ST Marine was never debarred from bidding on government contracts despite massive graft scandal

The Ministry of Finance (MOF) has clarified that the reason why ST Marine is still allowed to procure government contracts even after it was involved in one of Singapore’s largest corporate graft scandal that broke in 2014 is because the Corrupt Practices Investigation Bureau (CPIB) did not find any offences related to government contracts or agencies.

A tender from the Ministry of Home Affairs for the construction of 12 aluminum hulled patrol boats with the option to supply and maintenance of the boats for a firm period of 15 years with the options to extend for another three years, was awarded ST Marine in 2017. The company is the marine arm of defence and engineering group Singapore Technologies Engineering (STE) and 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. In our previous reports, we highlighted that 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, while ST Marine has no recent experience in supplying aluminium boats.

And according to the Standing Committee on Disbarment (SCOD), chaired by the Deputy Secretary of Finance (or his deputy), corruption offences are investigated by the CPIB and any company convicted of corruption involving public tenders with the government will be debarred and disallowed from participating in any future bids.

Note that back in 2017, former ST Marine group financial controller Ong Teck Liam as well as six other former ST Marine senior executives were convicted for 2014 corruption scandal for covering up and accepting bribes up to at least S$24.9 million between 2000 and 2011. So we found it puzzling as to why ST Marine was not barred to participate in the tender and winning it eventually, despite the conviction in the same year.

We had earlier reached out to MOF for their comments but to no avail. However, in the report (subscribers only) by Straits Times which pointed to TOC’s earlier reports on ST Marine, a MOF spokesperson said, “In this case involving ST Marine, CPIB’s investigations did not reveal any connection with a government agency or contract. Hence the CPIB did not recommend to SCOD to debar ST Marine,”

So it turns out that just because the corruption scandal did not involve any government contracts or caused any losses or damages to government agencies, ST Marine was allowed to continue throwing their hat into the ring and bid for government contracts, at least that’s what the SCOD guidelines say.

Also, according to the Defence Science & Technology Agency (DSTA) website, there are clear Defence Procurement guidelines which states that any company found guilty of corruption will be barred from obtained any new contracts or tenders from the government. ST Marine certainly fits the bill here as DSTA doesn’t differentiate between corruption involving government and non-government contracts.

So should the SCOD guidelines be re-evaluated? What message is the committee sending when they accept a bid and award a major contract to a company mired in scandal just because the government wasn’t affected by those shady dealings? CPIB, the agency that is supposed to recommend the debarment is under the Prime Minister’s Office headed by PM Lee Hsien Loong whose wife is the head of Temasek holdings, which basically governs ST Marine. Not to say that any wrong is committed here but the conflict of interest is glaring in this instance.

Earlier on, we also questioned the value of the contract that was awarded to ST Marine. The contract was for a shipbuilding project estimated at about S$203.7 million to build and maintain several vessels for the Police Coast Guard (PCG) according to the MHA 2018 budget estimate. However, ST Marine was ultimately awarded their quotation price of over S$300 million.

Responding to queries from ST, an MHA spokesperson clarified that the budgeted S$203.7. million was for ‘project capital cost’ which is an item under MHA’s Development Expenditure estimate. Apparently, this does not include the operating expenditure estimate for maintenance.

MHA said, “The total awarded value to ST Marine, on the other hand, which was about $316 million, includes the capital cost as well as the recurrent operating costs required for the comprehensive maintenance of the 12 boats for up to 18 years.”

The spokesman also said that other factors are considered when evaluating a tender such as the price quoted and the company’s experience.

Now, speaking of experience, the MHA has yet to address ST Marine’s experience in this type of shipbuilding, or lack thereof. According to industry experts, ST Marine has no recent experience in supply the aluminium boats as required in the contract. So is MHA paying up for that inexperience? MHA also has not replied to TOC’s queries about the progress of the project.

The other thing that we still don’t know is why MHA took so long to notify other bidders that the contract had already been awarded. 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. However, the other suppliers were only notified more than 120 days later when they received an automated email telling them that the bidding period has ended.