Sunday 5 May 2013

AIM deal 'in line with town council rules'

MND review finds no misuse of public funds in sale of IT software
By Goh Chin Lian, The Straits Times, 4 May 2013

A COMMITTEE appointed by the Government has found that People's Action Party (PAP) town councils did not lose or misuse public funds in the controversial sale of their software to a PAP- owned company.

The sale was in line with the Town Councils Act and Town Council Financial Rules, the Ministry of National Development (MND) team said in its report yesterday, which was accepted by Prime Minister Lee Hsien Loong.

PM Lee had ordered a review of the transaction in January, "in the interest of transparency and maintaining trust in the system", after a war of words erupted over a Workers' Party (WP) claim.

He had also asked MND to re-examine the nature of town councils, to ensure high standards of corporate governance.

In its 37-page report, the team noted that town councils were set up in 1989 as political bodies to give more flexibility in the running of estates to MPs, who would be accountable to residents.

While the councils had largely met their objectives, the committee noted some public calls for them to be depoliticised. It thus called on the Government to consider a strategic and comprehensive review of town councils.

The committee was set up after complaints by WP chairman Sylvia Lim, who heads what was then the Aljunied-Hougang Town Council, that her council had failed to receive a grade for corporate governance in a regular government review because of the termination of its IT contract with PAP-owned firm Action Information Management (AIM).

Exchanges ensued between the WP and the PAP town councils as well as AIM over who was at fault. During the row last December, it came to light that the 14 PAP town councils had sold their software to AIM - the sole bidder in an open tender - in 2010.

The review team acknowledged public concerns over a conflict of interest, but noted that the law does not forbid town councils from doing business with or engaging those who share their political agenda or are affiliated to their parties. And the practice is not uncommon among elected MPs across parties, the team added.

Town council members also did not have a financial or commercial interest in the AIM contract. In fact, AIM suffered a loss in the initial one-year contract, the committee noted.

The councils "acted in good faith in the interests of their residents", and awarded the contract to AIM as the price was fair for software that was nearly obsolete, among other things.

As for the spat over who wanted the contract terminated, the team put it down to a "different understanding" between the parties of how a clause to end the contract was executed.

But the team cautioned that the disputed handover of town council functions between MPs from different political parties could have an impact on the continuity of services for residents.

It saw a "fundamental tension" between the objectives of delivering good public service and the political accountability of MPs.

"The current arrangement inherently bears the constant risk of politicisation of town council administration," it said.

At stake is the management of public housing estates, it stressed. "It impacts the value of the homes and the experience of day-to-day life for a vast majority of Singaporeans living in HDB estates."

The coordinating chairman of the PAP town councils, Dr Teo Ho Pin, welcomed the findings. AIM chairman Chandra Das said the report confirmed it had gone in to help the councils and not to make money. Ms Lim said a response would be given in due course.

National Development Minister Khaw Boon Wan will deliver a ministerial statement on the review when Parliament sits on May 13.

Town councils followed tender process: MND
They had acted in good faith in interests of and for benefit of their residents
By Goh Chin Lian, The Straits Times, 4 May 2013

AT THE heart of the controversial news that broke last year, that People's Action Party (PAP) MPs had sold the software rights of their town councils' computer management system to a PAP-owned firm, was the possibility of a conflict of interest.

Did anyone gain from the transaction? Was the sale above board? Were residents' interests compromised?

In its review, the Ministry of National Development (MND), found nothing amiss.

Here are its key findings:

Sale, leaseback of software rights not uncommon

THE roots of the transaction date back to 2009 when consultant Deloitte & Touche Enterprise Risk Services, hired by the PAP town councils to review the second-generation computer system, warned that it was becoming obsolete and hard to maintain.

The consultant recommended two models: Either the town councils own the software - and incur upfront capital costs - or lease it from an external vendor.

The town councils also felt it was better to consolidate the software rights in one party that could manage the rights for them.

They called an open tender in 2010 for the sale of the software and to lease it back at a monthly fee until a third-generation system was available.

PAP company Action Information Management (AIM), set up in 1991 to help PAP town councils with their IT needs, stepped up and made a successful bid for the tender.

In its report, MND found that the sale and leaseback deal the town councils signed was permissible under the Town Council Financial Rules, as they had the "autonomy to manage their assets".

It noted that such arrangements were not uncommon in the IT industry.

Tender process was in order

MND said the town councils followed the tender process laid out in the Town Councils Act and Town Council Financial Rules.

