TWELFTH PARLIAMENT OF ______

First Session ______

REPORT OF THE PUBLIC ACCOUNTS COMMITTEE

Parl. 2 of 2012

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Presented to Parliament:

11 April 2012

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PUBLIC ACCOUNTS COMMITTEE

Members

Mr (Chairman) Mr Mr Ms Mr Desmond Lee Ti-Seng Ms Dr Mr

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CONTENTS

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REPORT OF THE PUBLIC ACCOUNTS COMMITTEE

Queries Pursuant to Auditor-General’s Report for FY10/11 and Ministries’ Responses

Public Sector Procurement Lapses 1-5

Need for Competitive Pricing for Agency Services 5-6

Lapses in Access Controls and IT Security 6

Other Irregularities • Substantial Advance Payments Made for Development 7 Projects • Lapses in Monitoring and Recovery of Outstanding Debts 7-8 • Lapses in Administration of INVEST Fund 8-9 • Non-compliance with Building and Construction Industry 9-10 Security of Payment Act • Non-compliance with Public Service Division's Directive 10

Enhancing Governance Framework and Practices of Statutory 11 Boards

APPENDIX

I Irregularities in Procurement and Contract Management 12-16

II Minutes of Proceedings 16-19

REPORT OF THE PUBLIC ACCOUNTS COMMITTEE

1 The Committee considered the Report of the Auditor-General for the Financial Year 2010/11 (Paper Cmd. 7 of 2011). For selected observations in the Report, the Committee sought written explanations from the ministries concerned and enquired into the remedial actions taken in respect of the lapses. The Committee’s enquiries into specific observations are discussed in paragraphs 3 to 64.

2 In respect of two ministries, the Committee also held hearings on 2 February 2012 to receive oral evidence from the Permanent Secretary of the Ministry of Home Affairs and his officials on the irregularities in procurement and payment found in the Singapore Police Force, and separately from the Permanent Secretary (Finance) (Performance) of the Ministry of Finance and her officials on the procurement irregularities reported by the Auditor-General’s Office (AGO) over the last five years.

Public Sector Procurement Lapses

3 The Committee noted that 10 out of the 22 observations reported by the Auditor-General in his latest Report (for FY 2010/11) relate to procurement and contract management in six ministries (including some of the statutory boards under their charge). The lapses observed include:

(i) Committing to a purchase beyond approved budget;

(ii) Using inappropriate term contracts resulting in gross overpayment for items purchased;

(iii) Setting unrealistically short period for submission of bids thereby limiting competition;

(iv) Not giving equal opportunity to tenderers to revise their bid prices when requirements were changed;

(v) Not having assurance of reasonable pricing offered by sole bidder;

(vi) Submitting inaccurate or incomplete information to tender approving authorities;

(vii) Awarding contracts without binding prices;

(viii) Accepting a tender not meeting specifications;

(ix) Paying for materials / works not meeting specifications; and

(x) Paying for materials not delivered.

4 The Committee is concerned that such lapses undermine the Government procurement principles of open and fair competition, transparency and value for

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money and could erode public confidence in public sector procurement. A number of these lapses have also resulted in the Government being overcharged, in some cases, with no recourse for recovering the money.

5 The Committee sought written explanations from the following Ministries on the procurement and contract management lapses:

(i) Ministry of Home Affairs (MHA)

(ii) Ministry of Information, Communications and the Arts (MICA)

(iii) Ministry of Trade and Industry (MTI)

(iv) Ministry of Transport (MOT)

The Committee noted the explanations of the ministries. Details are in Appendix I.

6 In the case of MHA, the Committee also called upon the Permanent Secretary (appointed on 1 November 2011) to present oral evidence. This is because serious lapses in procurement in the Singapore Police Force (SPF) have been reported in the last two Reports of the Auditor-General and these suggest underlying broad-based weaknesses in procurement management in some departments of SPF. In FY 2010/11, the Auditor-General observed irregularities at every stage of the management of two projects undertaken by the Police Coast Guard (PCG); these resulted in SPF being grossly overcharged. In FY 2009/10, lapses were found in the management of a contract for the maintenance of surveillance camera systems of the Traffic Police resulting in SPF paying, over many years, for maintenance work which was not done1.

