A different look at this AIMishambles
AIMgate is such a clichéd term; I prefer AIMishambles to keep up with the times, after the Oxford English Dictionary 2012 Word of the Year omnishambles. The term refers to “a situation which is seen as shambolic from all possible perspectives” and is a fitting one to describe not just the original PAP town councils-AIM transaction, but also the government’s response so far.
A lot has been said online but nothing much new since Dr Teo Ho Pin’s statement besides the brouhaha on the threat of defamation suits. There isn’t much value in the discussion when everyone is saying the same things on social media while the government is not saying much. So let me play the devil’s advocate and comment on some of the things said online, and offer some alternative explanations. Just keep an open mind and don’t shoot me for saying them.
Dr Teo’s statement
A lesson one learns from working in a corporate environment is to keep email replies as short as possible lest they invite further questions. While Dr Teo’s statement skipped over critical issues, it also gave information that it didn’t really need to, such as the consulting advice from Deloitte and Touche and the versions of software the TCs are using.
It was a little unnecessary for netizens to go on an almost line-by-line rebuttal of Dr Teo’s statement. Some of the things he said were business decisions which on hindsight are always easy to criticise. Some other faults, such as using outdated software and taking too long to build new ones, are ailments many organisations suffer from.
If we go on a fault-finding mission every time they explain something, PAP will think that online voices are irrational and that it is pointless to issue any more statements to clarify further because people will just find other details to pick on. Focus on the questions that are unanswered, the key one being the conflict of interest that the mainstream media and Grace Fu tried to distract us from.
Missing information
Two key pieces of missing information are how much was the initial project with NCS to build the software, and how much is the maintenance fee paid to NCS on top of the $140 monthly per TC to AIM. It is plausible and not unreasonable that PAP might not want to reveal these information because these are details of separate business dealings with a third-party company NCS, unless they are forced to do so by an inquiry.
Financials of the deal
I maintain my view in a previous post that the financial terms behind the deal as revealed by Dr Teo do not look improper. This is assuming that $140,000 is the right valuation for the software. A lot has been said online that the TCs actually ended up paying $25,030 to AIM despite Dr Teo’s claim that they made a modest profit of about $8,000. While Dr Teo can be faulted for misleading, he isn’t exactly wrong to say that because he was referring strictly to the sale-and-leaseback transaction.
Some netizens are asking why the TCs ended up paying $25,030 net to AIM. I’m not sure what they are expecting. Despite the misgivings we have on its political ownership, AIM is providing a service to the TCs as middleman. It has to pay its two part-time staff providing this service and other overheads. That’s about $2,000 a month in total from 14 TCs. Is that too much for two part-time staff? I don’t think so, even if we don’t know exactly how much work it entails.
Think about it—the transaction would raise a lot more suspicion if AIM is making losses despite this service it provides.
Essentially, after the sale-and-leaseback that lapsed in one year, AIM is no different from a resource agency that provides contract project managers, and gets paid for it. $2,000 is not a lot of money to cover two staff and overheads, so what Mr Chandra Das said about not making any profits for the directors is believable.
The $2 company
We risk digressing from the main issue of AIM being PAP-owned if we keep going on about it being a “$2 company”. Looking at the nature of the transaction, AIM paid the TCs $140,000, as confirmed by Mr Chandra Das, and in turn earned back monthly leasing fees. If somehow AIM had defaulted because it was just a $2 company, the TCs would not have lost any money because they had received the upfront payment.
So the default risk faced by the TCs was not high once AIM had paid the initial sale amount. Of course, the TCs could lose the use of the software if AIM defaults, but they face the same risk with a short notice of one month if AIM decides to terminate the contract. So AIM’s financial setup in terms of paid-up capital isn’t really a big concern at all.
In fact, AIM faces a much greater risk of being left with a potentially useless piece of software if the TCs terminate the contract, which may be another reason why other vendors chose not to bid for the project.
The tender process
One suspicion going around is that the tender process was rigged with the award predetermined to go to AIM. My hunch is quite the opposite: that no vendors wanted the project and AIM ended up picking up the pieces as a favour to the TCs. This theory is supported by the fact that their bid was submitted after the tender closing date. If the tender was to go to AIM all along, it would have had the bid ready way before the closing date.
