MOF Committee of Supply Speech 2016 by Senior Minister of State for Finance Ms Indranee Rajah

A. INTRODUCTION

A.1 Madam Speaker, I thank the honourable Members for their thoughtful comments.

A.2 The following broad themes were raised in the debate:

a. How government can partner industry to facilitate innovation and growth through our procurement processes. Members spoke about support for innovative SMEs, co-creation of solutions and helping smaller firms access government procurement opportunities;

b. Principles underlying our procurement approach;

c. Improving the ease of doing business and reducing compliance burdens.

A.3 SMS Sim Ann will address the other cuts.

B. PARTNERING INDUSTRY AND COMMUNITY TO FACILITATE INNOVATION AND GROWTH

Working together to develop innovative solutions

B.1 We share Mr Liang Eng Hwa’s and Ms Cheryl Chan’s views that government agencies should be open to developing innovative solutions together with the private sector.

B.2 The world today is becoming increasingly complex, and the multi-faceted issues we face require us to work in partnership with one another, each playing our part. This is the spirit of partnership underlying this year’s Budget speech.

B.3 Government agencies are crowdsourcing ideas more, and involving communities and businesses in problem solving, including through hackathons and innovation challenges where individuals and firms can participate in developing and co-creating innovative solutions to challenges faced by businesses or the society.

a. In IDA's Hackathon@SG last year, Goji, the winning team, developed a data visualisation tool which allows corporate and financial data from ACRA to be easily and quickly viewed. This can potentially be developed further for credit risk analysis. ACRA is working with the team to explore how we can implement the idea.

b. Another example is the recently deployed Volunteer Broadcast System mobile app for Food From the Heart.

i. Many are familiar with Food from the Heart, a non-profit organisation whose volunteers collect unsold bread from bakeries and hotels daily and deliver it to welfare organisations and self-collection centres within the heartlands for distribution to beneficiaries.

ii. Previously, volunteers had to call in to the coordinating centre to plan their delivery routes. The centre staff had to manually search and suggest delivery routes for the volunteers. To get replacement volunteers, the centre had to call volunteers individually, a manually intensive task.

iii. At a GeoHackathon event organised by SLA and VWOs, one of the winning ideas was an app that used SLA’s geospatial data to update the organisation and its volunteers on real-time collection and delivery information. Now, with the app, volunteers can quickly identify which collection or distribution point has not been visited and select their routes, without having to call the centre. What used to take 30 minutes to find a volunteer replacement previously, is now just a “click away”. This has significantly improved productivity for both the centre and the volunteers.

Enabling co-creation through outcome-based procurement

B.4 Mr Liang Eng Hwa will be pleased to know that as we promote the generation of new ideas, we also seek to adopt more flexible procurement processes, where practicable, to facilitate the adoption of innovative solutions.

B.5 Under the outcome-based procurement approach, we encourage government agencies to specify desired outcomes rather than prescribe solutions in their tenders. This approach allows vendors to propose innovative solutions to develop prototypes and potentially be awarded the contract subsequently.

B.6 A good example is IDA’s and Sentosa Development Corporation’s (SDC) recent Integrated Guest Experience Innovation Challenge - an open invitation for participants to develop ideas to enhance guest experience for visitors to Sentosa.

a. Proposed ideas included innovative solutions involving data analytics, wearable devices, virtual assistants and augmented reality.

b. SDC is currently exploring the possibility of inviting the shortlisted participants to develop their prototypes for implementation.

c. Those shortlisted need not go through a separate open tender, as the objectives of fair and open competition, transparency and value for money would have already been met through the Innovation Challenge.

B.7 We are working on introducing outcome-based procurement in the cleaning, security and landscape sectors over time.

a. For example, rather than specifying headcount for security contracts, agencies could specify areas to be monitored and the response time expected of security officers in the event of an alert.

b. This would enable tenderers to consider using technology and innovative deployment of their staff, to support our efforts to raise productivity and raise wages in these sectors - a point made by Mr Zainal Sapari in his Budget Debate speech.

B.8 This alternative procurement approach will require government agencies to change the way they call and evaluate tenders and how they monitor service providers. It will also require changes by service providers in the way they respond to tenders and provide their services. It will involve some effort, but we believe that this is a move in the right direction.

B.9 Mr Liang Eng Hwa also asked about the Public Private Co-Innovation Partnership (PPCIP) initiative and suggested it be boosted.

a. There have been some successes under the PPCIP. Under this initiative, JTC partnered a local company, Samwoh Corporation, to successfully trial the use of sedimentary rocks excavated from the Jurong Rock Caverns to pave a stretch of road outside Mediapolis.

b. The rocks had little value in themselves. With this initiative, the rocks have acquired a new value and the initiative has potential to be implemented across other new roads in Singapore.

c. This illustrates how a partnership between public and private sector can create value for our enterprises, while meeting public needs.

d. We are reviewing the initiative to see how it can be more effective in public-private co-innovation, alongside other existing efforts to promote collaboration.