7 In response to the Committee’s enquiries on actions taken in respect of the lapses pertaining to the two PCG projects (total contract value of $6.86 million), MHA informed the Committee that SPF has since recovered $1.18 million from the contractors, and $53,154 from the project management company in respect of work items overcharged. MHA is also seeking to recover an additional overcharged amount (estimated by AGO to be $0.70 million) from the contractors.

8 MHA informed the Committee of two key difficulties that SPF faced in procurement and project management, namely:

(i) Officers having responsibilities for procurement projects, especially if it is for the first time, may lack familiarity with financial controls and contract management. There is added difficulty if an officer is rotated out during the course of the project and another officer takes over the responsibility.

(ii) The officers may also lack the capabilities and technical knowledge necessary to oversee the work of contractors and consultants engaged for the project.

1 Following a police investigation, the contractor was prosecuted and subsequently convicted of six charges (i.e. four charges of forgery, one charge of cheating the Traffic Police and one charge of running a business without it being registered from 2006 to 2008). He was sentenced to 18 months’ jail. 2

9 To strengthen financial control, contract administration and project management across all departments in the Ministry, MHA would be implementing the following measures:

(i) Forming a task force to undertake a comprehensive review of the financial and procurement functions and recommend how MHA can be better organised and structured to support project and contract management. The review should be completed by July 2012.

(ii) Strengthening the skills and competency of officers handling projects and procurement through training. In this regard, MHA has introduced a contract management course and would be conducting more in-house courses on procurement and finance.

(iii) Expanding MHA’s internal audit function to conduct more in-depth audits on high-value projects and contracts.

10 The Committee noted that MHA has been proactive in addressing the various lapses. It has asked MHA to provide, in due course, an update on the outcome of the review by its task force [mentioned in paragraph 9 (i)], and of the effort to recover the amount overcharged [mentioned in paragraph 7].

11 Aside from the above, the Committee also noted from the Auditor-General’s Report that falsified documents could have been provided to AGO by the project manager engaged by PCG for the two projects. The Committee takes a serious view of such acts as they are tantamount to obstruction of AGO’s work.

12 In this regard, MHA informed the Committee that it has referred the matter to the Commercial Affairs Department (CAD) for investigation. CAD has since referred the case to the Attorney-General’s Chambers (AGC) for evaluation. The Committee has asked MHA for an update on the outcome of AGC’s evaluation when it is completed.

Improving Public Sector Procurement Practices

13 Most of the lapses reported in the Auditor-General’s Report for FY 2010/11 are in procurement. The Committee noted that many such lapses had been reported by the Auditor-General in the last five years.

14 The Committee is concerned that this may be a reflection of underlying weaknesses in public sector procurement which need to be addressed on a whole-of- Government level.

15 The Committee therefore sought the views of the Ministry of Finance (MOF), which is responsible for Government procurement policies and rules, on this matter. The Committee called upon the Permanent Secretary (Finance)(Performance) of MOF to give oral evidence.

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16 In its response, MOF attributed most of the procurement irregularities reported by the Auditor-General in the past five years to procurement officers’ poor understanding of procurement principles and/or their lack of familiarity with procurement rules. To address this, MOF has since changed existing rules and guidelines to make clearer the roles of key officers in the procurement process. MOF would also be implementing the following measures:

(i) Providing an online resource centre for procurement officers and pilot- testing a business intelligence tool for procurement planning and monitoring.

(ii) Informing every officer vested with approval authority of his responsibilities upon appointment to the role; and

(iii) Developing a checklist to help approving officers understand and better discharge their responsibilities.

17 The Committee noted that a number of the procurement lapses reported by the Auditor-General occurred in projects involving external parties appointed as project managers or consultants. The Committee asked MOF whether such lapses reflect an over-reliance by public sector agencies on external project managers and consultants and whether this is due to a lack of project management capability and experience.

18 In its response, MOF attributed these lapses to a lack of proper staff work and supervision rather than to a lack of project management expertise of the entities. MOF opined that lapses due to failure to carry out the necessary checks and supervision could occur even if project management is done in-house.