I don’t believe there’s much value in the software after it is retired, which if I’m not wrong is just a customised Oracle ERP module. The $25,030 amount made by AIM over more than two years is quite a pathetic sum that bigger companies such as NCS won’t bother with. So it was left with the smaller SMEs who might be interested, and the SMEs quite rightly regarded it too much of a risk to guarantee that rates with NCS wouldn’t change, plus the risk I mentioned previously of the contract being terminated prematurely by the TCs.
Were the requirements of the tender too stringent then? Probably. One of the companies who collected the tender documents said that there was too little information in them to make a judgement call. So it looks like the tender wasn’t prepared properly, and this again supports the theory no companies bid for it as a result and AIM then took on the contract.
If this is correct, it may be why PAP is so reluctant to reveal more—because they took the easy way out and awarded the contract without a second tender. But it would be nothing as sinister as what some are speculating.
Motivations for deal
If the above is correct, the question is then why are the TCs so desperate to sell away the software after an unsuccessful tender call? Honestly, there could be dozens of possible reasons.
For example, there could be cash flow problems and an urgent need for cash that the sale proceeds would generate. This would be worrying for residents but seems unlikely because the amount was not sizeable compared to the balance sheets these town councils are carrying.
Perhaps no TC wanted to take ownership of the managing of the relationship with NCS, so collectively the convenient thing to do was to outsource this ownership?
The most likely reason as I see it is the database jointly owned by the TCs that contains sensitive financial data. Co-ownership of such an asset by PAP and opposition TCs becomes very tricky if you don’t want the other party to be privy to your finances. How do you deny AHTC the right to access the database if it has equal ownership to it? So to sell it to a third party is a smart thing to do so that no TC can claim this right. Now that it belongs to AIM, a PAP-owned company, AHTC quite rightly decided to build their own software and database as well in order to protect their own sensitive data.
The point is, while many are seeing this sale of a town council asset as a political move to make things difficult for the opposition, it could just as well be for more innocuous reasons such as poor business decisions, a badly managed tender process or necessary protection of data. Surely, if the intention was to “fix” the opposition, there are better ways to do that than with an old piece of software.
Regardless of the intention, though, this was a deal that should never have happened because of the potential conflict of interest due to AIM’s ownership. While the government must shed more light on this AIMishambles it is now facing, we should not just read things the way we want to read them, and be prepared to accept explanations that are less exciting than our conspiracy theories.
Hi vd,
As more info dribbles out, what is more concerning is what holds for the future. A look into what may happen in the not too distant months should ring alarm bells. Who would hold the IP rights to the new software? Who pays for the new software? How much? When would this be implemented? What would happen if PE by-election is lost to another party?
Yes, these are issues that will always come up if PAP and opposition TCs share assets, so perhaps it’s better that the rights are owned by a neutral third party and TCs can individually negotiate contracts to use them. The problem in this saga is that AIM is hardly neutral of course.
Maybe the answers are provided on Harish Pillay’s blog:
http://harishpillay.wordpress.com/2013/01/09/doing-the-right-thing-and-a-proposal/
Open source software.
Your explanation for the sale of software to a third party to prevent AHTC from accessing other TC finances is weak. If data can be accessed easily by anyone, the software is badly written. In any case, AHTC has access for a short period of time so your assumption is highly improbable.
Why even bother to dream up excuses for PAP? They should account to the people for what happened as some laws might have been broken in the transaction.
The software may be airtight with all the right access controls, but the issue is the database. Say it’s housed at NCS, if one party (whether WP or PAP) goes to NCS and ask for a data dump, does NCS have the legal right to stop them since they own it? Such a situation is just too tricky to handle if they co-owns the data.
Since it was already sold to AIM in 2010, there is so such issue with AHTC getting access to what they shouldn’t see as long as the software is well designed to restrict it.
Let’s take a step back. Why should the TCs be concerned about transparency? As managers of the public estates, they are accountable to residents and they should be transparent with residents’ funds. Further the takeover of AHTC included the past finances anyway.
I agree with the need for transparency, but I’m thinking from the TCs’ perspective and they (both PAP and WP) may not appreciate letting the other party have access to their data.
