Government Procurement

Date: 12 August 2013

Assoc Prof Fatimah Lateef: To ask the Deputy Prime Minister and Minister for Finance following the latest findings by the Auditor-General's Office, what are the strategies that will be implemented to strengthen procurement practices and procedures in Government agencies and Ministries.

Ms Tan Su Shan: To ask the Deputy Prime Minister and Minister for Finance in light of the Auditor-General's Report for FY 2012/2013 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: To ask 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; (c) if not, how does the Auditor-General satisfy himself that there is no corrupt gratification involved that necessitates a referral to the Corrupt Practices Investigation Bureau for further investigation.

Assoc Prof Tan Kheng Boon Eugene: To ask 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.

Mr Pritam Singh: To ask 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 Teo Siong Seng: To ask 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.

Mr Zaqy Mohamad: To ask 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. 

Reply by DPM and Finance Minister Tharman Shanmugaratnam:

1. Members are rightly concerned about the lapses highlighted in this year’s Report of the Auditor-General (or the AGO Report). As DPM 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.

Checks and Balances: A Whole System

2. 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 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.

3. 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.

Implementing Procurement Rules Well

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

5. 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 received offered competitive terms. We also extended the minimum opening period for suppliers to submit bids for quotations from four to seven working days.

6. 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.

7. 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.

8. 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 MOS 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.

9. 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.

Strengthening the Internal Audit Function

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

11. 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 would include follow-up on audit observations by both their internal auditors and the Auditor-General.

12. 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.

Auditor-General’s Office: Enhanced Capabilities

13. 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 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.

14. AGO’s resources have been significantly enhanced - its manpower has grown by over 50% over the last 5 years. AGO has also 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 recurrence of the same problems.

15. 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.

Disciplinary Actions and Investigations under the Law

16. Let me go on to disciplinary actions, which some Members asked about. The cases highlighted in the FY2012/2013 AGO report 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 the lapses. Agencies will still assess their officers’ roles in each of the lapses and take follow-up actions.

17. 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.

18. 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 the Corrupt Practices Investigation Bureau (CPIB) for further investigation.

Impact of tightening measures

19. 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.

20. 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 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 4 working days to 7, the percentage of quotations receiving single bids has decreased to about 4% in 2013 from 15% in 2012.

21. 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.

22. 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.

Conclusion

23. We have been taking steps in recent years 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.