Lapse in notification for MHA tender project and the question of why was ST Marine awarded 55% higher than estimated budget

In July 2017, the Ministry of Home Affair (MHA) put out a tender for a shipbuilding project for the Police Coast Guard (PCG).

The tender called for a firm order of the construction of 12 patrol boats with the option to supply and deliver a further five boats. It also called for maintenance of the boats for a firm period of 15 years with the options to extend for another three years.

MHA decided to award the tender to a company called ST Marine, the marine arm of defence and engineering group Singapore Technologies Engineering (STE). Temasek Holdings is the controlling shareholder of STE.

The GeBiz document that TOC obtained showed that ST Marine was competing against at least five other shipbuilders – Damen Shipyards, Lung Teh Shipbuilding, Naval Group Far East, Odyssey Marine, and Strategic Marine. GeBiz is the government’s e-procurement portal where suppliers bid on tenders posted by the government.

According to Business Times, this tender is ST Marine’s most significant shipbuilding contract win in months. Back in December 2016, ST Marine won a contract via joint bid with Penguin International to supply three reserve vessels, two small aluminium boats and one heavy marine fire vessel for the Civil Defence Force. Penguin International undertook the construction of the aluminium boats while ST Marine handled the steel vessels.

For this project with the Police Coast Guard, TOC understands that Penguin International had intended to participate in the tender process but they were dropped due to late submission.

BT’s source noted that this new contract with the PCG will see ST Marine build aluminium boats for the first time in years.

The tender process for this new contract begun in July 2017 and closed in November that same year. The bidders were only notified that the contract had already been awarded when the automatic system notification from GeBiz emailed them about the closure of the tender bid.

Now, according to the Government Procurement Regulation 2014, a contracting authority – in this case, MHA – has to publish a notice to announce that the contract has been awarded no later than 72 days after the award was given.

But in this case, MHA took much longer than the required 72 day period to notify the other bidders that the contract had already been awarded. In fact, the other suppliers were only notified more than 120 later. So why did it take so long for MHA to make the announcement given that the contract was awarded in July last year?

Not only that, there is also the curious case of the contract being awarded to ST Marine in the first place.

The project was estimated to be S$203.7 million according to MHA’s 2018 budget. However, ST Marine’s was awarded the contract with their bid of S$312.7 million – about 55% more than the estimated. In fact, BT had said in their article that the amount awarded to ST was ‘up to S$400 mil’. According to industry experts whom TOC spoke with, this is likely due to MHA taking up the option to purchase additional boats and extension of maintenance period.

Still, this begs the question of why MHA chose to award the contract to the Temasek-held company which has no recent experience in supplying aluminium boats and at an amount significantly higher than the original tender?

Damen Shipyards, Lung Teh Shipbuilding and Naval Group Far East are all established international shipbuilding companies with strong experience backing them up. Strategic Marine, a local shipyard, is also a well-established aluminium boat yard that has built a significant number of boats for PCGs before. Why were they passed over for ST Marine?

TOC has written to MHA for their comment on the tender award and to seek clarification on the progress of the project. As according to the project timeline, ST Marine should be well underway with construction. It’s possible that the significantly higher cost quoted by ST Marine is based on their ability to fulfill the order faster than the other suppliers said they could. But if that is not the case, then the basis for this tender award to ST Marine seems dubitable.

We have also reached out to the Auditor General’s Office and the Defence Science and Technology Agency which oversees GeBiz for their comments regarding the lapse of the 72-day time limit for the notice of award of contract.