Sylvia Lim
MP for Aljunied GRC
13 May 2013
Parlimentary Speech
This debate has been triggered by the controversy surrounding the sale of town council management software (TCMS) by 14 Town Councils managed by the People’s Action Party (PAP) to Action Information Management Pte Ltd (AIM) in 2011 prior to the General Elections.
I would like to thank the Prime Minister for acknowledging the public interest in this matter and for ordering the Ministry of National Development (MND) to investigate and to do a broader based review of the nature of Town Councils (TCs). I would also like to record thanks to the Ministry officials for their efforts.
Where do we stand today, after the review? MND’s findings cleared the AIM transaction but highlighted areas for strategic review of TCs. It seems, however, that members of the public who have been tracking this issue are still asking critical questions, and many are not convinced that the 14 PAP TCs acted in the public interest when they sold the TCMS to AIM.
It is necessary to debate this matter calmly and clearly, to enable the public to understand the issues more fully and realize what is at stake. That was why I re-filed an adjournment motion last week. The government’s subsequent decision to enable the matter to be debated under Standing Order 44 is belated, but it is the correct thing to do.
WP’s and AHPETC’s Basic Position on MND’s findings
Let me first summarise how the Workers’ Party and Aljunied-Hougang-Punggol East Town Council (AHPETC) view the MND findings before elaborating. I shall thereafter make recommendations for the review.
First, we do not agree with the findings regarding the AIM transaction that public funds were safeguarded and residents’ interests had not been compromised.
From our reading of the documents available to us, there were aspects of tender suggesting it failed to follow the spirit of what an open tender should be. Further, the terms of the sale of the most critical town management IT system had unnecessarily endangered public welfare, particularly the relinquishing of ownership to AIM with the one-month termination clause. MND fell short in not admonishing the PAP TCs for risking disruption to the public in the name of politics. MND also did not take cognizance of the wastage of public funds incurred when such terminations required replacement systems to be set up. In addition, the one-year sale and leaseback was clearly an underestimate of the time needed to re-develop a new TCMS; the fact that the one year happened to straddle GE 2011 suggests that whatever “good faith” the TCs had in the sale to AIM, there were political objectives in crippling any new TC leadership of a different political affiliation, hence endangering the public in the process.
Second, as regards the MND’s recommendations for a review of TCs, we find that while they will improve continuity of services during a handover of TC management, the recommendations do not go far enough to prevent wastages of public funds. MND should entrench principles to recognize the public nature of assets being handled by TCs which should be safeguarded for public benefit, regardless of party politics.
Genesis: Why TC issues were raised by WP and AHTC in December 2012
Before I go further, I should at the onset state WP’s position concerning town management and why we brought the AIM sale to public knowledge in December last year.
WP MPs are committed to being politically accountable to voters for town management under the current regime. Whatever else is done in other countries, the responsibility for town management has been legislated to the MPs under the Town Councils Act. We accept this responsibility and have pledged during elections to manage towns entrusted to us to the best of our ability. We intend to continue keeping this promise.
We raised the sale to AIM after the MND released its banding of town councils under the revised TC Management Review framework in Dec 2012. Contrary to what some PAP members have charged, it was not raised as an excuse for non-performance, nor are we asking anybody to wait 24 or 30 months or 5 years for us to perform. AHTC was actually ranked well and comparably by MND in the areas of cleanliness, maintenance and lift breakdowns – the critical functions residents care most about. The main point which required public explanation was that the new indicator of “Corporate Governance” was graded as “pending”, as our auditors took much longer to complete their work. This was due to the need to reconcile accounts being kept under two different IT systems with differing nomenclature.
We do not believe that the AIM sale served the public interest, and the public deserved to know about this and assess it for themselves. We find it unacceptable for any TC to relinquish control over critical TC assets developed with public funds to third parties, who can cut the TC off from using the assets to service residents. In our view, the PAP TCs had unjustifiably risked a disruption to public services and that this should not be allowed to recur. I am relieved to read that the MND recognized the need to preserve continuity of public services as a paramount priority. The question is: why did the PAP TCs not recognize the risk of service disruption when selling the TCMS to AIM?
AIM Transaction
Let me now go into some detail about our misgivings concerning the AIM transaction.
Reasons for the sale
The reasons given by the PAP TCs for the sale of software and the intellectual property (IP) raise more questions than answers.
