Questions on town councils-AIM transaction
There are too many unanswered questions pertaining to this software transaction between the town councils and AIM. As long as the mainstream media chooses to stay silent and not report anything until there is a ready explanation from the officials, it is crucial that we continue to press for answers.
But first off, we must not focus on the wrong aspects. Netizens should not harp on about sale-and-leaseback transactions which are not uncommon in business and accounting. In fact, the decision not to hold on to a costly asset on the TCs’ books might make better financial sense. Small companies with very low paid-up capital using virtual addresses and external secretarial services are also common, though how the TCs can trust one to be creditworthy is a different question. We also can’t do straight line valuations without considering discount ratios, depreciation, value-added services and other risk factors. Lastly, the tiff between Aljunied-Hougang Town Council and AIM on the service extension is irrelevant and distracts from the main issue.
These are the questions I have:
- How much was the initial contract between the TCs and NCS to develop the software? This will give an indication of the value of the software.
- What is the useful life of the software and is there a buy-back clause at the end of the lease? It appears the lease was valued on an initial term ending 31 October 2011. Does that mean the TCs only expected the software to last one year, despite spending a significant amount to custom build it?
- Was there an obligation on all 14 TCs to lease the software from AIM and are they allowed to terminate prematurely? These factors may be priced into the differential between sale and leaseback.
- What is the service level agreement (SLA) in the leasing? This includes questions such as what levels of help desk and technical support, how many staff will be providing support, or is AIM outsourcing the support to another company?
[Update: Straits Times reported today that service was 'outsourced' from AIM back to NCS, and the TCs must knew this intention when awarding the contract. So the questions are why would they allow that having terminated NCS's services themselves, and what value does AIM add as the middleman. They have to come clean or face accusations of some sort of 'round-tripping'.]
- Was there sufficient notice on the open tender beyond the single day advertisement in The Straits Times and was it advertised on the government portal GeBIZ?
- With a single bid, how did the TCs determine that the sale and leaseback terms were competitive? How was due diligence conducted on their part?
- What is the track record of AIM in providing such services and did the TCs consider how it is financed?
- Can a contract between PAP town councils and a company 100%-owned by former PAP MPs be considered arm’s length? Should it be allowed at all to avoid even the slightest appearance of any potential conflict of interest?
In my mind, the last set of questions is the most important one while the others are mere details that they will find ways to explain away.