Friday, 4 January 2013

AIM IT deal done to benefit town councils: Teo Ho Pin

Cumbersome for service provider to deal with 14 town councils separately
By Goh Chin Lian, The Straits Times, 3 Jan 2013

THE coordinating chairman of the PAP town councils, Dr Teo Ho Pin, yesterday explained in detail why they had sold the software rights of their computer system to a company.

The reason: it would have been cumbersome for an IT service provider to negotiate separately with each of the 14 town councils (TCs) on the maintenance and upgrading of the system.

He also described how the tender for the sale was called in 2010 and the process by which it was awarded to Action Information Management (AIM), a company owned by the People's Action Party.

His statement came in response to Workers' Party (WP) chairman Sylvia Lim's questioning of the sale of the software rights to Aim, when she asked if it was in the public interest.

The controversy erupted after the WP blamed AIM last month when a government review did not give Aljunied-Hougang Town Council a banding for corporate governance because it did not submit in time an auditor's management report. It attributed the delay to the need to change its computer systems.

Tracing the events leading to the sale, Dr Teo said the PAP town councils worked closely together to derive economies of scale and share best practices for the benefit of their residents.

Hence, they contracted NCS to harmonise their systems with a system based on a common IT platform. The contract was from Aug1, 2003 to Oct31, 2010.

As the contract's expiry drew near, they engaged Deloitte and Touche Enterprise Risk Services in 2010 to review the computer system.

Among other things, the consultants found the system, built in 2003, was becoming obsolete and impossible to maintain. Its Windows software was outdated and Oracle was going to "discontinue support to its Financial 11 platform".

Although the NCS contract could be extended another year to Oct31, 2011, coming up with a new system could take 18 to 24 months or even longer, he said.

Deloitte and Touche also suggested centralising the software ownership, with a third party taking over the software rights.

The TCs, in turn, would pay this firm a maintenance fee.

Explaining the rationale, Dr Teo said: "Having each of the 14 individual TCs hold the intellectual property rights to the software was cumbersome and inefficient. The vendor would have to deal with all 14 TCs when reviewing or revising the system."

A tender was called in June 2010. The successful bidder had to, among other things, also get the NCS contract extended without any increase in price, as well as find a vendor for upgrades.

"We wanted to sell the IP (intellectual property) rights in the old software because it had limited value and was depreciating quickly," said Dr Teo.

Any wait for a new system to be in place would result in it becoming "completely valueless".

Five companies collected the tender documents: NCS, CSC Technologies Services, HutCabb Consulting, NEC Asia and Aim.

NCS did not bid, as it felt the software rights were going to be valueless, Dr Teo said - a point NCS confirmed last night to The Straits Times. Another firm withdrew after it found out it had to ensure renewal of the NCS contract without a rise in rates, he added, without naming the firm.

"The others may also have decided not to bid for similar reasons," Dr Teo said.

HutCabb chief executive officer Oliver Tian told The Straits Times it had not bid as the tender document did not give enough details and it did not have enough time to make an assessment.

AIM put in the sole bid on July20.

The town councils saw several possible benefits in giving it the contract. These included each of them saving about $8,000 by selling the software rights for $140,000, and leasing it back at $785 a month, until October 2011. After that, they could use the software without any additional lease payments to AIM.

Each TC also just has to pay AIM around $140 a month, from November 2011 to April this year, to have continuity of the existing system, secure its maintenance at no extra cost and options identified for a new system.

AIM also bore the risks of getting NCS to extend its contract with no increase in rates.

The town councils paid Aim a total of $33,150 in management fees. "This was the most important consideration for us, as it protected the TCs from an increase in fees," said Dr Teo.

He added: "We were confident that Aim, backed by the PAP, would honour its commitments."

Aim negotiated two extensions of the NCS contract until April this year and is working with vendors to explore new software.

Dr Teo stressed that the deal with AIM is strictly to benefit the town councils.

"Over the last two years, the intended benefits have been realised. There is, thus, no basis to suggest that the Aim transaction did not serve the public interest, or was disadvantageous to residents in the TCs," he said.

The WP did not respond to queries by press time.

Statement by Teo Ho Pin on AIM Transaction1. On 28 December 2012, I issued a press release in response to Ms Sylvia...
Posted by Teo Ho Pin on Wednesday, January 2, 2013


We entered into the transaction with AIM with the objective of benefiting the TCs. Over the last two years, the intended benefits have been realised. There is thus no basis to suggest that the AIM transaction did not serve the public interest, or was disadvantageous to residents in the TCs.
- Dr Teo Ho Pin

2003 - 2013: WHAT HAPPENED

Dealings between People's Action Party town councils and Action Information Management (AIM):

2003: Town councils call an open tender to provide a computer system based on a common platform. NCS is chosen and the contract is from Aug 1, 2003, to Oct 31, 2010, with an option to extend to Oct 31, 2011.