They told MND (MND report paras 17 to 19) that having the software rights reside in a single entity was better than having the vendor deal with 14 TCs which would be “cumbersome and inefficient”. But surely this can be easily overcome, since the PAP TCs have a Co-ordinating Chairman who can co-ordinate to ensure the proper authorisations? The TCMS was developed with $23.8 million of TC operating funds (MND report para 13); surely there is reason to retain ownership and control over it for the residents in the 82 electoral wards then under their charge? Much ado is being made in the report that the second generation (2G) TCMS was “almost obsolete and had limited value” (MND report para 19), but does this mean it is of limited value to the TCs using it now? If the system ceased to function without replacement, TC operations would grind to a halt! Another incomprehensible justification is the saving of $8,000 for the 14 TCs that arose from the sale (MND report para 26(a)). The $8,000 saving is the difference between the $140,000 paid by AIM and the sums paid by the TCs back to AIM during the one year leaseback. This total “saving” of $8,000 shared among 14 TCs amounts to about $571 per TC. Is saving $571 significant enough reason for a TC to sell a system?
Tender Terms
It was emphasized in the MND report that the choice of AIM was made after an open tender (MND report para 20, 21). Was it an open tender in substance?
The tender was advertised and 5 companies picked up the documents. However, a closer look at the Conditions of Contract will reveal that the specifications required each of the directors of the tendering company to have “adequate experience with the operations and functions of a Town Council”. I wonder how many companies in the software business in Singapore can say that all their directors have TC experience – perhaps only AIM?
The tender period was advertised as 14 days (MND report para 20), shorter than the minimum period of 3 weeks for local tenders required under the TC Financial Rule 74(6). It was then extended by another week to give 3 weeks. Why the initial period advertised was one week less than the minimum was not explained at all in the MND report.
In addition, one of the companies which picked up the tender forms had told the media that there was insufficient information in the tender documents to make a decision whether to tender (The New Paper, 5 Jan 2013, page 6).
Risk assessment of AIM
The PAP TCs told MND that one of the key reasons for selling the software to AIM was that AIM agreed to bear the risk of any price increases by NCS in maintaining the software, even after the original contract with NCS expired (MND report para 25(b)). We have not been able to find this exact clause in our documents. However, even assuming so, on what objective basis did the PAP TCs assess that it was safe to entrust this risk of cost increases to a company with a paid-up capital of $2? Who will pay in the event of a cost increase? What about the risk of AIM being wound up?
The PAP TCs highlighted AIM’s “track record”, but based on the tender documents we have seen, AIM listed only one prior project, also a sale and leaseback. When AIM was asked to fill in a table indicating the identities of their key technical and professional staff, a line was drawn across the table with only one word typed in: “Outsourced”.
Duration and timing of sale and leaseback
MND noted (para 5) that the TCs “underestimated the complexity of the task of developing the new generation TCMS software”. We find this quite puzzling, since the TCs had experience in developing the 1st and 2nd generation TCMS and should have known that one year was too short. Now, as MND has noted, 2 extensions were required after that (para 5), and a fresh tender was only called this year in 2013. Was there any re-development work from 2011 to now?
The timing of the sale to commence a few months before the General Elections in 2011 also calls for explanation. Was it a pure coincidence? Or was there simply a need to sell the software quickly, so that termination can be effected if political seats were lost? Let me now turn to the termination clause.
Termination clause
The reasons given by the PAP TCs for the one-month termination clause (MND report, para 3(e)) are plainly unconvincing.
First, no attempt was made to explain why a material change in membership of TC should allow unilateral termination by the contractor with one month’s notice. It is unfortunate that MND did not seem to query this, as this is the crux of the exchange between the PAP and WP. Could it be that there is simply no good reason to give?
Some attempt was made to explain why termination may be fair in the case of a change in boundaries: it was said that the contractor might be faced with a much larger town than anticipated, but be held to a fixed price to his detriment (MND report para 3(e)). I am not sure why there was this worry. At that time, the TCMS was being developed for the whole of Singapore except 2 SMCs viz. Potong Pasir and Hougang. In addition, the contract itself already provided for a variation in price based on the number of property units!
The real sting of the termination clause lay in its one-month notice period. Is a one-month termination reasonable for a critical IT system? It is quite clear that time is needed to develop a system of this complexity – in the PAP’s own estimation, 18 to 24 months. Did the PAP TCs not realize that this aspect of the AIM transaction endangered the continuity of public services? Or perhaps that was the intention in the case of a change in political leadership?
It was fortunate indeed that the WP could use the IT system in place in Hougang TC and upscale it within a much-abridged time to cater for a town of GRC magnitude. What if a constituency was won by a political party not running any TC, or by an independent candidate? Or is the continuity of public services not important to the PAP once they lose a constituency?
