Improving Compliance with Government Procurement and Contract Management Practices

Ms Tan Su Shan asked the Deputy Prime Minister and Minister for Finance in light of the Auditor-General's Report for FY2012/2013 which showed lapses in procurement processes and oversight of external consultants (a) what remedial action is being taken by these Ministries and Statutory Boards to address the weaknesses; and (b) what are the enhanced controls that are being implemented to ensure that such lapses do not happen again.

Mr Gerald Giam Yean Song asked the Deputy Prime Minister and Minister for Finance (a) whether the Auditor-General, on discovery of instances of non-compliance by public sector entities with Government procurement rules and principles, carries out independent investigations in all such instances to determine if any gratification has been paid or received corruptly by the transacting entities; (b) if so, what is the scope of these investigations; and (c) if not, how does the Auditor-General satisfy himself that there is no corrupt gratification involved that necessitates a referral to the CPIB for further investigation.

Assoc Prof Tan Kheng Boon Eugene asked the Deputy Prime Minister and Minister for Finance (a) what are the processes and measures put in place to ensure effective follow up on the findings of irregularities and weaknesses indicated in the Report of the Auditor-General for FY2012/2013; (b) how many public officers have been disciplined in the past five years for lapses in proper accounting, management and use of public funds and resources, and non-compliance with the relevant laws and Government Instruction Manual; and (c) how often are Ministries and Statutory Boards audited by the Auditor-General's Office and whether the frequency can be increased.

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Mr Pritam Singh asked the Deputy Prime Minister and Minister for Finance in view of the Auditor-General's remarks in the FY2012/2013 Auditor-General's Report that procurement has continued to be an area prone to lapses for the last six years and that annual audits are conducted on a test-check basis and do not reveal all irregularities and weaknesses, whether the Government will immediately direct a thorough one-off audit of all Ministries and Statutory Boards with specific emphasis on procurement-related transactions.

Mr Zaqy Mohamad asked the Deputy Prime Minister and Minister for Finance (a) whether the recent procurement lapses have led to increased time required to (i) approve projects within the public sector and (ii) award tenders and contracts to vendors; (b) whether time between the publication of tenders to the time of award has increased in the past year as compared to the previous years and, if so, what are the types and values of these projects; and (c) whether the Ministry has sought feedback from vendors on any added changes or procedures imposed on them due to the tightening of Government's procurement process.

Mr Teo Siong Seng asked the Deputy Prime Minister and Minister for Finance whether the latest Report of the Auditor-General which highlights the need for public sector agencies to step up on monitoring of contractors' performance will further increase the compliance costs of private sector companies bidding for public sector contracts.

Members are rightly concerned about the lapses highlighted in this year's Report of the Auditor-General (the AGO Report). As Deputy Prime Minister Teo as Minister in charge of the Civil Service has just stated, the Government is determined to uphold the highest standards of integrity and professionalism in the Public Service. This resolve certainly applies to the question of public sector procurements.

Before I get into the specific improvements being made, I want to emphasise that the system of checks and balances in procurement operates as a whole. It is not just about rules to ensure fair competition and value for money in public tenders, but also regular audits to detect lapses, and where

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appropriate, disciplinary actions against those responsible, including supervisors. And where there is any suggestion of corruption or fraud, it is investigated promptly and thoroughly, and the officer faces the full measure of the law, regardless of who he is.

So, it is a whole system, and it is working, which is why Singapore is widely recognised internationally as having one of the cleanest and most efficient systems of government anywhere. Nevertheless, we take each finding of a procurement lapse seriously and take action to minimise recurrence.

Our rules and procedures for procurement are comparable with those in most other reputable jurisdictions, and in line with World Trade Organization standards on open and fair competition.

We review the rules regularly, and especially when we observe weaknesses. Members may recall that in 2010 and 2011, we took major steps to reduce opportunities for procurement fraud. In 2012, we introduced further checks to ensure that single bids offered competitive terms. We also extended the minimum opening period for suppliers to submit bids for quotations from four to seven working days. These are examples of how we review the rules when we see weaknesses and, where it is necessary to tighten, we tighten up.

