Did the MND review report on AIM transaction answer questions?
By Terry Xu
Just on Friday, Ministry of National Development released its long awaited review report on the AIM transaction after a further extension from the previous scheduled release date 4 days ago . The review had been called upon by Prime Minister Lee Hsien Loong on 9th Jan 2013 after growing public criticism over the tender for the 14 town councils’ software management contract being awarded to Action Information Management (AIM) Pte Ltd, a company owned by Peoples’ Action Party (PAP) in 2010.
In the last statement which The Online Citizen released on the AIM transaction in Jan this year, we highlighted a series of problems on the Coordinating Chairman of the PAP’s town councils, Dr Teo Ho Pin’s statement on his clarification for the transaction with the town councils. TOC delivered the same questions from that statement to Dr Teo’s email on 23rd January but we have not heard from him till date.
So looking at the 37 page review report released by MND, have our questions been answered?
Conflict of interest, in PAP-controlled Town Councils awarding a key contract to a PAP-owned company.
On page 6 and 7 of the report, the reports writes,
TCs were set up for, and fulfil a political purpose, and therefore latitude has always been given to TCs to exercise autonomy, where they see fit, in engaging those who share their political agenda or are affiliated to their parties. The substantive issue is therefore whether a conflict of interest arose in terms of TC members having a pecuniary or direct interest in the transaction, and whether the interests of the TCs’ residents were protected or impaired and whether there was any misuse of public funds.
MND review team states that it is perfectly fine for the town councils to engage companies that are affiliated to the political parties if there is no conflict of interest in the transaction.
But is it really fine for town councils to be given a green light that engaging parties which has affliation with the political parties is acceptable by norms? It might seem fine since PAP prides itself being morally upright and incorruptible in running of their town councils but what if someone along the road decides to abuse the system to follow the same form of engagement?
The ministry also states in the report
The Review Team has also verified that AIM did not make a profit from the transaction and its Directors were not paid a fee. AIM made a loss during the one-year sale and leaseback arrangement from the 2010 contract. For the subsequent extensions, AIM’s management fees essentially covered the costs of the headcount required to fulfil its role in support of the TCs.
42. The Review Team found no pecuniary or direct interest on the part of any of the TC members in AIM. There was also no indirect interest on the part of the TC members in the AIM contract; the TC members did not have a financial or commercial interest in the contract that AIM was awarded
Therefore MND concluded that from their findings that there is no conflict of interest.
But does it require for monetary profit from the transaction to prove that there is indeed a conflict of interest? Why not define interest in form of political objectives? It seems that AIM made selfless sacrifices on its part to support the town councils but would any sound company do such form of business transaction? Is it not weird that a company would choose to bid and carry out services which would lose money by fulfilling its obligation to the contract?
Despite not having to come to a clear definition of whether or not, the TCs management software is considered as public property. Is it not a concern that a property that might be classified as public property be transferred as assets under a company owned by a political party?
The failure by the PAP-controlled Town Councils to ask for a performance bond or banker’s guarantee from a $2 company that was buying and licensing-back a mission-critical piece of software.
In the report writes that for the evaluation of AIM’s Bid: The PAP TCs’ Town Council IT Committee evaluated the tender based on the following criteria:
a) Track record of company in similar IT contracts;
b) Experience of Directors and/or key staff of the company in Town
Council operations or relevant IT based operations;
c) No outstanding legal issues against the company; and
d) Financial capacity to honour the contract.
Through ACRA, we discovered that Action Information Management (AIM) Pte Ltd is a company that has a mere $2 paid up capital, all three directors are ex-PAP MPs , the mailing address of the company is the same with PAP’s Headquarters at New Upper Changi Road and we wonder how all this would have seem right for the evaluation process by MND.
The absolute lack of detail in the tender notice, and the reported lack of detail in the tender document which cost $215. Why there is a discrepancy between the date on which AIM submitted its bid (20 July 2010) and the stated closing date of the tender period (14 July 2010).
The report explains the apparent discrepancy between the date on which AIM submitted its bid (20 July 2010) and the stated closing date of the tender period (14 July 2010) was due to a extension of the closing date to 21st July 2010 and that a 3 week notice period was given to all the tenderers on 30 June 2010.
Point 22 on page 16 of the report states,
No written reasons were given for non-participation by the other companies who collected the tender documents. However, the TCs were informed verbally that the reasons for non-participation included the limited value of the developed software outside of the TC context and that the purchase did not give assurance of the continuity of providing service to the TCs.
Though an explanation has been given for the lack of bids from the other tenderers but it is unclear if MND had approached the vendors for their account of the story since the reason given seems to have originated from a recount of verbal statements from the town councils rather than the interested tenderers themselves.
And the report still does not really answer why the tender advertisement looks more like a sales advertisement than a tender for software management contract.
The finding that the Town Council Management System was obsolete and needed replacement in 2010, when it continues to be used, and hence presumably perfectly functional, in 2013 and the long delay in replacing the supposedly obsolete TCMS, with the PAP-controlled Town Councils not even having selected a vendor 2.5 years after deciding that it was necessary to replace the TCMS.
MND addressed these two issues on page 14 and 18 of the review report. Stating the delay to replace the obsolete software was due to considerations on how to proceed with the redevelopment of the town council management system. While the review report covered on how the consultant firm derived the need to replace the software in 2010, the process of the extension with AIM and the cost involved with the extension. There still seems to be a missing explanation on why the town councils took 2.5 years to finally decide to call for a tender to redevelop the software while still engaging AIM to manage the software in that duration.
The payment of the management fee of $33,150 to AIM, the lack of information on how the management fee of $33,150 paid to AIM was used by AIM and how the incurring of this obligation was beneficial to the residents of the PAP-controlled Town Councils.
Covered in page 18 of the report, the payment of the management of $33,150 was explained to be for the services provided by AIM.
This was for the whole suite of services they provided during the extension period, which included securing extensions from NCS at the existing rates, advising on redevelopment options and preparing the new tender specifications. The management fee of $33,150 was to cover the cost of AIM’s staff and other expenses such as audit fees.
With the understanding that AIM operates from PAP HQ and the background of the company, I wonder how many number of staff does AIM employ apart from the directors. Did AIM use the sum of money to pay the staff managing the software and were there other projects which AIM has taken up on during the course of the one and a half year, if there were no other projects during this period for the company – then how did AIM manage to pay for the salary of the staff? Did AIM exist for any particular purposes as it does not seems to be for financial gains from the looks how it runs business.
Ultimately, has MND questioned if the management of town councils could have been able to manage the management software themselves to save this fee?
Problems not covered in the MND review report
One of the problems which the MND review report did not cover is the failure by Dr Teo and Mr Chandra Das to disclose the payment of this management fee to AIM at the earliest possible opportunity, especially when they were highlighting the “savings” of $8,120 from selling the TCMS to AIM and licensing it back.
Along with the apparent lack of independence in having the Ministry of National Development review the AIM transaction, as MND is the same body that oversees Town Councils. Why was MND asked to review the transaction instead of an independent third party auditor?
And furthermore PAP has not come out in the open with the public about the companies that it owns, what they do, the persons who benefit from their operations, and their business dealings (if any) with PAP-controlled Town Councils and government agencies, in particular the previous contracts between AIM and PAP-controlled Town Councils that Mr Das has alluded to.
The Ministry of National Development might have finally produced the review report on the transaction, and the Prime Minister has since announced through the media that there has been nothing wrong found about the transaction from the report. But there are still many questions about the whole saga that remains unanswered and it would take a lot more than just a review report to convince the general public that all is fine and dandy.