The Auditor-General’s Office (AGO) has just released the “Report of the Auditor-General for the Financial Year 2012/13″ [Link]. In the report, the Auditor-General revealed that there were more than 100 instances of irregularities in National Research Foundation’s (NRF) procurement and payment process while constructing its building.
One of the most glaring was the waiver of tender for project management services to build its building. The contract value for the service was $2.25 million. It was awarded to a vendor “based mainly on a recommendation”.
This happened when Dr Tony Tan was the Chairman of NRF. He had been NRF Chairman since the Foundation’s inception in January 2006. Dr Tan resigned from NRF on 31 August 2011. He was sworn in as President of Singapore on 1 September 2011.
The construction of NRF’s building, the Campus for Research Excellence and Technological Enterprise, was completed in July 2011. AGO test-checked expenditure on two construction contracts and three consultancy services contracts (total contract value of $322.97 million) for the Campus and found the following irregularities:
A. Weak Grounds for Waiving Competition
AGO found that a contract for project management services (contract value of $2.25 million) was awarded via waiver of competition to a vendor without reasonable grounds. NRF had selected the vendor based mainly on a recommendation. There was no evidence that the vendor was the only company which could provide such services. NRF was unable to provide AGO with documentary evidence that NRF had conducted an independent assessment on the reasonableness of the sole quote received. NRF had breached Government procurement principles of transparency and open and fair competition. There was also no assurance that value for money.
Furthermore, NRF had allowed the vendor to commence work more than two months before obtaining the requisite approvals for waiver of competition and award of the contract. This had the effect of circumventing the approving authorities’ gatekeeper role in ensuring that Government procurement principles were upheld.
B. Excessive Honorarium Amount for Design Consultancy Tender
For the tender for design consultancy services (total contract value of $25.00 million), AGO observed that NRF had paid approximately $467,000 as honorariums to three unsuccessful tenderers for their efforts in submitting concept design proposals. The amount of honorariums paid was three times the amount derived based on the compensation framework provided in the Government Instruction Manuals.
C. Scoring Method Used for Evaluation Not Disclosed in Tender Documents
For the tender for building works construction (contract value of $283.36 million), AGO observed that the scoring methods used for evaluating the qualitative criteria were not established upfront and made known to the tenderers. This was not in line with Government procurement principle of transparency. As there was no evidence that the scoring methods used were established prior to the tender closing date, NRF could also face difficulties in protecting itself against allegations of manipulation of scoring methods to favour certain tenderers after the details of the bids were known.
D. Contract Variation Instructions Issued Without Appropriate Approval
AGO test-checked 149 variation instructions issued to the contractor for building works construction and found 108 instances (72.5 per cent) amounting to $5.99 million, where there was no evidence that appropriate approval had been obtained. In another 17 instances (amounting to $330,900), AGO observed that retrospective approvals were obtained 29 to 260 days after variation instructions were issued.
NRF had not complied with the Government Instruction Manuals as well as its internal procedures which required approvals to be obtained before variation instructions could be issued. This undermined the role of the approving authority and bypassed the controls to ensure that variations were properly justified before they could be implemented.
E. Late Payments and No Payment Responses Provided
The Building and Construction Industry Security of Payment Act (Cap. 30B, 2006 Revised Edition) stipulated the time frame for making payment and requirements for payment response to a payment claim. The Act was passed to address cash flow problems faced by the construction industry by upholding the rights of parties to seek progress payments for work done and goods supplied.
For the contract for building works construction and another contract for foundation works (total contract value of $295.72 million), AGO found 32 instances of late payment to contractors (totalling $254.04 million). In six instances (totalling $26.09 million), the delays ranged from 33 to 174 days.
For the three consultancy services contracts (total contract value of $27.25 million), AGO observed that NRF did not provide payment responses to the consultants’ payment claims (totalling $24.56 million).
In response to AGO’s findings, NRF acknowledged that there were gaps in internal controls and staff competencies. NRF informed AGO that it has since taken steps to put in place measures for better control and monitoring of all procurement and contract management.
TR Emeritus
*Article first appeared on www.TREmeritus.com