This year, the AGO Report highlighted that a Statutory Board had procured a service from a related party in a manner that did not comply with our rules. The procurement rules require that any bid by a related party be treated on a strictly arms-length basis, and that a successful bid has to comply with the tender specifications regardless of ownership. The rules are clear. We are nevertheless reviewing if there is a need to further tighten approval processes for transactions involving related parties.

The procurement lapses cited in this year's AGO Report are, in fact, all due to non-compliance with established rules, rather than gaps in the rules. It should also be noted that the majority of the findings concern lapses committed before 2012. This partly reflects AGO's recent focus on Government procurement in its audits, which have included looking at procurements in previous years. Government agencies have since last year made special efforts to improve procurement processes. MOF has also strengthened training programmes for procurement, and developed and disseminated checklists to guide supervisors and officers on what to look out for at the various stages of the procurement process.

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We are doing more to build up capabilities, to help officers and supervisors implement the rules well. That includes having the skills and knowledge to seek value for money, and not just accept the cheapest tender bid. As Minister of State Josephine Teo mentioned during this year's Committee of Supply debate, we are developing a Procurement Specialist Track to build up a strong pool of officers with the skills needed, and with good career progression pathways. The new specialist track will be launched next year. Details will be announced in March.

However, in a system with 80,000 procurements each year, we cannot realistically expect to eliminate all lapses or human error. To seek to do so would be too costly and time-consuming, not just to Government but also to businesses and the public. Our approach, therefore, is to make every reasonable effort to minimise lapses, while undertaking regular audits to check for any that do occur and keeping open channels for suspected irregularities to be reported. Where any lapse is detected, we take actions to minimise recurrence.

MOF has required all Government agencies to ensure that they have an effective system of internal audit and control.

It is crucial that the top management sets the right tone. MOF has reminded the Permanent Secretaries and other Heads of Government agencies to maintain active oversight of Internal Audit. They will also henceforth be required to report to MOF with an assessment of findings on procurement audits and follow-up actions in their agencies each year, as well as pre-emptive plans to avoid future weaknesses. This is a new reporting system which the Permanent Secretaries and Heads of agencies will have to comply with. This would include follow-up actions on audit observations by both their internal auditors and the Auditor-General.

We will also keep up with the latest knowledge and techniques in supervision and audit of procurement, including good practices developed in the private sector. MOF will be making available additional analytical tools to help both auditors and senior management of the various agencies review procurement activities more effectively.

Let me turn next to the external audit of our agencies by the Auditor-General's Office (AGO). AGO conducts annual checks of Ministries with regard to financial statements, as well as internal controls and processes that directly impact on the financial statements. On a less regular basis, AGO also selectively audits other aspects of internal controls in the Ministries, either based on its

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assessment of risks or arising from public feedback. The Statutory Boards are audited annually by private external auditors. In addition, AGO conducts audits of internal controls of nearly all statutory boards at least once every five years.

AGO's resources have been significantly enhanced – its manpower has grown by over 50% over the last five years to about 180 staff currently. AGO has also, as I mentioned earlier, focused particularly on procurement issues in recent years. Every finding by the Auditor-General of a procurement lapse is taken very seriously within Government. It leads to improvements in procurement processes, and an awareness not just in the agency concerned but other agencies of the need to avoid the same problems.

AGO's audits are for practical reasons conducted on a test-check basis. AGO cannot realistically cover all aspects of procurement in all agencies. However, from time to time, the Government does conduct thorough, one-off reviews of specific aspects of procurement across the public sector. For example, before we tightened our procedures in 2012 for handling single bids, we reviewed the procurement transaction data for the entire public sector.

Let me go on to disciplinary actions, which some Members asked about. The cases highlighted in the latest AGO report for fiscal year 2012/2013 were administrative or procedural lapses. There was no evidence of fraud or corrupt intent. That is, in fact, the case with most procurement-related lapses – they are either due to a lack of knowledge, carelessness or poor supervision. But that does not mean that officers are not responsible for their lapses. Agencies will still assess their officers' roles in each of the lapses and take follow-up actions.