Helping smaller firms access government procurement opportunities

B.10 On helping smaller firms access government procurement opportunities, members will be heartened to know that over the past three years, SMEs have been successful in securing Government projects under our open procurement system, capturing more than 60% of total government contract value and around 85% of all government tenders. This share of the total number of government contracts is significantly higher than in other countries, such as the UK.

B.11 Our SMEs have successfully tendered not just for smaller projects, but also for more sizeable ones. For the past 3 years, by contract value, about 50% of all contracts above $50m were awarded to SMEs - a very respectable proportion!

B.12 We would encourage more SMEs to participate in government procurement.

B.13 Those who need information on how to go about doing so can refer to the SPRING and MOF websites.

B.14 SMEs are also encouraged to attend engagement sessions organised by industry associations and the Government to better understand government procurement processes. For example:

a. Earlier this year, the Singapore Business Federation (SBF) organised a Government Procurement Fair for SMEs, where various government agencies, including MOF, participated to clarify the government’s procurement practices.

b. SBF is also developing a Best Practice Guide to help SMEs better understand government procurement principles and processes, and how to bid for government contracts.

B.15 Another simple but useful thing which SMEs can do to improve their access to government procurement opportunities is to register for a GeBIZ account. If you are registered on GeBIZ, you will automatically receive alerts on new procurement opportunities. The system also allows businesses to save their business information, making it easier for them to submit bids. Registration is straightforward and can be done online. Best of all - registration for the first GeBIZ account is free!

B.16 To better help suppliers find and participate in government procurement opportunities, we revamped the Government procurement portal GeBIZ in January this year.

a. The revamped portal has a more user-friendly interface which was developed following extensive consultations with businesses that use the portal, and has received much positive feedback from existing suppliers and new users.

B.17 We will continue to work with industry associations to improve outreach and education to SMEs in this area.

SMEs with good products but no track record

B.18 We also recognise that SMEs without a track record may find it challenging to win tenders. We are open to helping SMEs with innovative ideas and quality products to compete and establish their track record.

Accreditation @IDA

B.19 An example of how we do this is the Accreditation@IDA programme.

a. Set up in 2014, this programme helps promising Singapore-based technology start-ups establish track record, to have a better chance at securing government and private sector projects.

b. The accreditation programme evaluates and accredits companies to give potential buyers the assurance of their quality. IDA also partners companies in their development process by providing advice and recommendations to strengthen their product, improve their financial management, and better manage their intellectual property.

c. To date, the programme has assisted 29 companies, of which 12 have obtained accreditation status. We expect more to be accredited in due course.

d. We have also revised our Government procurement rules, within the parameters of our international trade agreements, to make it easier for Government agencies to procure innovative solutions from these companies. They will be considered first when agencies seek to buy technology services or products. More than 15 contracts have been awarded to accredited companies, and many more are currently in various stages of discussions towards signing of a contract.

e. Subject to the obligations under international trade agreements, we are open to working with suitable industry partners to recognise promising start ups in other sectors so that they can compete favourably for contracts and build up their track record.

Principles of Government Procurement

B.20 In his Budget debate speech, Mr Zainal Sapari suggested using government procurement practice to achieve certain objectives, such as raising wages for lower income workers. Mr Chen Show Mao also talked about price escalation clauses.

B.21 I thought it would be helpful to clarify the government’s approach on this.

B.22 The objective of public tenders is to procure goods and services required for the delivery of public services in a fair and transparent manner and, given that we are spending public monies, to obtain value-for-money in our procurement. Value-for-money does not mean always and only going for the lowest price. Agencies also consider quality factors in their evaluation as this has a bearing on value and these are spelled out in the tender documents.

B.23 Where government intervention is required to meet certain policy objectives, we generally do this through targeted measures rather than as through conditions of procurement. This avoids mixing multiple objectives into the government procurement process which could result in distorted outcomes

B.24 That is the broad principle.

a. So for example, to help social enterprises, which Ms Cheryl Chan spoke about, the Singapore Centre for Social Enterprise, also known as raiSE, was set up to provide support in areas such as funding, business advisory and training. We believe this is a better approach to helping social enterprises stay viable rather than to artificially set aside government contracts to sustain them.

B.25 However, in very specific instances where the evidence suggests that government’s procurement practices can make a substantial difference, we will take the appropriate action.

B.26 So for example, we have our effort to support the Progressive Wage Model in the cleaning, security and landscape sectors. To combat the risk of cheap sourcing and suppressed wages in these sectors, and following agreement with our tripartite partners, the government took a deliberate decision to accredit or license companies that pay according to the Progressive Wage Model, and to buy only from these companies in these sectors.

B.27 However in other sectors when procurement policy is not a suitable or appropriate means of impacting wages, we have other ways to assist, such as through the Workfare Income Supplement (WIS), which has been enhanced in this Budget.

