Comments on the article, Why PAP town councils entered into transaction with AIM Article: http://www.todayonline.

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Summary of Comments The detailed statement by Dr. Teo Ho Pin provides the public with more information about the Town Councils-AIM issue. However, it may also raise more questions. These questions do not amount to a charge that there is corruption involved. The issue has, in fact, expanded to the question how wellmanaged the Town Councils arecould it have addressed the issue of the increasingly obsolete software earlier, for instance? The explanations should perhaps not be given by the Town Councils alone. Given the ties between AIM and the PAP, the owners of AIM may want to clarify how it has profited (or not) from the transaction with the Town Councilsexactly what payments and fees were paid? The statement by Dr. Teo ultimately may not help to eliminate the publics objections to the transaction with AIM. Even if nothing illegal has been done, public confidence is not dependent on the legality of actions.

Article with comments Coordinating Chairman for the 14 PAP Town Councils Dr Teo Ho Pin has issued a statement on why the town councils entered into a transaction with Action Information Management for the redevelopment of their computer system. This follows a dispute over the termination of AljuniedHougang Town Council's former computer and financial systems. Here is the statement in full:

1. On 28 December 2012, I issued a press release in response to Ms Sylvia Lim's statement on the website of the Aljunied-Hougang Town Council. Ms Lim had made various assertions in her statement. However, her statement was made without citing the relevant facts. I now make this further statement to set out fully the relevant facts. 2. I am the co-ordinating Chairman of all the PAP-run Town Councils ("the TCs"). The PAP TCs meet regularly and work closely with one another. This allows the TCs to derive economies of scale and to share best practices among themselves. This improves the overall efficiency of the TCs, and ensures that all the PAP TCs can serve their residents better. 3. In 2003, the TCs wanted to harmonise their computer systems. Hence, in 2003, all the TCs jointly called an open tender for a vendor to provide a computer system based on a common platform. NCS was chosen to provide this system. The term of the NCS contract ("NCS contract") was from 1 August 2003 to 31 October 2010. There was an option to further extend the contract for one year, until 31 October 2011. 4. In 2010, the NCS contract was going to expire. The TCs got together and jointly appointed Deloitte

Comment [A1]: Cant you be direct? Which assertions are you referring to and are the assertions valid? Not citing relevant facts doesnt mean that the assertions are not valid.

Comment [A2]: Nice to know, but this does not appear to be relevant. At least not until we start wondering why the TCs did not develop new software earlier despite their regular meetings to ensure that residents are served well.

and Touche Enterprise Risk Services Pte Ltd ("D&T") to advise on the review of the computer system for all the TCs. Several meetings were held with D&T. 5. After a comprehensive review, D&T identified various deficiencies and gaps in the system. The main issue, however, was that the system was becoming obsolete and unmaintainable. It had been built in 2003, on Microsoft Windows XP and Oracle Financial 11 platforms. By 2010, Windows XP had been superseded by Windows Vista as well as Windows 7, and Oracle would soon phase out and discontinue support to its Financial 11 platform. 6. The TCs were aware of and concerned about the serious risks of system obsolescence identified by D&T, and wanted to pre-empt the problem. In addition, as the NCS Contract was about to expire, they sought a solution which would provide the best redevelopment option to the TCs, and in the interim would allow them to continue enjoying the prevailing maintenance and other services. 7. As Coordinating Chairman of the TCs, I had to oversee the redevelopment of the existing computer system for all TCs. It was clear to me that the existing computer software was already dated. The NCS contract would end by 31 October 2011 (if the one year extension option was exercised). However, assessing new software and actually developing a replacement system that would meet our new requirements would take time, maybe 18-24 months or even longer. We thus needed to ensure that we could get a further extension (beyond October 2011) from NCS, while working on redevelopment options. 8. D&T also raised with the TCs the option of having a third party own the computer system, including the software, instead, with the TCs paying a service fee for regular maintenance. This structure was not uncommon. 9. We decided to seriously consider this option. Having each of the 14 individual TCs hold the Intellectual Property (IP) rights to the software was cumbersome and inefficient. The vendor would have to deal with all 14 TCs when reviewing or revising the system. It would be better for the 14 TCs to consolidate their software rights in a single party which would manage them on behalf of all the TCs, and also source vendors to improve the system and address the deficiencies. 10. The TCs thus decided to call a tender to meet the following requirements:

Comment [A3]: Shouldnt the review have been done much earlier instead of waiting until the contract was about to expire? This does not appear to be very good management.

