A different look at this AIMishambles

By Jimmy Chan –

AIMgate is such a clichéd term; I prefer AIMishambles to keep up with the times, after the Oxford English Dictionary 2012 Word of the Year omnishambles. The term refers to “a situation which is seen as shambolic from all possible perspectives” and is a fitting one to describe not just the original PAP town councils-AIM transaction, but also the government’s response so far.

A lot has been said online but nothing much new since Dr Teo Ho Pin’s statement besides the brouhaha on the threat of defamation suits. There isn’t much value in the discussion when everyone is saying the same things on social media while the government is not saying much. So let me play the devil’s advocate and comment on some of the things said online, and offer some alternative explanations. Just keep an open mind and don’t shoot me for saying them.

Dr Teo’s statement

A lesson one learns from working in a corporate environment is to keep email replies as short as possible lest they invite further questions. While Dr Teo’s statement skipped over critical issues, it also gave information that it didn’t really need to, such as the consulting advice from Deloitte and Touche and the versions of software the TCs are using.

It was a little unnecessary for netizens to go on an almost line-by-line rebuttal of Dr Teo’s statement. Some of the things he said were business decisions which on hindsight are always easy to criticise. Some other faults, such as using outdated software and taking too long to build new ones, are ailments many organisations suffer from.

If we go on a fault-finding mission every time they explain something, PAP will think that online voices are irrational and that it is pointless to issue any more statements to clarify further because people will just find other details to pick on. Focus on the questions that are unanswered, the key one being the conflict of interest that the mainstream media and Grace Fu tried to distract us from.

Missing information

Two key pieces of missing information are how much was the initial project with NCS to build the software, and how much is the maintenance fee paid to NCS on top of the $140 monthly per TC to AIM. It is plausible and not unreasonable that PAP might not want to reveal these information because these are details of separate business dealings with a third-party company NCS, unless they are forced to do so by an inquiry.

Financials of the deal

I maintain my view in a previous post that the financial terms behind the deal as revealed by Dr Teo do not look improper. This is assuming that $140,000 is the right valuation for the software. A lot has been said online that the TCs actually ended up paying $25,030 to AIM despite Dr Teo’s claim that they made a modest profit of about $8,000. While Dr Teo can be faulted for misleading, he isn’t exactly wrong to say that because he was referring strictly to the sale-and-leaseback transaction.

Some netizens are asking why the TCs ended up paying $25,030 net to AIM. I’m not sure what they are expecting. Despite the misgivings we have on its political ownership, AIM is providing a service to the TCs as middleman. It has to pay its two part-time staff providing this service and other overheads. That’s about $2,000 a month in total from 14 TCs. Is that too much for two part-time staff? I don’t think so, even if we don’t know exactly how much work it entails.

Think about it—the transaction would raise a lot more suspicion if AIM is making losses despite this service it provides.

Essentially, after the sale-and-leaseback that lapsed in one year, AIM is no different from a resource agency that provides contract project managers, and gets paid for it. $2,000 is not a lot of money to cover two staff and overheads, so what Mr Chandra Das said about not making any profits for the directors is believable.

The $2 company

We risk digressing from the main issue of AIM being PAP-owned if we keep going on about it being a “$2 company”. Looking at the nature of the transaction, AIM paid the TCs $140,000, as confirmed by Mr Chandra Das, and in turn earned back monthly leasing fees. If somehow AIM had defaulted because it was just a $2 company, the TCs would not have lost any money because they had received the upfront payment.

So the default risk faced by the TCs was not high once AIM had paid the initial sale amount. Of course, the TCs could lose the use of the software if AIM defaults, but they face the same risk with a short notice of one month if AIM decides to terminate the contract. So AIM’s financial setup in terms of paid-up capital isn’t really a big concern at all.

In fact, AIM faces a much greater risk of being left with a potentially useless piece of software if the TCs terminate the contract, which may be another reason why other vendors chose not to bid for the project.

The tender process

One suspicion going around is that the tender process was rigged with the award predetermined to go to AIM. My hunch is quite the opposite: that no vendors wanted the project and AIM ended up picking up the pieces as a favour to the TCs. This theory is supported by the fact that their bid was submitted after the tender closing date. If the tender was to go to AIM all along, it would have had the bid ready way before the closing date.

I don’t believe there’s much value in the software after it is retired, which if I’m not wrong is just a customised Oracle ERP module. The $25,030 amount made by AIM over more than two years is quite a pathetic sum that bigger companies such as NCS won’t bother with. So it was left with the smaller SMEs who might be interested, and the SMEs quite rightly regarded it too much of a risk to guarantee that rates with NCS wouldn’t change, plus the risk I mentioned previously of the contract being terminated prematurely by the TCs.

Were the requirements of the tender too stringent then? Probably. One of the companies who collected the tender documents said that there was too little information in them to make a judgement call. So it looks like the tender wasn’t prepared properly, and this again supports the theory no companies bid for it as a result and AIM then took on the contract.

If this is correct, it may be why PAP is so reluctant to reveal more—because they took the easy way out and awarded the contract without a second tender. But it would be nothing as sinister as what some are speculating.

Motivations for deal

If the above is correct, the question is then why are the TCs so desperate to sell away the software after an unsuccessful tender call? Honestly, there could be dozens of possible reasons.

For example, there could be cash flow problems and an urgent need for cash that the sale proceeds would generate. This would be worrying for residents but seems unlikely because the amount was not sizeable compared to the balance sheets these town councils are carrying.

Perhaps no TC wanted to take ownership of the managing of the relationship with NCS, so collectively the convenient thing to do was to outsource this ownership?

The most likely reason as I see it is the database jointly owned by the TCs that contains sensitive financial data. Co-ownership of such an asset by PAP and opposition TCs becomes very tricky if you don’t want the other party to be privy to your finances. How do you deny AHTC the right to access the database if it has equal ownership to it? So to sell it to a third party is a smart thing to do so that no TC can claim this right. Now that it belongs to AIM, a PAP-owned company, AHTC quite rightly decided to build their own software and database as well in order to protect their own sensitive data.

The point is, while many are seeing this sale of a town council asset as a political move to make things difficult for the opposition, it could just as well be for more innocuous reasons such as poor business decisions, a badly managed tender process or necessary protection of data. Surely, if the intention was to “fix” the opposition, there are better ways to do that than with an old piece of software.

Regardless of the intention, though, this was a deal that should never have happened because of the potential conflict of interest due to AIM’s ownership. While the government must shed more light on this AIMishambles it is now facing, we should not just read things the way we want to read them, and be prepared to accept explanations that are less exciting than our conspiracy theories.