2010: As the existing system is becoming obsolete and impossible to maintain, the town councils want to develop a new one. But this may take 18-24 months or more - beyond the expiry of the extension of the NCS contract.

Consultants Deloitte and Touche Enterprise Risk Services suggest having a third party own the system, including the software rights, and town councils pay it a service fee for regular maintenance. Such a move would meet the town councils' objective to centralise ownership of the software. They suggest town councils call a tender, requiring vendor to buy the software and lease it back; undertake to get NCS contract extended beyond 2011 at the same price; and help town councils upgrade their computer system.

June 30, 2010: Tender ad goes in The Straits Times.

July 20: Only AIM submits a bid. It offers $140,000 for the fast-depreciating software and to lease it to each town council at $785 a month, from November 2010 to October 2011.

After October 2011: Lease payments to Aim end; town councils can use the software without any additional lease payments to AIM, until new software is developed. They also make a gain of about $8,000 from selling existing software. Aim negotiates two extensions of the NCS contract with no increase in price: November 2011-October 2012 and November 2012-April 2013.

November 2011-April 2013: AIM charges town councils $33,150 in management fees for suite of services. So each council pays around $140 a month for Aim to ensure continuity, secure system maintenance at no extra cost, identify options for a new computer system.

Aim put in bid 'to help' PAP councils
By Goh Chin Lian, The Straits Times, 3 Jan 2013

AT LEAST one company did not think it was worth buying the town councils' IT software.

Another did not want the burden of negotiating a contract with NCS to extend its maintenance of the software, at no change in price.

These requirements of a tender by the 14 PAP town councils eventually attracted only one bid - from Action Information Management (AIM), which is owned by the People's Action Party (PAP).

Aim put in a bid for the rights of the IT software because it wanted to help the town councils, its chairman S. Chandra Das said.

Aim, he told The Straits Times yesterday, participated in the tender not knowing that other companies would not do so.

"The sums involved in the transaction are modest," he said.

"But as a PAP company, we wanted to be helpful to the PAP town councils, so we were ready to take on the task and submitted the proposal to help PAP town councils achieve their goals."

AIM offered $140,000 for the software rights.

The details of the tender were disclosed yesterday by the coordinating chairman of the PAP town councils, Dr Teo Ho Pin.

NCS was the firm that felt the software - developed in 2003 - was not valuable. He did not name the firm that was put off by the need to renew the existing contract without an increase in rates.

AIM has come under close scrutiny since it was criticised by the Workers' Party for terminating its services to the Aljunied-Hougang Town Council.

Many netizens are asking how the company could carry out its tasks with a paid-up capital of $2 and two part-time staff.

Records of the Accounting and Corporate Regulatory Authority show it was formed on July 22, 1991, as an IT consultancy. Its three directors are former PAP MPs - Mr Chandra Das, Mr Chew Heng Ching and Mr Lau Ping Sum.

Last night, Mr Chandra Das declined to give details of AIM's track record and business dealings, but The Straits Times understands that it has served PAP town councils before they contracted NCS to develop a common IT platform in 2003.

He would only say: "AIM has been in business for 20 years. It has got cash and it paid the $140,000 in cash."

Teo explains need for termination clause
By Andrea Ong, The Straits Times, 3 Jan 2013

DR TEO Ho Pin has defended a controversial clause in a contract between PAP-run town councils and IT service provider Action Information Management (AIM), saying it is "reasonable".

The clause allows either party to give one month's notice to terminate the contract on the lease of a computer system.

This move gives the 14 People's Action Party (PAP) town councils (TCs) the flexibility to end the lease if they are not satisfied with AIM's performance, said Dr Teo, the coordinating chairman of the town councils. It also gives AIM the option to terminate the contract should there be "material changes" in, say, the membership, scope and duties of the town council, he added.

"This is reasonable as the contractor has agreed to provide services on the basis of the existing TC- and town-boundaries, and priced this assumption into the tender.

"Should this change materially, the contractor could end up providing services to a TC which comprises a much larger area and more residents, but at the same price," Dr Teo said in a statement.

The clause has come under fire online following a dispute between the Workers' Party (WP) and AIM on why the computer system lease at WP-run Aljunied-Hougang Town Council had not been extended further. Netizens have questioned if there was a political motive to the clause.

In the war of words, WP chairman Sylvia Lim had asked if it was in the public interest to have such a clause. She added that AIM, which is owned by the PAP, "presumably could act in its own interests when exercising its rights to terminate the contracts".

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