Round-Up Statement on Town Councils 13 May 2013 1. Mdm Speaker, I thank all the members who spoke, sharing their views on the MND Review Report, and also their actual ground experience running their TCs. Several MPs, including Ms Denise Phua, Mr Zainal Sapari, Mr Teo Ho Pin, and Mr Liang Eng Hwa, offered many suggestions for SMS Lee Yi Shyan to consider when he reviews the TCs and I am sure he will take them up. Let me respond to the key comments. 2. The Review Team has established that the AIM transaction has complied with the TCs Act and the TC Financial Rules. Ms Sylvia Lim unfortunately continued to question whether the AIM transaction truly complied with the TCs Act since the tender period was only posted for 2 weeks in the first instance. 3. Under the TC Financial Rules, the minimum period of tender notice should not be less than 3 weeks. Nonetheless, latitude is given to the Chairman of the TC to approve a shorter period of tender notice. The Review Team has established that the PAP TCs had obtained the necessary approvals for the shorter two week tender notice, as well as a subsequent extension of one week. So in the end the tender period was 3 weeks. 4. In fact, the TC Financial Rules also provide latitude to TCs or their Chairmen to waive requirement to call for tender altogether. Ms Sylvia Lim would be familiar with this because she exercised this latitude when her TC waived competition and appointed FM Solutions and Services Pte Ltd (FMSS) as its Managing Agent (MA) in 2011. MND left the appointment to her best judgement and did not object. We have to apply the TCs Act and the TC Financial Rules fairly, evenly and consistently. 5. Ms Sylvia Lim said that the tender was only open in substance because “each of the directors of the company had to have adequate experience in the operations and functions of a town council”. 6. The tender requirements had been drawn up in the interests of residents. It was important that the vendor should have an established track record in TC operations, given the extensive and specialised nature of TC administration, involving thousands of HDB blocks and associated common property. 7. AIM was not the only company that could have qualified. For one thing, Ms How Weng Fan, with her extensive experience in TC work, could have formed a company with others like her and submitted a bid for this. After all, this is what she, her husband and her HGTC colleagues did when they set up FMSS several days before the setting up of AHTC. And they went on to win the contract to be AHTC MA, which is worth millions of dollars, without even a tender being called. 8. In reality, the TCs did not receive any feedback from prospective tenderers to change or vary this requirement. In fact, from the informal feedback obtained, the sense is that stringency of requirement was something else. It was that the contract for the transaction ensured against any increase in maintenance costs – this is a maintenance cost charged by NCS – even as sourcing and development of a new generation TCMS (Town Council Management System) was pursued. 9. This particular requirement, coupled with the fact that there is no certainty that the vendor would be given the contract to develop the next generation software, explains why the other vendors were not interested. 10. Ms Sylvia Lim mentioned that a vendor told the media that there was insufficient information in the tender document. There was a 3-week tender notice period, during which potential vendors could seek clarifications from the TCs or ask for a tender briefing. So there was sufficient opportunity for potential bidders to obtain the necessary information for their assessment. 11. Mrs Lina Chiam asked how there can be no conflict of interest even if nobody made money. She said she was not sure if any lawyer would be satisfied with how a conflict of interest has been defined in the review report. Let me share that the Review Team had consulted the Attorney-General who had confirmed the legal position taken in the report on this. 12. Some WP members could not accept the Review Report’s conclusion that there was no conflict of interest in the AIM transaction. I had explained earlier the background to the enactment of the TCs Act and the political nature of TCs. And this is the context against which the AIM transaction needs to be examined. Let me state the case from MND’s perspective as the administrator of the Act. We are the authority, we own the policy. We are the policy formulator and the policy administrator for this Act. 13. TCs are specifically set up to establish a link between the elected MPs and their TC. The Act by design does not prohibit transactions between the TC and party-related entities or persons. Latitude has always been given to MPs to manage their TCs according to their best judgement and be accountable to their residents politically. TCs run by MPs from all political parties have at one time or another appointed party supporters or former candidates to provide services to the TCs they run. The Straits Times gave some examples in an article of 7 May; so did LHZB on 11 May. 14. Mr Pritam Singh suggested that, going forward, to avoid conflict of interest, companies owned by political parties should not be allowed to transact with TCs. As I mentioned, the TCs Act presently does not prohibit transactions with party affiliates. However, if we choose to do this as Mr Pritam Singh proposed, we must impose it across all TCs, and also not just narrowly for party-owned companies but companies owned by people in various forms of party affiliations, like ex-party members and party supporters and even their immediate families. If we do this, we would of course be prohibiting the appointment of FMSS by the AHTC as well. Ms Sylvia Lim mentioned about FMSS and some comments about MND providing this information to a media query. She asked about this point, so let me elaborate on what this entity called FMSS is. 15. FMSS was formed by a group of Hougang TC employees. It is now principally owned by Ms How Weng Fan and her husband Mr Danny Loh, who although not a staff of Hougang TC, was a contractor of services to Hougang TC when his wife, Ms How, was the estate manager. Apart from their long association with the WP’s leadership, Mr Danny Loh and Ms How are WP supporters who acted as assentor and proposer to the WP team of candidates led by Mr Yaw Shin Leong to contest in Ang Mo Kio GRC in the 2006 General Election. 16. Thus, if you look at the substance of the contract between AHTC and FMSS, the following points are quite striking: a) FMSS was formed on 15 May 2011, four days after the 2011 GE. The company was principally owned by two very close WP party associates. They were husband and wife and were providing services to Hougang as well. And they were Secretary and Deputy Secretary of AHTC. b) The Management Contract, which was worth $5.2 million a year, was awarded to FMSS without tender. c) One year later, AHTC did go for a tender where FMSS was the only tenderer and a three-year contract worth $16.8 million was given to FMSS. d) Subsequently, another three-year contract for EMSU (Essential Maintenance Services Unit) was also given to FMSS, which was worth $3.9 million. 17. So, Madam Speaker, when we talk about public interest, how would Ms Sylvia Lim characterise the FMSS transactions? In substance, has public interest been protected? Would she take the position that contracts like these given to close Party associates be prohibited? In the AIM contract, public interest was enhanced. Can the same be said for the FMSS contract? In this respect let me also remind members that Mrs Lina Chiam too was appointed as Potong Pasir Town Council’s Secretary in February 2010 and she was paid a monthly salary. She was then the Singapore People’s Party’s CEC member and became its Vice Chairman in August that year. MND accepted that, consistent with its approach to allow all town councils the same latitude with all party affiliates and we did not interfere with any of these transactions. And I think that should be the same, fair, consistent approach that we apply to all parties, whether it is PAP, WP or SPP. 18. Ms Sylvia Lim and Mr Pritam Singh asserted that the transfer of ownership of the management software from the TCs to AIM was improper and against the residents’ interests. Ms Sylvia Lim has of course been spreading this narrative ever since MND found her TC to be lacking in performance. She asked essentially: why should the TCs pass the ownership of an essential software to AIM only to lease it back at a fee from AIM? The Review Report has given a detailed explanation for this arrangement. This was a sale and leaseback arrangement, which is perfectly normal in the industry. Just because at the end of it, the software has been transferred to AIM does not mean that it is at all improper. 19. Why did the TCs do so, just when the software was nearing obsolescence? Precisely because the software would soon be obsolescent, the TCs needed to move onto next generation software.