Statement by the People’s Association on Audit Observations

Statement by the People’s Association on Audit Observations in the Report of the Auditor-General for Financial Year 2020/2021

Summary:

The Auditor-General’s Office (AGO) audited two development projects under PA, namely, Our Tampines Hub (OTH) and Heartbeat@Bedok (HBB).

Description:

The Auditor-General’s Office (AGO) audited two development projects under PA, namely, Our Tampines Hub (OTH) and Heartbeat@Bedok (HBB).

2 OTH and HBB were new and large-scale development projects undertaken by PA in 2014. OTH is Singapore’s largest integrated community and lifestyle hub, housing a 5,000-seat sports stadium, six swimming pools, sports halls, a performing arts theatre, regional library, community club (CC), hawker centre, supermarket, retail and F&B outlets. HBB is another community and lifestyle hub that houses a polyclinic, senior care centre, sports centre, four swimming pools, six sheltered tennis courts, a public library, CC, retail and F&B outlets. Both OTH and HBB were completed in 2017, at a total construction value of $476 million and $147 million respectively.

3 In respect of the above two development projects, AGO made the following audit observations, that there were:

a) lapses in the computation of adjustments for price fluctuations for the main construction contract at OTH;

b) weakness in the management and oversight of contract variations for the main construction contracts in respect of both OTH and HBB;

c) possible serious irregularities in documents relating to payments and lapses in the management of facility maintenance contracts at OTH; and

d) two critical tender requirements not explicitly incorporated into tenancy agreements at HBB.

4 PA has taken immediate steps to review the management of contracts at both developments, address the lapses identified and initiate rectification of any overpayments or underpayments.

Improving Construction Contract Management of Development Projects

5 AGO had observed that OTH did not adopt full price fluctuations for construction materials as per the requirement for government projects, and that its appointed consultant did not adhere to the contractual requirement to compute the price fluctuations based on the quantities of materials delivered. PA is working with the consultant to recalculate the price fluctuation adjustments of the materials based on the formula identified by AGO. PA is also seeking legal advice for recovery of appropriate sums.

6 PA has since also incorporated a revised provision in its standard contracts for future development projects, to ensure greater clarity in relation to how such price fluctuation adjustments ought to be made, to address the concerns identified by AGO in its audit.

7 AGO had also observed lapses in the management of contract variations by PA and its consultants. The lapses indicated weaknesses in the monitoring of contract variations and also inadequate oversight of the consultants by PA. PA is working with the consultants to review the variations identified by AGO, and to determine the amount of underpayment and overpayment arising from such variations, and to take the appropriate steps thereafter.

Addressing Possible Irregularities in Documents relating to Payments and Lapses in Management of Facility Maintenance Contracts

8 In respect of OTH, PA had engaged contractors to carry out minor building works at the facilities. PA had also engaged a managing agent to assist in managing the facilities and to supervise the contractors. In reviewing the payments made to the contractors, AGO sampled 36 payments (totalling $1.27 million) made between 1 April 2018 and 31 March 2020. It found that there were possible irregularities in the supporting documents for 34 of such payments. The possible irregularities include possible falsification of quotations, alteration of hardcopy payment supporting documents and creation and backdating of documents to give the false impression that proper processes had been followed.

9 Upon notification by AGO of the above in March 2021, PA immediately convened an internal investigation panel, led by senior officers from PA and MCCY, to conduct a thorough review of the related processes. The investigation was completed in May 2021 and confirmed AGO’s observations. As the lapses relate to serious allegations involving falsification of documents, including in relation to claims by external parties, PA has lodged a police report and investigations are ongoing. PA has suspended its staff pending the outcome of these investigations.

10 In order to ensure that the operations and maintenance of facilities at OTH carries on without disruption, PA has set up a taskforce led by senior officers to strengthen processes in procurement, contract and facility management, raise staff capabilities, and improve oversight of contractors and managing agents.

11 In addition to the above, PA will be appointing an external consultant to conduct a thorough review of its governance system and oversight functions in relation to contract management of all development projects. The external consultant will be given a broad mandate to review the above matters and provide recommendations to strengthen PA’s oversight of contract management.

Incorporating Two Critical Tender Requirements Explicitly into Tenancy Agreements

12 AGO observed that two critical tender requirements were not explicitly incorporated into tenancy agreements (TA) entered into at HBB.

13 On the tender for provision of childcare services, PA had stipulated that there be a cap on full-day childcare fees in the first two years of operation as part of the tender requirements, to provide residents in the vicinity of the HBB with lower fees for childcare services. As this was a unique arrangement, such a term was not part of PA’s standard TA template for development projects. Notwithstanding this, the tenant has agreed it ought to be complying with the tender conditions and will be refunding the difference in monthly fees to the affected parents by end of July 2021.

14 In similar vein, tender requirements in relation to adjustments to rent and service and conservancy charges (S&CC) due to revision of tenanted floor area, were not incorporated into the TA. PA has since made the appropriate adjustments to the charges and refunded the affected tenants.

15 PA has noted AGO’s findings on the above two large-scale development projects and has implemented remedial steps. PA is also in the process of undertaking a broader review, as set out above, with the view to enhancing its governance systems and oversight for contract management of development projects.