Committee’s Recommendations

19 The Committee noted MOF’s views and the additional measures that it has introduced to ensure that procurement officers and approving authorities are clear about their roles and responsibilities. In this regard, the Committee would also like to emphasise the importance of senior management of public sector entities setting the right tone-at-the-top on governance and financial control matters.

20 Based on oral evidence received from its hearings, the Committee noted that officers overseeing large procurement projects may not have the requisite expertise or experience. Such officers may also be rotated in the midst of a project. The Committee therefore suggests that MOF considers the option of setting up a central procurement agency. With such a central agency, smaller ministries and statutory boards especially those where the management of large procurement projects is not part of their normal or regular operations, can opt in to use the services it offers. The Committee also feels that specialist career development and institutional knowledge on procurement and project management can be developed and retained in such a central procurement agency.

21 With regard to approving authorities, the Committee is of the view that given the important role that they play as gatekeepers of public funds, there is a need for

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them to be properly briefed and trained on their responsibilities before they assume the role.

22 The Committee also recommends that AGO continue to pay special attention to procurement in its audits of ministries and statutory boards. In this regard, the Committee notes and supports AGO’s recent initiative to obtain access to the central database on public sector procurement transactions for analysis. Considering that AGO audits most statutory boards only once in five to seven years, this initiative would also help AGO in checking for possible irregularities in public sector procurement in between scheduled audits.

Need for Competitive Pricing for Agency Services

23 The Committee noted the observation in the Report of the Auditor-General with regard to the sale of water to vessels using water-boats by an agent of the Maritime and Port Authority of Singapore (MPA). Under the agency agreement, MPA would pay the agent a service fee which covers “all costs and expenses relating to the operation of the water-boats”. AGO observed that in addition to this, MPA had also allowed the agent to retain the “distance surcharge” (a levy mandated by law) collected on its behalf even though this was not provided for in the agreement. MPA explained that it had “policy intent” to allow the agent to retain the distance surcharge in addition to being paid the service fee and would take remedial action to reflect its intent in the water sales agreement. The total amount of distance surcharge collected and retained by the agent since 1996 was $14.18 million.

24 The Committee noted that the same agent had been supplying water to vessels using water-boats since the establishment of MPA in 1996; MPA had not procured the agent’s services through a competitive process. The Committee is concerned that without some form of competition, MPA would not have the assurance that what it pays the sole agent is fair and reasonable. The Committee asked MOT whether MPA would review its long-standing arrangement of engaging the same agent (since the establishment of MPA) to supply water to vessels using water-boats and consider actively inviting proposals from others to act as MPA’s agents.

25 In response to the Committee’s concern, MOT explained that MPA regularly reviews the regulatory framework and pricing for water sales to vessels i.e. reviewing the policy intent, and seeking to balance the needs of the shipping community and the water sales agents to recover their operational and infrastructure costs. MOT said that the amounts paid to the agent took into consideration the agent’s capital and operating costs incurred to operate the water-boats.

26 To the Committee’s query, MOT informed the Committee that MPA is exploring moving from the current agency model (where MPA sells the water and appoints agents to carry out the operations) to a licensing model (MPA licenses operators to sell water) to engender greater competition and improvements in efficiency. The licensing regime would allow the operators to compete in terms of service level and price, with MPA mandating certain minimum service standards and maximum price.

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27 The Committee noted MOT’s proposal to switch to a licensing model over the next one to two years whereby MPA would actively invite applications from operators for the provision of water using water-boats. The Committee has asked MOT to provide an update on this in due course.

Lapses in Access Controls and IT Security

28 The Committee noted that the Auditor-General had reported lapses in access controls and IT security in Vital (a department of MOF providing centralised payment and payroll processing services) pertaining to its Government-wide accounting and payroll systems and in SPF pertaining to its systems for recording revenue collection, related traffic offences and drivers’ records. The lapses include:

(i) Access rights not granted on a need basis (Vital and SPF);

(ii) Delay in removing access rights of officers who no longer needed them (Vital);

(iii) No periodic reviews of user accounts, including those of privileged users (SPF); and

(iv) No review of activity logs of privileged users (SPF).

