Town councils’ software statement: ‘Full of holes’?

I refer to the report “No basis to suggest AIM transaction improper to town councils, says Teo Ho Pin” (Channel NewsAsia, Jan 2).

According to the “statement by Teo Ho Pin on AIM transaction“, “Having each of the 14 individual
TCs hold the Intellectual Property (IP) rights to the software was cumbersome
and inefficient. The vendor would have to deal with all 14 TCs when reviewing or
revising the system. It would be better for the 14 TCs to consolidate their
software rights in a single party which would manage them on behalf of all the
TCs, and also source vendors to improve the system and address the
deficiencies.
10. The TCs thus decided to call a tender to meet the following requirements:
a. To purchase the software developed in 2003, and lease it back to the TCs
for a monthly fee, until the software was changed;
b. To undertake to secure extensions of the NCS contract at no extra cost i.e.
take on the obligation to get an extension on the existing rates, until the
TCs obtained new or enhanced software. This was put in to protect the
financial position of the TCs”.

“Cumbersome and inefficient” to deal with 14 TCs?

If it is indeed “was cumbersome and inefficient”, why not have the software rights owned by say two town councils, an entity owned by the town councils or a public agency? By transferring it to a private company, puts the town councils and the residents at tremendous risk.

What if “Third, we were confident that AIM, backed by the PAP, would honour its commitments”, ended up with say the directors resigning to join another political party, and then in accordance with the contract terms, terminate most of the town councils because “existing TC- and town-boundaries” had changed as the GRC and SMC boundaries were changed for the 2011  general elections?

Wouldn’t this be a disaster for the efficient management of the town councils and their residents?

From public to private – Conflict of interest?

Moreover, there is the conflict of interest in transferring public property developed for the people and presumably with the town councils’ funds which belong to the people, to a private  company that reaks of being linked to a political party.

Cost to develop the software?

Also, the question as to how much it cost to develop the software remains unanswered.

Applying this logic of ” The vendor would have to deal with all 14 TCs”, wouldn’t it apply to other contracts and services as well that involve other vendors? Wouldn’t it simply be easier to have the vendor deal with just the town councils’ staff designated to handle this task. After all, they are all using the same system. So, does it make sense to say that the vendor would have to deal with 14 TCs?

Material changes?

As to “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”, this is somewhat self-contradictory and thus irrelevant, because the price is already fixed in the contract.

Normally, I understand that contracts may have clauses to cater for variation due to material causes and changes, instead of just termination.

Also, since it is only the software rights, where is the logic that a “much larger area and more residents” will cost more to the holder of the software rights, since the costs of future maintenance is also guaranteed “from NCS beyond the original contract period, without any increase in prices”?

Much ado over so little?

As to “This meant that the TCs expected to gain a modest amount (about S$8,000) from the disposal of IP in the existing software”, can we have a break-down of how this figure was derived? All this complexity and so much work involved – just to save $8,000!

What is amazing is that the statement “Second, AIM was willing to undertake the risks of getting an extension of the NCS contract with no increase in rates. This was the most important consideration for us, as it protected the TCs from an increase in fees”, gives us a clearer picture as to why perhaps no one would tender under such terms?  How does a company guarantee that its sub-contractor (NCS) would not increase its fees in the future within the very short time frame of the tender period? Moreover, wouldn’t it have been better for the town councils to have negotiated the “no increase in fees” directly with NCS with whom they have been working for many years.

If AIM, a $2 company is unable to fulfill this contract term of “no increase in fees”, what can the town councils do? Sue a $2 company and then the $2 company sues NCS? Can the documents, meetings and process that enabled AIM to meet this unusual contract terms be made public?

30 months gone by – have open tender for new system?

Since “It was clear to me that the existing
computer software was already dated. The NCS contract would end by 31
October 2011 (if the one year extension option was exercised). However,
assessing new software and actually developing a replacement system that
would meet our new requirements would take time, maybe 18-24 months or even
longer. We thus needed to ensure that we could get a further extension (beyond
October 2011) from NCS, while working on redevelopment options”, and about 30 months have lapse since the award of the tender, can the progress of  “assessing new software and actually developing a replacement system” be made public?

Has an open tender been called for this “assessing new software and actually developing a replacement system”?

Sell and lease-back?

With regard to “We wanted to sell the IP rights in the old software because it had limited value and was depreciating quickly. Had we waited until the new system was in place, the IP to the superseded old software would have become completely valueless”, it would appear from what has been disclosed so far, that the town councils were already and will also pay NCS in the future for maintenance. So, why was there a need to pay “S$785 per month from November 2010 to October 2011” and another S$33,150 from November 2011 to April 2013, when it seems that there was no such “software rights lease” to pay at all in the past.

Why sell at $140,000 and then pay $165,030 ($785 x 12 months x 14 town councils + $33,150), when apparently there was actually no need to pay previously? Why didn’t the town councils just transfer the software rights to say two town councils, an entity owned by the town councils or a public agency for free, without the round-about way of getting paid through an open tender and then paying more out by way of a lease-back, and thus also avoid the conflict of interest altogether?

How much are the town councils paying to NCS for maintenance?

So many more questions?

Can all the documents between the town councils and AIM be made public? Was the $33,150 part of the tender? Was it even in the tender specifications in the first place? Why not make public the $214 tender document? Also, questions about why the tender advertisement looks like a purchase rather than a sale with hardly any details and “not to accept the lowest or any tender” (shouldn’t it be the highest for a sale) remain unanswered.

In respect of “In 2010, the NCS contract was going to expire. The TCs got together and jointly appointed Deloitte and Touche Enterprise Risk Services Pte Ltd (“D&T”) to advise on the review of the computer system for all the TCs. Several meetings were held with D&T”, how much was paid to D&T and can the documents advising the controversial course of action taken by the town councils, which is now at issue, be made public?

Was a open tender called to select D&T?

Also, can the minutes of meetings, the process of how and who made the decisions at issue now, be made public?

I find it rather strange that instead of a statement by the PAP town councils like in their previous two statements, it  now appears to be a personal statement from Teo Ho Pin signing off as Co-ordinating Chairman, 14 PAP Town Councils. What has all the other MPs and committee members of the town councils got to say about this continuing saga?

Did they or did they not know about all the above, and were they and are they now in concurrence with Teo Ho Pin’s statement.

Considering all of the above, the ending sentence of the statement – “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”, may arguably the greatest understatement of the century in the history of Singapore!

Leong Sze Hian

About the Author

Leong
Leong Sze Hian is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been host of a money radio show, a daily newspaper money column, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), and invited to speak more than 100 times in about 25 countries on 5 continents. He has served as Honorary Consul of Jamaica and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.