In the last two years, 60 officers and supervisors have been counselled, reprimanded or issued warning letters, depending on the severity of the lapse. Where warranted, officers were penalised in their performance bonuses or increments.

There have been cases in previous years where AGO has basis to suspect corrupt or fraudulent intent. It refers all such cases to the Commercial Affairs Department (CAD) or CPIB for further investigation.

Mr Zaqy Mohamad and Mr Teo Siong Seng have asked about the impact of our tightening measures in recent years on procurement efficiency and vendors.

Our main aim is to improve compliance, build capabilities and strengthen audit. These do not impact vendors directly. A number of the rules that were

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refined can, in fact, improve procurement efficiency and benefit vendors. For example, since we introduced new rules last year on single bids, and extended the minimum quotation period from four working days to seven days, the percentage of quotations receiving single bids has decreased to about 4% in 2013 to date, from 15% in 2012.

Mr Zaqy and Mr Teo's questions, however, relate to a broader point. We should not burden Government procurement with ever-increasing rules and procedures. Doing so would slow down the Government's functions and its responses to needs, and often impose higher costs. It can also deter some businesses from participating in Government tenders.

We should keep instead to a sensible balance of rules, audit and enforcement actions, so as to minimise risk of wrong-doing without hindering the vast majority of legitimate procurements, or causing civil servants to become risk-averse and bureaucratic in handling procurements.

We have been taking steps in recent years, Mdm, Speaker, to strengthen the procurement system. However, the public sector's procurement needs will grow and become more diverse in the years to come. We are placing greater emphasis, therefore, on supervision and top-level oversight, by requiring the Heads of Government agencies to assess and report to MOF on follow-up actions where problems are found, and on their pre-emptive plans. MOF itself will monitor the timeliness and effectiveness of these actions, and review further practical ways in which we can preserve the well-functioning of Government procurement.

There has been some trend for the evaluation periods to go up. I do not think this is a bad thing. On average, the

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evaluation period over the last five years has increased from about two weeks previously – the start of the five-year period – to about three to four weeks currently.

This is not simply because of greater caution. It is also because of the change in the nature of public sector tenders. More tenders are now being specified in terms of outcomes. In other words, rather than specifying things upfront in terms of what the contractors should not do in terms of the technique or the process, you specify an outcome. And you get bids that then provide for different routes of achieving that outcome, sometimes even from the same bidder providing a range of alternatives. This requires more time to evaluate. It is less straightforward than it used to be.

So, four weeks are, to my mind, not excessive, and, indeed, for the large public sector infrastructure projects, it is more than four weeks. I do not think we are in a situation where we have gone past the tipping point and we are now being inefficient because of excessive caution.

Madam, I have three supplementary questions for the Deputy Prime Minister. Firstly, of the many procurement lapses discovered by the Auditor-General in this year's report, were there indications of gratification being paid, given or received by public servants in any of them? Secondly, does the AGO presume that any procurement lapses may involve gratification and, therefore, conducts specific investigations to discover that? Thirdly, if gratification is found to be involved, does the AGO presume that there may be corruption involved, unless the contrary is proven, in accordance with section 8 of the Prevention of Corruption Act?

First, with regard to this year's procurement lapses, there was no basis to suspect gratification. There was certainly no evidence of it; no basis to suspect fraudulent or corrupt intent. Where there is any evidence of gratification, then by definition and presumption, there is corruption. In fact, in some of the cases in the last five years – not this year's report but previous years' – there was reason to suspect that there might be some fraudulent or corrupt intent. In those instances, AGO refers the cases to either CAD or CPIB. That, in fact, is being done.

This is the usual question that, indeed, is one that we are addressing. We do it each year but we are looking at this very seriously internally.

First, capabilities need to be built up, up and down the procurement chain; not just the officer who is responsible for administering the tender, but the supervisors and top management. So, we are doing two things. First, we are taking significant steps to build up capability, through training in general, and, indeed, there are some agencies, such as MDA, that are requiring all their Division 1 officers to go for procurement training even if they are not directly involved in procurement. That is one aspect.