Hi Xmen
I support the view that the sale of the software to a 3rd party makes sense although I have a slightly different explanation from VD.
If the software is developed to be used across any number of TCs and held in-house, PAP would have to hire IT resources for maintenance, debugging and user-support. . This works fine if all TCs come under the same control. But when some of the TCs fall to opposition parties, having a centralized IT support could become messy – how do you charge the opposition party for the use/support of an IT engineer whose headcount belongs to PAP? No matter what figure it comes up with, it may not be well received, could be susceptible to criticisms and even used as a political tool.
Chucking it out to a 3rd party and charging individual TCs a flat fee makes sense to me.
You mentioned about having to part ways because the WP has taken over. This should have been factored in when the PAP TCs ganged together to have a common system. This just reflects again how bad managed the PAP TCs is.
U should U write up a piece about WP and their relations with FMSS. That deal was way more holes than this one. No need for tender to award management of TC to kakis
Ah, you’re referring to this:
http://sg.news.yahoo.com/blogs/singaporescene/aljunied-hougang-town-council-employs-managing-agent-045208110.html
Yes it’s a clear conflict, but at least they came clean on it and shortened the contract. Shows that sometimes if you are open with your reasons, people are more likely to accept them.
You mentioned about how $25,030 is a reasonable amount for AIM. I thought we should ask why should the TCs lose $25,030 when it need not.
For 25k, they are getting two workers from AIM. Alternatively if they choose to manage the systems themselves, they will have to engage their own staff to do the same work, which will cost money as well. So it’s just a matter of internalising or externalising this cost.
Would it be cheaper to engage their own staff? Maybe, but not necessarily. But my point is we can’t just say the TCs lost 25k for nothing. This is the part that a lot of people conveniently disregard.
You are making this up. How do you know they have 2 part-timers working on this matter and what are their responsibilities? Sure, the $25k for 3 directors and their part-time employees may appear reasonable to you but it should be payment for services provided. You should get a copy of their contract to justify the $25k and future payment.
There are so many services the TCs can outsource. $25k here and $25k there and pretty soon we are talking real money.
It was reported that they have 2 part-timers:
http://www.asiaone.com/print/News/Latest%2BNews/Singapore/Story/A1Story20121230-392369.html
Although the report didn’t explicitly say the 2 were working for this specific project, Teo’s statement said the below:
“AIM has also been actively working with several vendors to explore new software options and enhancements for the TCs. AIM has identified software from a number of possible vendors, and has invited them to make presentations to the TCs in order for a suitable option to be chosen.”
So someone from AIM has done some work, and they have to be paid for it.
I don’t really want to go into this hair-splitting, but can I just reiterate that based on the info given, these aspects look above board. If AIM is totally neutral 3rd party, nobody would be saying 25k is lost.
We should focus on the real issue of whether it’s ok for a PAP-owned company to bid and win these projects.
“We should focus on the real issue of whether it’s ok for a PAP-owned company to bid and win these projects.”
Absolutely!
Should political parties be allowed to operate businesses? Today, a small non-essential entity like AIM can create havoc with TC finances. Can you imagine the resulting chaos if a political party owns buses, trains, taxis, utilities, communications and banks?
Agreement at last!
I hope this MND investigation doesn’t come out with the usual “some shortcomings in processes but there was no conflict of interest”.
“Can you imagine the resulting chaos if a political party owns buses, trains, taxis, utilities, communications and banks?”
@ Xmen, lets not be coy abt this; doesnt a “political party” already “own” (loosely translated or directly its up to you) Singapore’s “buses, trains, taxis, utilities, communications and banks”?
haha..
just ask yourself; who decides the next bosses who will helm; NTUC, Singtel, SMRT, Singpower, DBS etc etc.
Good writeup!
I agree quibbling over non-essential details is counter-productive. In response, I don’t think the $25k earned by AIM is a necessary cost. TCs do have full-time employees and how hard can it be to negotiate extension of a contract with NCS? Look, this is easy money for NCS. They have been servicing the software for more than 10 years! Also, does anyone honestly think that NCS would dare to hold the behemoth of 14 TCs hostage?