Comment [A4]: Many ordinary folks out there could have told the TCs the same thing. Perhaps earlier too.

Comment [A5]: What eactly are these services? Was Aim supposed to provide these services and did it have the staff to do it?

Comment [A6]: Again, this reminds us of why the review was done so late. The contract with NCS expires on 31 October 2010. One would have thought that 24 months before that, the signs that the software was becoming obsolete would have been clear. If proper and timely steps had been taken, back in 2008, the TCs might have had no problems transitioning from old software to new software. Is all the fuss that we see now a result of the lack of timely action? Poor management?

Comment [A7]: Thats the vendors problem, isnt it? Comment [A8]: Why cant the single party be formed by the TCs themselves? Why is a third party needed since the PAP TCs work so closely together? Comment [A9]: It is very strange to think that there would be a company willing to purchase an almost-obsolete software and lease it back to the TCs for a monthly fee if it can gain no benefit from it. What benefit does this company stand to gain? Also, when the software is sold for $140, 000, how is the money represented in the TCs accounts? Is it divided amongst the funds of the 14 TCs? Is the money directly used to fund the monthly fee or does the monthly fee still have to come from residents? Comment [A10]: One remembers that this would have been unnecessary if the TCs had started looking for new software earlier.

a. To purchase the software developed in 2003, and lease it back to the TCs for a monthly fee, until the software was changed;

b. To undertake to secure extensions of the NCS contract at no extra cost i.e. take on the obligation to get an extension on the existing rates, until the TCs obtained new or enhanced software. This was put in to protect the financial position of the TCs; and

c. To work with the TCs to understand their enhancement and redevelopment needs and look for a suitable vendor to provide these upgrades.

11. Under the tender, the TCs sold only the IP in the old software. The ownership of the physical computer systems remained with the individual TCs. We wanted to sell the IP rights in the old software because it had limited value and was depreciating quickly. Had we waited until the new system was in place, the IP to the superseded old software would have become completely valueless. 12. The TCs advertised the tender in the Straits Times on 30 June 2010. Five companies collected the tender documents. These were CSC Technologies Services Pte Ltd, Hutcabb Consulting Pte Ltd, NCS, NEC Asia Pte Ltd and Action Information Management Pte Ltd ("AIM"). 13. I am aware that NCS considered bidding but in the end, decided not to do so as it was of the view that the IP rights to software developed in 2003 on soon to be replaced platforms were not valuable at all. 14. Another company withdrew after it checked and confirmed that it was required to ensure renewal of the NCS contract without an increase in rates. The company did not want to take on that obligation. The others may also have decided not to bid for similar reasons. 15. In the end, only AIM submitted a bid on 20 July 2010. 16. We evaluated AIM's bid in detail. First, AIM's proposal to buy over the software IP would achieve our objective of centralising the ownership of the software, consistent with the model suggested by D&T. 17. AIM was willing to purchase our existing software IP for S$140,000, and lease it back at S$785 per month from November 2010 to October 2011. The lease payments to AIM would end by October 2011, with the expiration of the original NCS contract. Thus after October 2011, the TCs would be allowed to use the existing software without any additional lease payments to AIM, until the new software was developed.

Comment [A11]: OK, so what value did it have for AIM? What did AIM do with the software? Maintain it at a loss? Lease it to some others at a profit?

Comment [A12]: Because?

Comment [A13]: It would have been be hard for a PAP-owned company to come up with a proposal that does not meet the PAP TCs objectives, wouldnt it?