Secondly, it is important that we have the Procurement Specialist track. It does not mean that everyone doing procurement has to be on the Procurement Specialist track because there is some merit in officers rotating in and out of procurement within an organisation. But you do need a core of people who take pride in being procurement specialists and have a career progression pathway, culminating in being a Chief Procurement Officer within the Government. It is important to build up that core, just as we have done for certain other services.

Thirdly, however, we are placing emphasis on top management responsibility – setting the tone within each agency, as well as overseeing internal audit. The external auditor is not the fulcrum. At the end of the day, supervision within an organisation, the tone that they set and internal audit are critical to a well-functioning procurement system; and we are taking further steps in that regard.

I am heartened to hear about the increased training and the emphasis on procurement standards being lifted. My question is around the use of technology and analytics to surface these issues before they become an issue. Has the Deputy Prime Minister looked at how technology or data analysis can be used to surface these control lapses before they become a control lapse?

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Absolutely. There is an important set of techniques that has been developed, particularly when it comes to larger organisations or common procurements across many organisations and we are making greater use of IT. We are providing these additional tools to our agencies. Some of our agencies, for instance, within the defence establishment, already use these tools quite effectively. It is becoming a bit of a science in the private sector and we are keeping close track of that and trying to make sure that we are never far behind.

Madam, I thank the Minister for being so patient to answer the questions. My question is directed to the Minister for Finance. What is the role of the auditors? I believe the role of the auditors involves the purchase order, delivery order and the invoice – I believe there should be an auditors' report every year. How come there is no auditors' report? And may I know the names of the auditors?

Okay. First, audit as a norm, not just in our public sector but the private sector and indeed internationally amongst the public sectors, is performed on a test-check basis. Otherwise, if you were to scrutinise every transaction, then audit becomes part of the approval process in the first instance. So, audit is done on a test-check basis, based on where risks are thought to be higher. It is a risk-focused exercise. Not everything needs to be checked every year, or even across a period of years, but focus on where the risks are likely to be.

Occasionally, we would do this very thoroughly and on a very resource-intensive basis. For instance, in 2009, we did a thorough health check of IT. There were some problems we observed and we did a thorough health check of IT in the Government sector. I will tell you how long it took – two to three years – just for audit of IT processes; a very resource-intensive exercise. So, it is not something that you do often.

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The system rests, ultimately, not on waiting for audit, let alone enforcement actions. It rests on having, first, sensible rules not overdone but, very importantly, honest and diligent officers and supervisors with the tone being set at the top.

Thank you, Madam. Madam, I have supplementary questions concerning the scope of the Auditor-General's audit. Earlier, the Deputy Prime Minister mentioned that the AGO's capabilities had been beefed up and there have been more staff, but I understand that their audit is limited by the Audit Act, which sets out the nature of the audit that the AGO conducts.

I have done a comparison, for example, with the Malaysian Audit Act. It appears that, in Malaysia, the AGO there has wider powers in terms of the nature of their audit. For example, the AGO can look into whether public properties have been properly disposed, whether there has been waste and extravagance and so on.

So, my question is, one, whether the Deputy Prime Minister can confirm whether, indeed, the scope of AGO is perhaps narrower than some other governments and, secondly, whether the Government has plans to review the scope of the audit done by AGO.

I am always happy to review this, but, as of now, no Government agency perceives the AGO to have a scope that is too limited. In fact, the AGO is – how do I put it – feared. Agencies take very seriously the coming of the AGO for an audit. When you talk about Government financial statements and internal controls and processes that impact on those statements, they can cover anything. They can cover a very wide area because everything, ultimately, comes down to that dollar.

Interpreted correctly, the current ambit of the AGO allows it to look at virtually all the internal controls and processes because everything at the end of the day does have some implication on Government financial services. I do not want to compare too literally with other countries but I think it stands recognised around the world, Singapore is regarded as having a cleaner and more efficient system of government than many others.

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