29 Noting that similar lapses were also reported in the previous year’s Report of the Auditor-General, the Committee is concerned that weak access controls could be a recurring problem across public sector entities. The Committee has emphasised to MICA (the central agency for IT security in the public sector) the need for greater vigilance in IT controls, especially on access controls, so as to reduce the risk of fraudulent or unauthorised transactions being put through computer systems.

30 MICA explained to the Committee that the public sector policy on IT Security requires all system owners/managers to re-certify access requirements regularly at intervals that are commensurate with the risk profile of the IT systems. To reinforce these guidelines, as from the financial year 2012, MICA would require public sector entities to include system access control reviews for systems with high business impact in the annual security review exercise.

31 MICA also informed the Committee that MICA and Info-Communications Development Authority of Singapore would be working out a detailed standard operating procedure (SOP) that provides greater clarity on the roles and responsibilities of all parties involved in the management of access rights. The SOP would be disseminated to all agencies by June 2012.

32 The Committee noted the actions taken by MICA.

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Other Irregularities

Substantial Advance Payments Made for Development Projects

33 The Ministry of Defence (MINDEF) assigns development projects to the Defence Science and Technology Agency (DSTA) and makes payments to DSTA at specified milestones based on the materials cost estimated at the time the projects are assigned.

34 The Committee noted that with this payment arrangement, payments made to DSTA far exceeded the actual materials cost incurred by DSTA. As at 31 March 2010, the cumulative advance payments made to DSTA totalled $333 million.

35 The Committee is concerned that a substantial amount of Government funds is being kept at DSTA, and asked MINDEF to describe the measures that it has put in place to ensure that its payments to DSTA do not have the effect of giving DSTA a cash float that is not warranted.

36 MINDEF explained that the intent of its payment arrangement with DSTA was to allow DSTA the flexibility to time and consolidate purchases across various development projects to secure better deals through economies of scale. To reduce the accumulation of cash in DSTA, MINDEF has since instituted a process to regularly review the progress of all DSTA-managed development projects and adjust the payment schedules on a quarterly basis. Following the implementation of this new procedure, the cumulative balance of advance payments as at 30 September 2011 was below $90 million.

37 The Committee noted the actions taken by MINDEF.

Lapses in Monitoring and Recovery of Outstanding Debts

38 The Committee noted that as at July 2009, $3.03 million in advances made by MINDEF had not been recovered from 358 Singapore Armed Forces (SAF) personnel who had left the service. Of this amount, about $1.78 million had been outstanding for more than two years. MINDEF informed the Committee that it has since taken action to recover the outstanding debts and reminded its external debt recovery agency to adhere to its requirements. It has also improved the debt recovery process and put in place standard operating procedures.

39 MINDEF explained that such advances are part of its retention framework to make the SAF career more attractive. To minimise the risk of default, MINDEF sets a limit to the amount of advance given to the servicemen. On leaving service, every serviceman would go through a financial clearance process and any outstanding debt is offset, as far as possible, from the salary and accumulated service benefits due to him. Suitable arrangements would be made for servicemen to repay any remaining debt, taking into account his financial circumstances.

40 MINDEF also informed the Committee that its external debt recovery agency has tightened its internal processes to strengthen the monitoring and closure of the

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cases it manages. It has increased manpower to manage the cases and uses a central database to track and monitor outstanding debts. In addition, the agency sends monthly reports to MINDEF so that high-value debts not recovered would be escalated for attention and necessary action.

41 The Committee noted the actions taken by MINDEF.

Lapses in Administration of INVEST Fund

42 MHA manages the INVEST Fund which is a retirement fund for its uniformed service officers. The law establishing the Fund prescribes how it is to be administered and the accounts to be maintained.

43 The Committee noted that $7.4 million of expenses incurred for administering the Fund had been wrongly charged to the Government since inception of the Fund in 2001 to the end of FY 2010/11. The law requires the expenses to be charged to the Fund. The Committee also noted AGO’s observation that $7.23 million of investment income was wrongly put into a particular account of the INVEST Fund.

