The PAP town councils sold the management software to a third party because it was "cumbersome and inefficient" to have 14 individual town councils hold intellectual property rights to the software.
Dr Teo Ho Pin, the coordinating chairman of PAP town councils, gave this explanation in a 26-paragraph, four-page statement outlining why and how the town councils came to have a sale and lease back deal with the PAP-owned Action Information Management (Aim).
"The vendor would have to deal with all the 14 town councils when reviewing or revising the system. It would be better for the 14 town councils to consolidate their software rights in a single party which would manage them on behalf of all the town councils, and also source vendors to improve the system and address the deficiencies," he said.
He added that the idea to have a third party own the computer system with the councils paying a service fee was not uncommon and that the deal ultimately yielded savings of around $8,000 for the town councils.
Dr Teo went on to name the five companies that collected tender documents. Apart from Aim, there was CSC Technologies Services, Hutcabb Consulting, NCS, and NEC Asia.
In the end, only Aim submitted a bid.
Said Dr Teo: "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."
Another withdrew, he said, because it did not want to fulfil a requirement that it ensure the renewal of the contract with NCS would not come with a rate increase.
Dr Teo also gave an explanation of a clause stating that the contract with Aim can be terminated if there is a material change in the town council. Workers' Party chairman Sylvia Lim had questioned twice how this clause was in the public interest.
He said: "Under the contract with AIM, the TCs (town councils) 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."
Wednesday's statement comes in response to one issued on Friday by Ms Lim, who is also chairman of the Aljunied-Hougang Town Council. Ms Lim, Dr Teo and Mr Chandra Das of Aims had been engaged in a war of words over the matter ever since mid-December when a report on town councils failed to give a score to the opposition town council for corporate governance.
On Friday, Ms Lim had issued a statement asking questions about the circumstances surrounding the deal between PAP town councils and Aim. That night, Dr Teo said he would go through Ms Lim's "latest allegations" of conflict of interest and "deal with them openly, in a further statement over the next few days".
He ended his latest remarks by stressing that the deal was beneficial to the town councils: "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."