bid. Then he would submit an even lower price just before the closing time to ensure the winning of the tender.
Knowing that David needed help for the down payment of his new flat, Mr. CHAN promised David a handsome contribution to the down payment if David helped him out. He also persuaded David that he was just as good as anyone else and that it would be a ‘win-win’ situation for both of them. David really needed a hand financially, and he did not want to sabotage the excellent relationship with Mr. CHAN.
Should David say yes to Mr. CHAN? Would this be illegal? Would it harm anybody in anyway?
Case Analysis
Under Section 9(1) of the Prevention of Bribery Ordinance (Cap.201) (POBO), it would be an offence if David (i.e. agent), without the approval of his employer (i.e. principal), accepted the advantage (i.e. the financial assistance to the down payment of the new flat) as an inducement to assisting Mr. CHAN to get the tender. Meanwhile, Mr. CHAN might also be liable for promising to offer bribes to David under Section 9(2) of the POBO.
By leaking the insider information to Mr. CHAN, David might also breach the Rules of Conduct of the Hong Kong Institution of Engineers, which prohibited engineers from disclosing confidential information and required them to act in the best interest of the employers.
Corruption would impair fair competition and put public safety at stake. The quality of work would be in question as the sub-contractor was not chosen by an objective assessment of its competence and capability. To uphold professional ethics and avoid breaching the law, David should say no to Mr. CHAN’s request and report the matter to his company and/or the ICAC.
Case in Perspective
Leakage of sensitive or confidential tender information (e.g. bid prices) by compromised personnel to favour a particular bidder will undermine fair competition and integrity of the procurement process. To prevent such malpractice, the company should establish a robust procurement system to ensure the selection of the most suitable contractor based on merit. For example,
(a) Take precautionary measures to prevent leakage of tender information, such as receiving tenders through secure electronic channels with the password split and separately held by different staff members, and tasking an independent team to witness tender opening;
(b) Prohibit the opening of tenders received before the deadline, and ensure tenders remain in the custody of designated officer to minimise the risk of information leakage;
(c) Accept late tenders only with the endorsement of the management (or the tender board, if any) on justifiable grounds;
(d) Require staff involved in procurement to declare whether they have any conflict of interest in the matter, and manage any declared conflict to mitigate integrity risks; and
(e) Maintain proper documentation of the tendering process, including but not limited to meeting minutes, tender evaluation and negotiation, correspondence, and declaration and management of conflict of interest, to facilitate independent audits and ensure accountability.