44 In response to the Committee's inquiries on the actions taken to rectify the errors, MHA reported that it had since refunded the $7.4 million to the Government by transferring the amount from the INVEST Fund to the Government Consolidated Fund in October 2011. The Ministry would also be paying $0.64 million to the Consolidated Fund, being interest on the $7.4 million.

45 MHA acknowledged its mistake and informed the Committee that it has since taken the following measures to ensure that expenses required by law to be charged to specific Funds are not borne by the Government:

(i) MHA’s Legal Division has, in consultation with AGC, drawn up a list of administrative expenses to be charged to the Fund. The approving officers of the Fund would ensure that these expenses are not charged to the Government.

(ii) A Finance Directive has been issued to MHA’s Home Team Departments to reiterate that all expenses required by law to be charged to specific funds should not be paid using Government funds.

(iii) Certifying Officers at MHA’s Departments have been reminded to perform thorough checks on the nature of expenses before certifying payment from Government funds.

46 As regards the error of putting $7.23 million of investment income into the wrong account of the INVEST Fund, MHA informed the Committee that the error has since been corrected by transferring the $7.23 million to the right account in October 2011. MHA acknowledged that this was an accounting error that arose from a wrong interpretation of the law governing the INVEST Fund.

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47 MHA confirmed that both errors did not have any impact on members of the Fund.

48 The Committee noted the actions taken by MHA.

Non-compliance with Building and Construction Industry Security of Payment Act

49 The National Parks Board (NParks) acted as an agent of its supervising ministry, the Ministry of National Development (MND), to manage a park development project. The Committee noted that NParks was found, on eight occasions, to have exceeded the time limits allowed in the Building and Construction Industry Security of Payment Act (Cap. 30B, 2006 Revised Edition). In five instances involving $1.65 million, the delay in responding to payment claims was as long as 42 days. In three instances involving $2.70 million, the delay in making payment was as long as 25 days.

50 The above Act was enacted in 2004 to address the cash flow problems confronting the construction industry by upholding the rights of parties to seek progress payments for work done and goods supplied. As the Act is administered by MND, the Committee impressed upon MND the importance of ensuring that the Ministry, its statutory boards and appointed agents comply with the Act so as to be an example for the industry.

51 MND assured the Committee that it takes a serious view of the matter. It has worked with its statutory boards and has taken the following actions to improve the timeliness of payments:

(i) Emphasising the importance of strict compliance with the Building and Construction Industry Security of Payment Act and raising staff awareness through various communication platforms;

(ii) Identifying business process improvements and best practices to prevent, detect and monitor compliance with payment timeframes stipulated in the Act; and

(iii) Stepping up internal audit.

52 Following AGO’s report, NParks has also carried out a comprehensive review and implemented a range of measures, including:

(i) Implementing a tracking system to monitor the payment progress of payment claims and invoices received;

(ii) Streamlining the approval process to reduce the time required to process payments; and

(iii) Quarterly reporting of late payments at Management meetings.

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53 The Committee noted the actions taken by MND and NParks.

Non-compliance with Public Service Division's Directive

54 Under a Public Service Division (PSD) circular, the Economic Development Board (EDB) is required to seek the approval of the Permanent Secretary of its supervising ministry, the Ministry of Trade and Industry (MTI), when setting salaries and other service conditions. The circular also requires the Permanent Secretary to seek and take into account the views of PSD when giving his approval.

55 The Committee noted that the Permanent Secretary of MTI had delegated his authority on such matters to EDB with effect from February 2007. Since then, EDB had made various changes to its staff salary structure and service conditions without seeking the PSD’s views.

56 In response to the Committee’s inquiries, MTI informed the Committee that it has since directed EDB to seek MTI’s views for all salary-related proposals and MTI, in turn, would consult PSD on the proposed changes.

57 The Committee also asked PSD for its objectives in requiring its views to be sought, measures to ensure compliance with the circular and whether there is a need to tighten these measures.

58 PSD responded that its objective is to maintain an oversight of statutory boards even as they exercise flexibility in personnel matters. This is to prevent wage escalation and to uphold financial discipline.

