The managing agent of Aljunied GRC at the time the Workers' Party took charge of it in May 2011 had asked to be released from its contract for "business reasons", WP chairman Sylvia Lim said in Parliament.
Hence, it became urgent for the WP to put in place systems and take over properly the management of the town council, said party chief Low Thia Khiang.
This meant WP had no choice but to appoint FM Solutions & Services (FMSS) for a one-year transition period, he added.
As a result, no open tender was called between July 2011 and July 2012, but this was in line with the Town Councils Act, given the circumstances, he said.
Law Minister K. Shanmugam, however, argued that the party was "playing the victim card".
As the town council's contract with managing agent CPG Facilities Management would expire only on July 31, 2013, there was still two more years to go, he noted.
"The contract was such that it could not be terminated by CPG.
"The Town Councils Act provides for continuity. There was no need to start from scratch. But it was up to the WP whether they wanted to let CPG go," he added.
Noting that FMSS was set up on May 15, 2011, exactly one week after the WP's electoral win in Aljunied GRC, he said the move was "premeditated".
FMSS is in the spotlight after an Auditor-General's Office report highlighted potential conflicts of interest as the firm's majority share owners Danny Loh and How Weng Fan are, respectively, the secretary and general manager of the WP's town council.
Ms Lim said there was no such ploy: "The request to be released came from CPG. Their lawyers drafted the Deed of Mutual Release. We respected their decision because we need to work with the managing agent, and we cannot have one that is reluctant to work with us."