Comment [A14]: The PAP owns a company that offers buy an almostobsolete software and then stop collecting lease payments even before the cost of the software is fully recuperated? Additionally, the same company presumably needs to employ staff to provide maintenance and fulfill the other terms of the contract? Is AIM such an altruistic company or does it gain in some other way? Good to note: lease payments are not the only payments. Point 25 mentions a management fee. Perhaps there is a need to state clearly every payment and fee that has been, is being made, and will be made to AIM in order to convince the public.

18. This meant that the TCs expected to gain a modest amount (about S$8,000) from the disposal of IP in the existing software.

Comment [A15]: They expected to? Did they, in the end?

19. Second, AIM was willing to undertake the risks of getting an extension of the NCS contract with no increase in rates. This was the most important consideration for us, as it protected the TCs from an increase in fees.

Comment [A16]: What are these risks? Pardon the cynicism, but does the so-called PAP backing mentioned below make it easier for the company to secure the extensions? In any case, the TCs would not have needed the extensions if it had addressed the software issue in a more timely manner, would it?

20. Third, we were confident that AIM, backed by the PAP, would honour its commitments.

Comment [A17]: So the contract was awarded because the PAP TCs trusted the PAP and the PAP-owned company? This is rather subjective. Comment [A18]: But only PAP-backed companies would have that merit mentioned in Point 20. We cant really be sure if you should call that its own merits. Comment [A19]: Given the difficulty of dissociating the PAP TCs from AIM, this may seem to many like a subjective exercise in self-assessment.

21. Given the above considerations, AIM had met the requirements of the tender on its own merits. We assessed that the proposal by AIM was in the best interests of the TCs, and thus awarded the tender to AIM. 22. Under the contract with AIM, the TCs could terminate the arrangements by giving one month's notice if the TCs were not satisfied with AIM's performance. Similarly, AIM could terminate by giving one month's notice in the event of material changes to the membership of a TC, or to the scope and duties of a TC, like changes to its boundaries. This is reasonable as the contractor has agreed to provide services on the basis of the existing TC- and town-boundaries, and priced this assumption into the tender. Should this change materially, the contractor could end up providing services to a TC which comprises a much larger area and more residents, but at the same price.

23. Since winning the tender, AIM has negotiated two extensions of the NCS contract until April 2013, at no increase in rates. The first extension was from November 2011 to October 2012, and the second from November 2012 to April 2013. The TCs received a substantial benefit in terms of getting the extensions from NCS beyond the original contract period, without any increase in prices. 24. 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. 25. Following the expiry of the initial lease arrangement for the software from AIM on 31 October 2011, no further lease payments for the software were made to AIM. During the period of its contract extension from November 2011 to April 2013, the management fee payable to AIM for the

Comment [A20]: Yes, but the fact that the company is PAP-owned should have triggered alarm bells because of the possibility that the PAP-owned company might just decide to terminate its services to certain Town Councils if the opposition takes over them after the General Election? The Town Councils should have considered the interests of the people in the long run. Comment [A21]: Who represented AIM in the negotiations? Comment [A22]: Couldnt the TCs have done the same job itself?

whole suite of services it provided was S$33,150, apart from what was payable to NCS for maintenance. In the end, inclusive of GST, each TC paid slightly more than $140 per month for AIM to ensure continuity of the existing system, secure the maintenance of this system at no increased costs, and identify options for a new system to which the TCs could migrate. 26. We entered into the transaction with AIM with the objective of benefitting the TCs. Over the last two years, the intended benefits have been realised. There is thus no basis to suggest that the AIM transaction did not serve the public interest, or was disadvantageous to residents in the TCs.

Comment [A23]: Hopefully the $35, 150 helps to ensure that AIM is not doing a losing business. Comment [A24]: Why use the past tense and not the present continuous?

Dr Teo Ho Pin Coordinating Chairman 14 PAP Town Councils

Comment [A25]: Maybe the transaction did service public interest. But could the same interest have been served without the transaction? Or could it have been served if the transaction had been made with a non-PAP-owned company?