The Aljunied-Hougang-Punggol East Town Council (AHPETC), run by the Workers’ Party, “will be embarking on direct management” of the town council from July 2015, says an open letter to residents issued by the town council’s chairman, Sylvia Lim.
The decision for direct management was made because there were no takers to the town council’s call for a managing agent in a tender exercise last November.
“We will do our best to keep costs down and protect AHPETC’s long-term financial interests,” Ms Lim, who is also chairman of the WP, says.
The 15-page, four-language letter, which also appears in the latest issue of the AHPETC’s quarterly newsletter, “Good Neighbours”, says that “despite the challenging political climate”, the town council will continue to serve residents to the best of its ability.”
AHPETC would be the second town council to embark on direct management, after the People’s Action Party (PAP) town council of Bishan-Toa Payoh.
The bulk of the AHPETC letter, however, dealt with “misconceptions” which had surfaced in recent months, including charges made against the town council by ministers.
Contracts given to “friends”?
On the charge that AHPETC had allegedly given contracts to “friends”, Ms Lim said it has not.
She says that public tenders were called in 2012, 2014 and 2015 for Managing Agents (MA) and Essential Maintenance and Services Unit (EMSU) services.
“Anyone can submit a bid for a public tender,” the town council letter says. “AHPETC does not and cannot reserve contracts for friends in a public tender.”
Ms Lim then explained why a tender was not called for MA services for the period of July 2011 to July 2012.
AHPETC had taken over the town council after the general elections which took place in May 2011.
The contract was awarded to the then newly formed FM Solutions and Services (FMSS), which consisted primarily of managers and staff from the former Hougang Town Council, Ms Lim says.
“This was in order to ensure a smooth takeover of town management in view of the short time on hand to do so and to avoid any disruption in services to the residents.”
That year, the PAP-run Potong Pasir Town Council had also foregone a public tender for a managing agent. The town council was formerly run by the opposition Singapore People’s Party before the 2011 elections.
“Not calling a public tenderfor an MA contract is allowed under Para 76 of the Town Councils Financial Rules,” Ms Lim’s letter to residents says.
“However, the town councillors did not award a standard three-year MA contract to FMSS at this point, as the Town Council intended to call for a public tender for MA services as soon as possible after takeover of town management has been completed and operations have been stabilised.”
AHPETC “overpaid” MA? Did PAP TCs overpay MAs?
Ms Lim then turned to the allegation that it had “overpaid” its MA, FMSS.
Government ministers have claimed that AHPETC had “overpaid” FMSS by an estimated S$1.6 million a year, and an estimated S$6.4 million over four years.
In particular, Ms Lim pointed to the charts presented in Parliament on the debate on the Auditor General’s report by Law Minister K Shanmugam.
Ms Lim’s letter republished the said charts.
The letter then went into the details of how PAP town councils charged for MA services, and why AHPETC had paid the rates for their own MA.
Ms Lim noted that “MA rates of PAP town councils in 2014 were lower compared to preceding years for six TCs.”
“In 2011, there were eight PAP TCs with MA rates per residential unit over $6, and nine in 2012 and 2013.
“In 2014, the number dropped to five and the ‘weighted average’ MA rate in PAP TCs was the lowest.”
Ms Lim also observed that in 2013, MA rates per residential unit “dropped drastically in 2014 for four PAP TCs even though the MA did not change.”
“East Coast from $6.30 to $5.10; Moulmein-Kallang from $6.63 to $5.80; Pasir Ris-Punggol from $6.25 to $5.50; and Potong Pasir from a high of $7.80 to $5.80.”
For commercial units, Ms Lim noted that prior to 2014, “some MAs of PAP TCs practiced [sic] charging a higher rate for managing commercial property compared to residential property.”
“For example, the MA rate for commercial units at East Coast and Pasir Ris TCs were $11.50 when the residential rates were in the range of $6,” the AHPETC letter says.
In 2014, this practice was apparently changed – all MAs managing PAP TCs adopted a flat rate for both residential and commercial units.
“Hence, by taking the 2014 rates only, the commercial rate of $14.92 for AHPETC stood out compared with the flat rates of PAP TCs,” Ms Lim says.
“In any case, if we use the same logic of the ministers to derive at ‘overpayment’ estimates, PAP TCs such as Tanjong Pagar (77,300 units), Nee Soon (65,000 units) and Sembawang (67,000 units) are also overpaying their MAs by around $860,000, $530,000 and $550,000 a year respectively.”
Ms Lim says she is not alleging that the three PAP town councils are in fact overpaying their MAs.
“My point is that comparing the MA rates of a TC to the ‘weighted average’ of MA rates for all TCs is not a good way to judge the fairness of rates charged by the MA,” she explains, adding that the charts presented to Parliament reflect the different geography and requirements of each town councils.
Using former PAP ATC as reference point
Ms Lim explains that AHPETC had used the rates charged by the PAP’s town council, Aljunied Town Council (ATC), prior to the PAP’s defeat in the constituency in the 2011 elections, as reference point for its own rates.
The ATC had used CPG Facilities Management (CPG) as its MA then.
When FMSS took over the running of the town from CPG in 2011/2012, the contract was based on the rate agreed between ATC and CPG.
“In other words, our contract with FMSS was substantially the same as CPG’s contractual MA rates for the second year, $6.37 for residential unit and $12.80 for commercial unit,” Ms Lim says.
However, Ms Lim also explains that there was a second cost component to be considered for the contract – the costs of the taking over of existing staff of the former Hougang Town Council at their then existing salary and also the costs of some additional staff to help with the handover.
Contracts 2012 and 2014
For its tenders for MA services in 2012 and 2014, AHPETC did not receive any competing bids.
“Only FMSS submitted a bid for our public tender for MA in 2012,” Ms Lim says.
“In the absence of a competing bid, we again returned to the CPG contractual rates and used the third year rate (2012) as the reference point.”
The contract was awarded to FMSS at the rate of $7.01 for residential units.
This rate represented an estimated “premium” of approximately 4 per cent compared to the third year CPG rate of $6.73.
One of the reasons for this was the need to operate an additional TC office in Kaki Bukit, and that FMSS had a “lower economies of scale” because it was a smaller operator, compared to CPG.
“We were also aware of the MA rates in several PAP TCs being in the range of $6 to $7 at the time of the tender, ie in 2012,” Ms Lim’s letter says.
“The subsequent rise in FMSS’ contractual MA rate from $7.01 in 2012/2013 to $7.43 for 2013/2014 for residential units mirrors the annual 6 per cent rise in the CPG contractual MA rates for residential units,” she added.
“To summarise, our contractual commitments with FMSS have been based on strict reasoning using available market information in 2012 when tender was called in the absence of competing bids, while placing residents’ interests in undisputed services at the forefront,” Ms Lim says.