Also, I’m very troubled by AIM helping the TCs select a new software. This is just plain weird. First, none of the AIM directors are experts in this field, i.e. I can get a chimpanzee to choose a software for me for peanuts. Second, judging by the management fee of $30k as mentioned earlier, I’m assuming AIM will get another cut once a software is selected. Again, why should AIM benefit from something that can be handled by the TCs without any extra cost?
Last, I don’t buy the argument that 3rd-party ownership of the software ensures the integrity of the data. The financial worksheets of TC are fairly straightforward and more importantly, these are public funds. It’s supposed to be white beyond white and able to stand up to the scrutiny of every Singaporeans, blind or deaf. Let’s say you are right, then I will have to revert back to the conspiracy mindset that the PAP TCs are trying to hide their finances behind the imaginary walls of a $2 company.
Thanks!
Truth is we will never know if the TCs saved cost by engaging AIM, or if they could have just asked existing staff to do the same job. But I think it’s more of a ceteris paribus (all else equal) argument to say if AIM is not there, they would have to pay someone on their own for the work.
AIM’s directors may not be experts, but they could have engaged people with some IT project management knowledge (there were 2 part-time staff). Your concern of AIM taking cuts is valid, but these should be put down to bad business decisions. All organisations engage lots of third parties to do things that they probably didn’t need to.
Yes transparency is important, but we shouldn’t confuse with need for data privacy. For example, staff salaries are private data even if they need to be properly account for.
@ VD,
just to add to the discussion; regarding the issue of “fixing” the opposition – i do not see it as a surprise that the key PRIORITY and intention of AIM was for control of something/anything in order to stall/fix/disturb/disrupt/annoy (or whatever you want to call it) any opposition party that takes over. Albeit in a “legal” or grey area sort of manner. In short, PAP MUST at all times have the upper hand.. whether they choose to use it or not is another matter altogether.
This style is simply a legacy of our dear LKY. A man who believed (or at least used to) in eugenics, who crushes (and i mean it literally) his opponents – whom is detailed enough to finesse out opportunities and exploit ANY loopholes to ensure that his rule is always intact – regardless of which party is in power.
remove PAP from power tomorrow, and the layers and layers of “PAP-linked machinery” (thinly disguised or otherwise) will still continue to function and definitely ensure that it can stifle the life out of any opposing party that dares to take over govt.
LKY did not achieve what he has today by being a softy facebookie – u like me i like u politician. do you really believe that he thinks he is “ruled” by his citizenry via “democracy”? Its a cancer in the system – one that generate tons of money & status for those in sync with him.
As such, strictly IMO only; i believe that siphoning of such monies out for whatever reasons by AIM is the least of their priorities – IF it can even be considered as one by Directors who are well monied and living on landed properties. So what do you think is their priority? Data confidentiality? PAH!
They are simply trying to follow in the footsteps of their founding father to ensure the upper hand at all costs.
BTW who coined the term: “fix the opposition”? and who runs the NCB?
The term: “Non-partisan” definitely does not feature in the PAP’s vocabulary. THAT to me is the gist of this issue…
It’s true. The machinery is so entangled it will take a long time to pry it apart. Regarding non-partisanship and conflict of interest, I think the PAP believes its own hype so much that once they convinced themselves that they are clean and above board, they don’t see a need to have clear rules to prevent these conflicts.
@Voiddecker
Good argumnets
What’s your take on the termination clause, ” material changes blah, blah.” Sounds odd to me.
I doubt any otherbiddr would come wiht such a clause if they got the contract. it was that clause that got WP worked up and then all this got revelaed.
While I’m not an expert, I think it’s not uncommon to have such clauses. Just like your phone or internet service provider will have this clause hidden somewhere in the contract. But it’s rare that they are actually exercised. The one mth notice sounds short though. If the software is otherwise useless, there’s no way any other bidder would want it because they could easily end up getting terminated after paying a lump sum for it.
Looking at the series of events, AHTC sent AIM a letter in early Jun 2011 saying they are building their own software (which i think is reasonable). It wasn’t clear if they wanted to continue with AIM (though Sylvia says now that they did). AIM either misinterpreted or decided to pre-empt their decision and sent the termination notice to AHTC.