The open tender was advertised in The Straits Times. Five vendors expressed interest, but only AIM placed a bid.

Their reasons for not placing a bid, the town councils were told, included the limited value of the near-obsolete software.

MND said the rules allow a single-bid award if it satisfies tender requirements and evaluation criteria.

AIM offered to buy the software for $140,000 and lease it back to each town council at $785 a month.

MND said it was "reasonable" for the town councils to award the tender to AIM.

Their considerations were:
- The bid of $140,000 was a "fair one" for software that had fully depreciated.
Also, the town councils could use the software with no additional lease payments when the leaseback ended in October 2011, and on balance, they would gain about $8,000 from the sale of software rights.
- AIM took on the risk of getting the National Computer Systems contract extended at no extra charge.
- AIM had a track record, having worked with the PAP town councils from 1994 to 2004, and its directors were former MPs who had run town councils.

The tender evaluation report was discussed with the chairmen of the PAP town councils and approved by all the town councils before the tender was awarded.

Public monies not misused

THE town councils "acted in good faith in the interests of and for the benefit of their residents", MND said.

They drew up a contract that ensured no increase in maintenance fees by the winning bidder.

Independent external auditors did not raise the AIM deal as an issue. MND said it verified, among other things, that AIM did not make a profit from the deal and its directors were not paid a fee.

In fact, AIM made a loss. This 2010 contract was extended twice, by 18 months in total.

AIM charged a management fee of $33,150 - or about $140 a month for each town council - to pay for services during the extension period.

MND "found no pecuniary or material interest by any town council member in AIM or in the contract awarded to AIM".

But the town councils "underestimated the complexity of the task" of developing the third-generation software, it added.

Rules do not ban deals with political affiliates

MND said the Town Councils Act does not prohibit them from transacting with those who are associated with political parties.

In fact, the report noted town councils were set up in 1989 for a political purpose: to let MPs take charge of their constituents' estate and to make them accountable to voters.

"Latitude has always been given to town councils to exercise autonomy, where they see fit, in engaging those who share their political agenda or are affiliated to their parties," MND said.

It was also "not an uncommon practice across parties" for MPs to engage those who share their party affiliation as town council staff. They included party members and supporters as well as supporters of the MP personally.

The coordinating chairman of the PAP town councils, Dr Teo Ho Pin, told The Straits Times that the report showed the "transparency and public accountability" of the PAP town councils.

He said: "I hope the facts of the AIM transaction will enable the public to understand that the PAP town councils had acted in good faith for the benefit of our residents."

Strategic review of town councils
By Janice Heng, The Straits Times, 4 May 2013

THE Government is set to take a deeper look into the nature of town councils after Prime Minister Lee Hsien Loong accepted the recommendations in a Ministry of National Development (MND) report released yesterday.

The MND team had called for a "strategic review of town councils in their current form".

It pointed to "the fundamental tension" between town councils' dual objectives: delivering good public service, and ensuring political accountability of MPs.

"This current arrangement inherently bears the constant risk of politicisation of town council administration," said the report.

It added: "With the town councils having been around for the past 20 years, it would be timely for a comprehensive review to be carried out on the roles and functions of the town councils in meeting the needs and aspirations of the residents they serve."

When the MND was tasked with reviewing the AIM deal in January, it was also meant to re-examine "the fundamental nature" of town councils.

In its report, released yesterday, the review team noted that town councils were set up for two reasons. The first was to give MPs responsibility for the estate and allow each town to develop its own character. The second was to make MPs accountable to voters.

Town councils have largely fulfilled these objectives, said the report. But it also noted a view which came up in public discussions: That town councils should be depoliticised "so that the issue of handover between political parties would not arise".

Another view was that depoliticising town councils can improve their governance, "as MND can regulate and oversee them without perception issues".

Corporate governance expert Mak Yuen Teen, who has raised similar concerns before, said he agreed with the need for a review, which should be done with "a properly constituted committee".

The review team also discussed suggestions for better managing town council changeovers, especially between different political parties. In studying this issue, they had sought the views of Potong Pasir Town Council and Aljunied-Hougang Town Council (AHTC). Both changed hands after the 2011 General Election, with Potong Pasir going to the People's Action Party and AHTC going to the Workers' Party.

AHTC has since been expanded to become Aljunied-Hougang-Punggol East Town Council.