B.28 Mr Zainal Sapari also spoke about unfair contracts and options to extend.

B.29 Options to extend contracts are a common practice internationally and in the private sector. The benefit of an option to extend is that it enables a longer term relationship with the supplier if the supplier has provided good quality service and demonstrates the ability to continue to do so.

B.30 The extension also means continued employment of the suppliers’ employees.

B.31 It could operate unfairly, however, if the extension does not allow for any increase in contract price in subsequent years to take into account wages increments. This can be avoided if price increases upon extension are factored in from the outset.

B.32 Our practice is to ask government agencies to remind tenderers of multi-year contracts to factor in wage increments for their workers. We also explicitly allow tenderers to present their price bid on a year-by-year basis, so as to factor in the annual wage increments.

B.33 Mr Chen Show Mao spoke about encouraging the increased use of price escalation clauses in government contracts. We are open to this in the appropriate situations and where it is right to do so. For example, in standard clauses for construction contracts, we do explicitly allow for material price fluctuations based on material price indices which are published by BCA. These are based on objective indices that are published independently. What I would suggest is for tenderers to propose this, if they feel that the price of materials that form part of their costs would be subject to price fluctuations, and they need to provide for price escalation in years to come. These should be something they raise with the Government.

B.34 Let me assure members that we regularly review government procurement practices to keep abreast of developments, and ensure that procurement clauses are reasonable and fair. We welcome feedback as we learn from them as well as the practices in other countries and the private sector.

B.35 We will also continue to raise the capabilities of our procurement officers and community in the public sector, so that they can handle government procurement well and ensure public monies are spent prudently.

C. FACILITATING BUSINESSES

C.1 Mr Saktiandi asked what can be done to reduce the compliance burden and facilitate the ease of doing business.

C.2 As Mr Saktiandi noted, Singapore has been ranked #1 in the World Bank Group’s Ease of Doing Business Index for the past 10 years, ahead of other countries such as Korea, Japan and the US. So we are not doing badly.

C.3 However, we cannot be complacent. As we press on to transform our industries, we will continue to review our regulations to facilitate doing business in Singapore.

C.4 Over the past one year, ACRA has implemented significant changes to the Companies Act to reduce regulatory burden, provide greater business flexibility and improve the corporate governance standards in Singapore.

a. These include exempting small companies from statutory audit and allowing public companies to issue non-voting or multiple vote shares.

C.5 MOF and ACRA are reviewing other corporate regulations to facilitate business, including:

a. Requirements on the use of common company seals;

b. The holding of annual of general meetings (AGMs); and

c. Filing of annual returns.

C.6 Details of the proposed changes will be announced during MOF’s public consultation on the regulations later this year.

C.7 We will continue to work closely with businesses to avoid unnecessary burdens on businesses.

C.8 Ms Sun Xueling highlighted the need to ensure that our licensing requirements remain conducive for promising new technology and business models in her Budget Debate speech.

C.9 We agree. The Pro-Enterprise Panel, comprising business leaders and senior public officers, was set up in 2000 as an internal advocate for businesses within the government. The Panel works closely with public agencies to provide timely, effective and practical solutions to address the regulatory concerns that businesses face, including those in new technology areas. Since its inception, the Pro-Enterprise Panel has reviewed more than 1,800 suggestions and more than half have led to changes in regulations and rules.

C.10 Mr Saktiandi also highlighted that some companies might inadvertently overlook regulatory and compliance requirements. On our part, we try to reduce the likelihood of default.

a. Where possible, our agencies facilitate compliance by sending reminders ahead of statutory deadlines such as for AGMs and filing of annual returns.

b. ACRA has also partnered other government agencies such as IRAS, CPF Board and SPRING to organise information sessions on statutory obligations for new and aspiring business owners.

c. Feedback has been generally positive, and we intend to ramp up our outreach efforts to another 2,000 businesses this year.

Simplifying grant application process

C.11 Mr Saktiandi commented on difficulties faced by SMEs in applying for business grants.

C.12 It’s a question of achieving the right balance. In administering grant schemes, the Government is accountable for the money spent. We therefore require information to monitor the output of the support we give to businesses to ensure that the money is used for the proper purpose.

C.13 At the same time, we recognize that applications for grants should not be unduly burdensome and a deterrent instead of an encouragement. As such, we constantly review the appropriate level of documentation and information that is required for grant applications.

a. In last year’s Budget we simplified the application process for SPRING’s Capability Development Grants below $30,000 by reducing the information required.

b. In this year’s Budget Minister Heng announced that the launch of the Business Grants Portal. That will simplify grant application processes.

D. CONCLUSION

D.1 Madam, in conclusion, the Ministry of Finance will continue to review government procurement processes to ensure that we remain open to innovative ideas and support the co-creation of solutions in delivering public services. We must continue to ensure financial prudence, but we must also be fair to our companies and their workers. We will also continue to review our corporate regulatory regime to ensure that it remains relevant while facilitating ease of doing business in Singapore.