59 To ensure compliance with the circular, PSD conducts an annual survey on the HR policies and practices of statutory boards to monitor the changes made by the boards. PSD also exercises oversight by monitoring the terms and service conditions of the statutory boards’ Chief Executive Officers (CEOs). Statutory boards are required to seek PSD’s endorsement for the remuneration packages of their CEOs.

60 PSD informed the Committee that it takes a serious view of the responsibility placed on supervising ministries to ensure that their statutory boards comply with the requirements in the circular. PSD would remind all Ministries of the requirement to seek its comments when undertaking major changes to staff remuneration and other conditions of services. PSD also informed the Committee that it is reviewing the compliance and monitoring framework and it plans to issue an updated circular thereafter.

61 The Committee noted PSD’s response and has asked for an update on the outcome of the review when it is completed.

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Enhancing Governance Framework and Practices of Statutory Boards

62 In 2010, AGO developed two guides on governance and internal auditing practices of statutory boards which MOF circulated to all statutory boards as good practice guides.

63 MOF informed the Committee that an inter-agency study team formed in December 2010 to study statutory board governance had referred to the two AGO guides. The findings and recommendations from the study, which included a proposed set of governance guidelines, were presented to a Ministerial Committee in February 2012. MOF and PSD are currently refining the set of guidelines for distribution to statutory boards.

64 The Committee noted the actions taken by MOF.

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Appendix I

IRREGULARITIES IN PROCUREMENT AND CONTRACT MANAGEMENT

Ministry of Home Affairs (MHA)

Audit Observations

The Report of the Auditor-General for the Financial Year 2010/11 covered two projects that the Police Coast Guard (PCG) of the Singapore Police Force (SPF) undertook in FY2009/10. Project 1, costing $5.73 million, involved the supply and installation of floating sea barriers (FSB) at various coastal locations. Project 2, costing $1.13 million, involved the repair of a coastal barrier. A project management company was engaged to manage these projects.

The Committee noted that serious irregularities were found at every stage of the projects, namely purchase commitment and approval stage, contract management stage and payment stage. The lapses found include the following:

(i) Inappropriate use of term contracts (Projects 1 and 2)

(ii) Inappropriate pricing of FSB items (Project 1)

(iii) PCG overcharged or could have been overcharged (Projects 1 and 2)

(iv) Payment for materials not delivered (Project 1)

(v) Payments made for materials not meeting specifications (Project 1)

(vi) Failure in payment control (Projects 1 and 2)

(vii) Documents could have been falsified (Projects 1 and 2)

Actions Taken by MHA

MHA informed the Committee that SPF has since:

(i) Recovered $1.18 million of overcharged amounts from both contractors to date;

(ii) Recovered fees of $53,154 from the project management company, calculated based on the overcharged amounts by the contractors;

(iii) Received all outstanding materials;

(iv) Ceased assigning the contractors with any new projects;

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(v) Instructed the project management company to replace the project manager handling both projects;

(vi) Issued a Letter of Warning to the project management company on its negligence as Project Manager and directed the company to strengthen its project management systems. (MHA senior management also wrote to the senior management of the company to register MHA’s concerns over the poor project management); and

(vii) Referred the cases of possible falsification of documents to the Commercial Affairs Department (CAD) for investigation. CAD has since referred the case to the Attorney-General’s Chambers (AGC) for evaluation.

MHA also informed the Committee that it is trying to recover an additional overcharged amount (estimated by AGO to be $0.70 million) from the contractors in respect of the overpricing of one of the items purchased.

Ministry of Information, Communications and the Arts (MICA)

Audit Observations

The following lapses were found in the procurement processes of the Info- Communications Development Authority of Singapore (IDA):

(i) In a tender for provision of manpower services (estimated value of $2.48 million), there was no evidence that seven tenderers who had been shortlisted were given the same information and equal opportunity to clarify on their bids, after tender had closed;

(ii) In a tender for public relation services (estimated value of $464,000), approval was not obtained before accepting pricing alterations made by tenderers after tender had closed; and

(iii) In the above two tenders (total estimated value of $2.94 million), tenderers were not disqualified although they did not meet critical evaluation criteria specified in tender documents.