The town councils suggested that more time should be allowed when there is a change of political party and that the town council taking over should not be made to incur extra costs as a result of contracts being terminated.

The councils added that terms and conditions of contracts should not be detrimental to a council's interest, and MND could play a bigger role in facilitating handovers when there is a change in political party.

The report said that it was arguable whether the current provision for a maximum period for transition of 90 days would be sufficient in all circumstances.

"While the elected MPs should continue to be given full authority and autonomy after an election, there is value to consider placing safeguards to minimise the risk of disruption of critical services during a change in leadership," it added.

One option, it said, is for town council contracts to provide for automatic one-off extensions after an election when a different political party takes over, and a minimum notice period for termination.


The Review Team found that it was not an uncommon practice across parties for the elected MPs to tap on the reliability, expertise and support of those who share their political party affiliation (instances include party council and ordinary members, as well as party supporters or political supporters of the MP personally) and engage them as Town Council professional staff to deliver their programmes for the estate and achieve the MPs' electoral promises.
- MND committee report

2 differing views of termination clause
By Janice Heng, The Straits Times, 4 May 2013

THE back-and-forth between then Aljunied-Hougang Town Council (AHTC) and Action Information Management (AIM) last December over who terminated the software contract may have stemmed from a misunderstanding.

The Ministry of National Development review team had interviewed both sides and concluded in its report that there was a "different understanding of the execution of the termination clause" by both parties.

The clause lets AIM terminate the contract by giving a month's notice, in the event of material changes to the town council's membership or scope and duties.

The matter of who initiated the termination after the Workers' Party took over the town council for Aljunied GRC in 2011 was one of the big sticking points in the dispute when the issue blew up late last year. Both AIM and AHTC had made public the letters exchanged to back up their case that they did not ask for the town council software contract to be terminated.

In its report, the review team included the seven letters the two sides exchanged. It found that AHTC, before receiving any "direct or written communication" from AIM, had come to believe - via its interim secretary - that AIM would be terminating its contract under that clause. The council thus planned to develop its own system. It wrote to AIM on June 10, 2011, to say that it was doing so, and asked to continue using AIM's system until Aug 31.

But upon receiving that first letter, AIM thought that AHTC was giving notice of its intention to use its own system and not rely on AIM's. It thus issued a notice of termination to AHTC on June 22, citing the termination clause.

Two days later, AIM also agreed to the one-month extension that AHTC asked for in its first letter. The rest of the correspondence shows AHTC and AIM agreeing on a second extension.

AIM saga: What happened

2009: People's Action Party (PAP) town councils appoint Deloitte & Touche Enterprise Risk Services to review their computer systems. Based on its advice, the councils decide to call an open tender to sell the software and lease it back.

2010: A tender is called and Action Information Management (AIM) is the only bidder. It is awarded the contract after being assessed to have met the tender requirements and evaluation criteria.

DEC 14, 2012: Aljunied- Hougang Town Council's (AHTC) chairman Sylvia Lim says that AIM's move to terminate its computer software contract was the reason AHTC failed to receive a grade for corporate governance in a government review.

DEC 17: AIM says it would have extended the software contract if the Workers' Party (WP) had asked, but Ms Lim says an extension "had to be fought for".

She also asks why the PAP town councils had sold the software system to AIM and questions how a termination clause in the contract is in the public interest.

DEC 24: PAP town councils' coordinating chairman Teo Ho Pin says the contract complied with financial regulations.

He and AIM give details of the 2010 open tender. AIM says the AHTC had wanted to develop its own computer system and had thanked the firm for two extensions it had given.

DEC 28: AIM releases its letters with the AHTC, including one that shows that the town council had wanted to develop its own computer system.

Ms Lim says the AHTC had to develop its own system because of a possible termination. She questions the sale of systems developed with public funds to a company owned by a political party.

JAN 3, 2013: Dr Teo gives more details of the sale of the system to AIM, the sole bidder. He says the sale saved the PAP town councils about $8,000.

He defends the termination clause, saying the contractor priced its tender based on the existing boundaries of town councils.

JAN 8: Prime Minister Lee Hsien Loong orders a review of the AIM transaction and the fundamental nature of town councils, to ensure high standards of corporate governance.

FEB 4: PAP town councils call an open tender, seeking a company to develop and maintain a new computer system.

FEB 27: AIM says it will not take part in the tender as it helped prepare the tender documents.

APRIL 2: A seven-year contract is awarded to Japanese company NEC Asia Pacific for $16.8 million.