Wastage of Public Funds
No finding has been made about the wastage of public funds caused by the need to replace IT systems due to a change in political leadership. Once a system has been developed with TC funds, the residents have a beneficial interest in it, since they contribute to TC funds via Service and Conservancy Charges. Why should they pay again, for a replacement system, just because the town council management has changed hands? Even those who live in private estates have asked me about the wastage, since TCs are also funded by government grants that they, as taxpayers, contribute to. MND has made a finding that there was no loss of public funds caused by the AIM transaction, but what about the wastage of public funds which the transaction brings about? Residents and taxpayers pay twice for political intrigue – how is that justifiable?
Nature of TCs and AHPETC
Let me now move to the nature of Town Councils and the recommendations for strategic review.
Town Councils provide essential public services to HDB dwellers via public funding. As custodians of public funds, all MPs must act in the best interests of residents, regardless of which political party they support. At the same time, TCs unavoidably have some political elements. The manner and quality of town management is one factor in a voter’s choice of MP, and MPs wish to do well in town management in order to get re-elected. However, it does not mean that MPs can allow TC assets to be endangered or cut off from TC use for political reasons.
Let me at this juncture share some essential facts about AHPETC and correct some misconceptions.
The IT system in use in AHPETC belongs to the TC and will be there for use even if there were to be a change in political leadership. There are no equivalent termination clauses unlike the AIM transaction. In fact, I understand that Potong Pasir TC is still using the IT system developed before the change in political leadership in 2011.
I also take strong issue with a misleading release by MND on our Managing Agent, FM Solutions and Services Pte Ltd. The Straits Times of 7 May 2013 reported that “MND gave examples of how politics and town councils sometimes mix” which included, in our case, the former General Manager of Hougang TC and her husband setting up a company to provide town management services to AHTC. We find this insinuation mischievous, as neither she, nor her husband, nor any of the directors and shareholders of the company, are WP members. They were hired based on their experience in property management, professional skills and track record in running Hougang TC. What is MND implying? The Minister should explain.
Recommendations for TC review
I now come to the final part of my speech – our key recommendations for the review of Town Councils.
First, restrictions should be in place in the TC Act to prohibit the sale of critical assets / systems still needed for TC’s operations to third parties. On no account should TCs relinquish control over the use of the assets, which should survive any change in political leadership. The most critical system would be the IT system for town management. Ownership of the town management software system and its intellectual property rights should reside with the Town Council.
Second, town management systems which serve several constituencies should be configured to be easily segregable at low cost in event of boundary change or leadership change. This should be ensured for the 3G TCMS.
Third, another important IT system which should be safeguarded for continuity is the telemonitoring system (TMS), which monitors lift breakdowns and lift rescue. All TCs are currently using the TMS from the same provider, and at the minimum, the existing termination period of 3 months is too short and should be reviewed.
Fourth, important service contracts such as those for Managing Agent and Essential Maintenance and Services Unit (commonly called EMSU) should provide for a longer termination period to allow for a fresh tender to be called, if necessary, after a handover.
Finally, unilateral terminations by contractors of essential contracts due to a change in political leadership should be disallowed. Should there be a need to put in place another contractor due to business considerations, a mutual discharge can be agreed between the TC and the contractor.
We are ready to provide further input if needed.
Conclusion
We believe that the sale of the TCMS by the PAP TCs, whatever its other ancillary benefits, was to enable AIM to cut off any non-PAP TC from using the TCMS at short notice, crippling the TC. By doing so, they acted in their party political interest and jeopardised the public interest, using a critical asset developed with public funds.
In this light, I cannot help but recall the Parliamentary debate in 1988 when the Town Council Bill was first presented for the Second Reading. At that debate, the then First Deputy Prime Minister Goh Chok Tong justified the introduction of Town Councils as providing political stabilisers to the political system. He said there was a need to protect the public by ensuring that political parties which aspired to be government should first prove that they could run a Town Council for a constituency. He said: “If a new party finds itself unexpectedly in government, it would be like an aspiring pilot taking over an SIA jumbo jet in mid-air before he has flown solo in a Cessna. This cannot be in the interest of passengers in the jumbo… TCs are the Cessnas of our political system”. He also highlighted that some PAP MPs had expressed a fear that opposition MPs could win “some seats, prove themselves” (able to run the Town Councils) and thereafter “fan out to other constituencies in subsequent elections” (Hansard, 28 June 1988).
Is this what this whole AIM episode is about – ensuring that the passengers in the Cessnas have bumpy rides or even crash land? Does the government even care about the passengers in the Cessnas, or are they simply collateral damage in a bigger political game?