Actions Taken by MICA

MICA informed the Committee that IDA has since reviewed its internal standard operating procedures on procurement and incorporated pertinent points from government procurement guidelines. It has enhanced its existing procurement-related templates. IDA has also put in place additional checks at critical stages of the procurement process such as having an approving authority to review and approve the tender specifications and evaluation criteria prior to issuing a new tender so as to minimise possible errors.

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MICA also informed the Committee that IDA would continue to train and brief its officers on government procurement rules and would be setting up a centralised procurement unit by March 2012 to manage high value purchases.

Ministry of Trade and Industry (MTI)

Audit Observations

The following lapses were found in the procurement processes of the Economic Development Board (EDB) and the International Enterprise Singapore Board (IE Singapore):

EDB (i) Two period contracts for printing and production services were awarded without binding prices;

(ii) In a tender for renovation works (awarded at value of $484,143), tenderers were not given equal opportunity to clarify on their bids in light of changes in EDB’s requirements, after tender had closed;

(iii) No evidence of assessment of sole bid to ascertain reasonableness of prices offered in respect of two tenders for advertising and marketing services (total estimated value of $2.48 million);

IE Singapore (i) Quotation period for provision of overseas retail space was unduly short;

(ii) Procurement of goods and services for a trade promotion event (estimated procurement value of $84,000) was wrongly done through quotation instead of open tender;

(iii) In the same procurement as (ii), vendors were not given equal opportunity to revise bids in response to changes in IE Singapore’s requirements; and

(iv) Inaccurate or incomplete information were submitted to approving authorities in respect of item (ii) and two other quotation exercises involving provision of manpower services (total estimated value of $120,885).

Actions Taken by MTI

With regard to EDB’s procurement lapses, MTI informed the Committee that EDB has since reviewed and updated its procurement processes to address the lapses. Other measures introduced by EDB include:

(i) Providing officers with checklists and templates for each stage of the procurement process;

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(ii) Setting up an internal web portal to provide officers with easy and timely access to latest information on procurement information and procedures;

(iii) Conducting quarterly sharing of procurement principles and best practices among officers,

(iv) Providing structured education on roles and responsibilities to officers assigned as approving authorities; and

(v) Setting up a centralised procurement team to provide advice on all procurement matters.

As regards the procurement lapses found in IE Singapore, MTI informed the Committee that IE Singapore has briefed its officers on the procurement lapses and corresponding key learning points. IE Singapore has also introduced, among other things, a quotation/tender evaluation form to guide officers in evaluating bids. All completed evaluation forms would be vetted by its Procurement Unit which would ensure that government procurement procedures are complied with and that complete information is provided to the approving authorities.

MTI also informed the Committee that it would disseminate information on the procurement lapses to its agencies and encourage them to strengthen their procurement processes.

Ministry of Transport (MOT)

Audit Observations

The following lapses were found in a few Land Transport Authority of Singapore (LTA) contracts which were audited:

(i) A contract for a road camera system was awarded to the sole tenderer although the offer did not meet a number of technical requirements specified in the tender.

(ii) LTA agreed to pay $547,200 instead of the contracted price of $292,800, following an appeal by the contractor to increase the rates, when LTA exercised the option to renew the contract for provision of traffic wardens.

(iii) Payment was made to the contractor even though works were not carried out in accordance with contract specifications i.e. asphalt joints of the road were located within the lane instead of at the lane lines as specified in the contract.

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Actions Taken by MOT

In response to the Committee’s query, MOT said that LTA had no legal recourse to seek reinstatement of the original contracted price for the traffic warden contract and redress for contract specifications not met with regard to asphalt joints.

MOT also informed the Committee that LTA has a robust procurement process which is aligned with the government procurement principles and that LTA has since amended its Contract Procedure Manual to take into account the lessons learnt. LTA also has a robust payment control process to ensure that payments are made for work done in accordance with contract specifications; LTA has amended its Quality Management System checklist used in all LTA road construction projects to include a check for asphalt joints to be on lane markings.