MAY 3: The Ministry of National Development releases its report, saying the AIM sale complied with regulations and there was no conflict of interest. It also recommends a strategic review of town councils, to ensure continuity of services to residents when there is a change of MPs from different political parties.

WP motion on town councils 'inadmissible'
By Andrea Ong, The Straits Times, 9 May 2013

SPEAKER of Parliament Halimah Yacob has ruled that an adjournment motion on the town council review, filed by Workers' Party chairman Sylvia Lim, is inadmissible in Parliament when it sits next Monday.

The reason: The subject of the motion will be fully debated under a ministerial statement to be presented at the same sitting.

Ms Lim had filed the adjournment motion earlier this week, on Monday, following last Friday's announcement that National Development Minister Khaw Boon Wan would deliver a ministerial statement on the review in Parliament.

She did so as she wanted more time to discuss the issue, she had said, citing Standing Order 23 of parliamentary rules. It states that MPs may only seek clarification on a ministerial statement, not debate it.

An adjournment motion would let her speak for 20 minutes at the end of the sitting.

But yesterday, the Clerk of Parliament said debate on ministerial statements is provided for under Standing Order 44.

"Members can make their speeches during this debate, not only clarifications," said the Clerk. Each MP can speak up to 20 minutes, followed by a wrap-up speech from Mr Khaw that can last up to 40 minutes.

Hence, to avoid repetition, the Clerk said: "The Speaker has ruled it inadmissible."

She cited Standing Order 53(2), which states it is out of order to discuss the subject matter of a motion - which in this case is the ministerial statement - in an adjournment motion.

When contacted, Ms Lim told The Straits Times that when she filed the adjournment motion on Monday, there was no indication that the Government would provide for any debate.

"In any case, this is an important matter and we will be participating in the debate on the motion, which was notified on Tuesday," she added.

Ms Lim is chairman of the WP's Aljunied-Hougang-Punggol East Town Council. In January, she filed another adjournment motion: on safeguarding public interest in town council management.

She withdrew it after the Government announced its review of the fundamental nature of town councils and a controversial sale of computer software from People's Action Party town councils to a PAP-owned IT company.

A report on the review by the National Development Ministry was released last Friday. It highlighted the risk of politicising town council administration and called for a "strategic review" of town councils.

Let us not centralise Town Council services
By Eugene K B Tan, Published TODAY, 6 May 2013

With the Government accepting the findings and recommendations of the Ministry of National Development (MND) Town Council Review Report, the focus has now shifted to a “strategic and comprehensive review of Town Councils”. This is timely and needed.

The three-month review was primarily to examine the 2010 sale of the PAP Town Councils’ Town Council Management System software in an open tender to Action Information Management (AIM), a PAP-owned company. The MND is satisfied that public funds were safeguarded and that residents’ interests were not compromised in the sale and leaseback transaction.

It would appear that the kerfuffle between AIM and the Workers’ Party (WP) stemmed from a “different understanding of the execution of the termination clause” in the IT contract following the transfer of Aljunied Town Council from the PAP to the WP after the latter’s May 2011 electoral victory in Aljunied GRC.

To my mind, the issue was unnecessarily politicised after the WP laid the blame on the termination of its IT contract with AIM for lapses in running the Aljunied-Hougang Town Council. This incident reflects the political “new normal”.


The town council (TC) was first established in 1989. While the main intent of the TC framework was to provide for the decentralisation of the control, management, maintenance and improvement of Housing and Development Board (HDB) estates, the political consequences were even more significant.

That TCs are inherently political was evident from the outset, and it would be naive to think otherwise.

As a form of local government, TCs transformed the role of the elected Member of Parliament (MP) from being a mere politician to one that included administrative responsibilities. MPs are now directly responsible and accountable to their resident-voters for the day-to-day running, upkeep and upgrading of their HDB estates.

While not solely determinative of the MP’s political fortunes, there are political implications to the quality of estate management, given the abiding concern of Singaporeans with the value of their residential properties.

TCs, in the words of Ministry of National Development Permanent Secretary Benny Lim, “were set up for, and fulfil a political purpose”.

As the report noted of the TC’s political character: “It is inevitable that the TC function is carried out in a competitive politicised context.”

Mr Lim added that the “party political nature of TCs operating in a competitive context raises a constant risk of politicising town council administration”.


Should we revert to the pre-1989 situation in which the management and maintenance of public housing estates was HDB’s sole responsibility? I would rather not.

