One-month termination clause in AIM agreement 'reasonable': Teo Ho Pin

[UPDATE on 2 January 2013: adding Teo Ho Pin's additional statements]

A clause in the People's Action Party (PAP) Town Councils' agreement that allows its fully-owned company Action Information Management Pte Ltd (AIM) to terminate its deal with just a month's notice was deemed "reasonable" by the town council coordinating chairman.

In a second lengthy statement from Teo Ho Pin on Wednesday, The Straits Times reported that he explained the reason for the party-owned town councils selling and leasing its computer systems back from AIM, which was allowed to terminate the contract with any town council that experiences a "material change in composition".

"This (the clause) is reasonable as the contractor has agreed to provide services on the basis of the existing (town council) and town boundaries, and priced this assumption into the tender," he wrote. "Should this change materially, the contractor could end up providing services to a town council which comprises a much larger area and more residents, but at the same price."

He also explained in his statement that the sale took place because it was "cumbersome and inefficient" to have 14 individual town councils hold intellectual property rights to the software being used by all of them. He further added that the move to sell resulted in savings of about $8,000 for the town councils.

Teo was responding to Workers' Party and Aljunied-Hougang Town Council (AHTC) chairman Sylvia Lim, who last Friday aimed a follow-up shot in the latest of an enlarging ongoing spat between the town council and those run by PAP.

In a statement published on the AHTC's website, Lim challenged the PAP and its subsidiary company Action Information Management Pte Ltd to come clean on why the town councils sold and leased their computer systems back from them.

Earlier, local media reported that the PAP Town Councils defended the sale of its management systems to AIM, with coordinating chairman Teo Ho Pin saying that its transactions followed regulations.

The deal involved the sale of software, while the ownership of hardware remained with all the town councils, he reportedly said.

In a letter, he explained that in 2010 they called an open tender
to which AIM submitted the sole bid though five companies collected the tender agreement.

Meanwhile, AIM described Lim's allegation that the opposition-run council had to fight for an extension as "inaccurate".

Service extensions were granted by AIM twice, once in August and once in September 2011, and since AHTC did not ask for a further extension, the contract lapsed, it said.

Responding to what they said on Friday, Lim said it was "regrettable" that Teo's and Chandra Das's statements were "calculated to side-step the most critical question of how the public interest was served" in the scenario they had created through the sale of the management systems.

"What justification was there for the Town Councils to relinquish ownership (of the systems) and leave the continuity of the Town Council operations at the mercy of a third party? Residents all over Singapore have a right to know," she wrote.

Noting that Teo had admitted that AIM was "fully-owned" by the PAP, Lim pointed out further that the PAP-managed town councils "had seen it fit to sell away their ownership of the systems, developed with public funds, to a political party, which presumably could act in its own interests when exercising its rights to terminate the contracts".

Controversy reignited

Public debate over the matter ensued after questions were
raised over how AHTC's computer and financial systems were placed under the control of AIM.

In a post in his blog Yawning Bread last Friday, Alex Au said the issue “has the potential to be a big story, causing enormous damage to the People’s Action Party (PAP)”.

first erupted earlier this month when the Ministry of National Development (MND) released its latest town council management report, singling out the AHTC with a “red” rating for its handling of service and conservancy charge (S&CC) arrears.

The council
was not rated for its corporate governance due to its lateness in submitting its auditor’s management letter “material to the banding of the corporate governance indicator”, the ministry said.

WP’s response

to the report, AHTC chair Sylvia Lim, who is also chairman of the Workers’ Party, noted the fact that the town council’s audit took longer than expected because of its need to develop a new computer and financial system from scratch.

In a statement
released on 14 December, the same day the town council management review was published, she explained that as her party was taking over the town council in the wake of their success at last year’s election, it was informed that its existing computer and financial systems would be terminated from 1 August 2011, “due to material changes to the membership of the Town Council”.

She pointed
out also that the systems, having been developed collectively by the 14 PAP town councils over a period of more than 15 months, were in January last year sold to a company called M/s Action Information Management Pte Ltd (AIM).

The town councils then leased the systems back from AIM, paying the company fees every month for the usage of the computer systems — and a report from online socio-political site TR Emeritus said these payments would have to come from the S&CC paid by residents.

When the sale and lease-back occurred, AIM was empowered by its prevailing service agreement to terminate the systems contract with any of the town councils within a single month’s notice in the event of a “material change” to its composition, which is what happened with AHTC.

Given the
circumstances, Lim said in comparison to the “more than 15 months” that the 14 town councils spent collectively developing a finance and computer system, the AHTC was left with a two-month timeframe to develop its own equivalent systems.

it as a “near-impossible task”, Lim said her town council had to prioritise the development of its financial system into phases, resulting in a delay for its audit.

Firm's directors

Details about AIM and its make-up then came to the fore. Lim noted in her statement that the company was in fact a dormant one. TR Emeritus reported that AIM had been operating out of an office which allegedly shares its address with more than 1,000 other businesses, apart from the actual company that operates from that address — one KCS Corporate Services Pte Ltd.

Further, a second report from the alternative news website noted its discovery that AIM consisted of just three people, all of whom were former PAP Members of Parliament — its chairman, S Chandra Das, and directors Lau Ping Sum and Chew Heng Ching.

The company had a total paid-up capital of just $2, with $1 held in shares by Chandra Das, and the other $1 owned by Lau, according to the report showing the firm's business filing with the Accounting and Corporate Regulatory  Authority.

“As (Lim) pointed out, the questions have to be: Why did the PAP Town Councils relinquish ownership of the computer and financial system, and how much did they sell it to AIM for?” asked Au. “It was probably developed with taxpayer money by the 14 town councils, with much input and support from taxpayer-paid town council staff, unless — and it is hard to believe — the PAP paid for the development of the system.”

Terms used in contract

Another issue that was raised involved the nature of the contract signed when the town councils collectively sold the computer systems to AIM, allowing the firm to terminate the contract with just a month’s notice “should there be a material change to the composition of the town council”.

“As (Lim)
asked: ‘How is it in the public interest to have such a thing (the contract terms)?’” wrote Au.

“What price was it sold to AIM for? How was that price arrived at? Was there competitive tendering?” he asked in succession.

Au added further the questions of how acting for partisan advantage is in the best interest of the residents of the constituency, as well as whether or not the priority should be to ensure that the systems in the town councils continue accordingly.

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