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Appendix II MINUTES OF PROCEEDINGS ______

1st Meeting ______

Tuesday, 29th November 2011

10.30 a.m. ______

PRESENT:

Mr Cedric Foo Chee Keng (in the Chair) Ms Foo Mee Har Mr Desmond Lee Ti-Seng Ms Jessica Tan Soon Neo Dr Teo Ho Pin Mr Zaqy Mohamad

ABSENT: Mr Ang Hin Kee Mr Christopher De Souza

______

1. The Committee considered the Report of the Auditor-General for the Financial Year 2010/11 (Paper Cmd. 7 of 2011).

2. The Committee examined findings contained in the Auditor-General’s report and agreed to write to the Ministry of Defence, Ministry of Finance, Ministry of Home Affairs, Ministry of Information, Communication and the Arts, and Ministry of National Development, Ministry of Transport, Ministry of Trade and Industry, and the Public Service Division to submit memoranda on matters raised. The Committee also agreed that the Permanent Secretary of the Ministry of Finance and Permanent Secretary of the Ministry of Home Affairs be invited to give oral evidence at the next meeting.

Adjourned to a date to be fixed.

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2nd Meeting ______

Thursday, 2nd February 2012

10.00 a.m. ______

PRESENT:

Mr Cedric Foo Chee Keng (in the Chair) Mr Ang Hin Kee Mr Christopher De Souza Mr Desmond Lee Ti-Seng Ms Jessica Tan Soon Neo Dr Teo Ho Pin Mr Zaqy Mohamad

ABSENT: Ms Foo Mee Har

______

1. Mr Tan Tee How, Permanent Secretary, Mr Raja Kumar, Deputy Commissioner (Policy) (Singapore Police Force), Mr Sam Tee, Deputy Commander (Police Coast Guard), Mr Chan Kwok Mun, Senior Director (Finance), Mr Raymond Khoo, Director, Technology & Logistics Division, Ms Jo Choo, Director, Admin & Finance (Singapore Police Force) and Mr Norman Tan, Deputy Director, Admin & Finance (Singapore Police Force) of the Ministry of Home Affairs were examined on irregularities in procurement and payment.

2. Ms Chan Lai Fung, Permanent Secretary (Finance)(Performance), Mr Lim Hock Chuan, Deputy Secretary (Performance), Mr Terence Ho, Director (Performance and Resource Management) and Ms Tay Jing Ying, Associate (Procurement and Resource Systems) of Ministry of Finance were examined.

3. The Committee considered the memoranda received from Ministry of Defence, Ministry of Finance, Ministry of Home Affairs, Ministry of Information, Communication and the Arts, and Ministry of National Development, Ministry of Transport, Ministry of Trade and Industry and the Public Service Division.

4. The Committee deliberated.

5. The Committee agreed to write to the Ministry of Defence, Ministry of Finance, Ministry of Home Affairs, Ministry of Transport and Public Service Division to submit further memoranda on matters raised and provide updates when required.

Adjourned to a date to be fixed.

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3rd Meeting ______

Tuesday, 20th March 2012

10.00 a.m. ______

PRESENT:

Mr Cedric Foo Chee Keng (in the Chair) Ms Foo Mee Har Mr Ang Hin Kee Mr Desmond Lee Ti-Seng Dr Teo Ho Pin

ABSENT: Mr Christopher De Souza Ms Jessica Tan Soon Neo Mr Zaqy Mohamad

______

1. The Committee considered the memoranda received from Ministry of Defence, Ministry of Finance, Ministry of Home Affairs and Ministry of Transport.

2. The Committee agreed to write to the Ministry of Transport to submit further memorandum to provide update when required on matter raised.

3. The Committee further deliberated.

Report

4. The Chairman’s report brought up and read the first time.

5. Resolved, “That the Chairman’s report be read a second time paragraph by paragraph.”.

6. Paragraphs 1 to 64 inclusive read and agreed to.

7. Resolved, “That this report be the report of the Committee to Parliament.”

8. Agreed that the Chairman do present the Report to Parliament when copies are available for distribution to Members of Parliament.

Adjourned sine die.

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