Firstly, it is likely to result in our HDB estates not developing their own distinctive identities as HDB would adopt a cookie-cutter approach to avoid any allegations of preferential treatment.

Secondly, nationalisation of estate management would take away a vital platform for an elected MP to not only administer and run an estate, but also to work with town councillors and residents in a common effort to make one’s immediate living environment better — not just in terms of physical aesthetics, but also in creating the so-called “kampung spirit” for strong community bonds.

Thirdly, the nationalisation of estate management in a more competitive political landscape would mean that an elected MP’s accountability and ability will be reduced, at a time when it should be of growing importance. This is because any MP would simply be able to lay the shortcomings in estate management at the feet of HDB — and, indirectly, the Government.

Let me be clear that parliamentary elections cannot be about electing persons who are only competent in TC management.

The MP’s TC function will not take away the need for an MP to be an effective representative of his/her constituents; it will, rather, add to the centrality of elected MPs in our system of government. It will also add another dimension to the relationship between elected MPs and the electorate.


The challenge for the TC, as the report has identified, is how to ensure that its political nature does not affect the continuity of services to residents whenever there is a change of MPs from different political parties.

As I see it, the risks of politicisation of TC administration are magnified in three instances: When there is a handover of a TC from one political party to another following an election; the TCs’ practice of tapping people who share the political party affiliation, be it party members or supporters of the MP, and engaging them as TC-paid staff or awarding them contracts; and during the hustings, when the incumbent’s TC management record is scrutinised or challenged, which is par for the course.

On the first point, the risks of politicisation should not be exaggerated. Apart from the AIM matter, the handover from the PAP to the WP of Aljunied TC was relatively smooth. There was no known major disagreement between the Singapore People’s Party and the PAP in the handover of Potong Pasir Town Council in 2011; as well as between the PAP and the WP in the handover of Punggol East after the January 2013 by-election, save for the use of the TC office there.

In the MND’s report, some suggestions for better management of changeovers are given and they are worth following up.

While MND’s light regulatory approach in TC matters should be continued, the MND should take a more prominent role in overseeing any changeover. New subsidiary legislation may need to be drafted to prescribe the protocols in a changeover.


While latitude should continue to be extended to TCs and MPs in engaging those who share their political agenda or are affiliated to their parties, better controls and safeguards ought to be introduced to ensure the interests of residents remain a paramount priority in all commercial transactions.

This is notwithstanding the fact that the Town Council Act does not prohibit such transactions.

All political parties that have run TCs — the PAP, SDP, WP and SPP — have entered into contracts or employed staff with related parties. Indeed, it would appear that this is not uncommon. For instance, the managing agent appointed in 2011 for Aljunied-Hougang Town Council was FM Solutions and Services, a company set up in May 2011 by a former General Manager of Hougang Town Council.

The MND should consider introducing measures to promote transparency and accountability in TC management; at the same time, information pertaining to related-party transactions should be publicly available.


Beyond reducing the level of politicisation of TCs, the comprehensive review should also consider the “softer” aspects of TCs, such as how devolution of control and management of public housing estates can imbue in residents a stronger sense of personal and collective responsibility. This potential has yet to be realised even after two decades.

Perhaps town councillors should be residing in the areas where they serve, and be elected by residents rather than appointed by the MPs, as is the practice today. This might give more of an impetus to grassroots democracy.

Given that Group Representation Constituencies — which is to secure adequate minority representation in Parliament — and TCs were mutually grafted onto each other in their development, delinking the two institutions can prove helpful in ensuring that the mission and objectives of each can be better attained.

A balanced approach should be taken towards the politicised nature of TCs. Politics is a reality in a large public undertaking, such as the management of TCs. To pretend that we can divorce politics from it and yet gain the benefits is not realistic.

The raison d’etre behind the TC generates political competition — it should not be for the sake of competition, but the competition engendered should motivate political parties to raise their game and deliver on their electoral promises.

The proposed comprehensive review of TCs should endeavor to reduce the “fundamental tension” between the political and administrative functions of the TCs. A more robust set of rules and procedures as well as safeguards can remove unnecessary political catfights.

But this should not take away from the fundamental character of TCs which is, ultimately, about promoting good governance and improving people’s lives at the local levels. Re-centralisation of control would be a retrogressive step.

Eugene K B Tan is Assistant Professor of law at the Singapore Management University School of Law, and a Nominated Member of Parliament.

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