Parliament

PA's review following AGO report uncovers other lapses

The People's Association (PA) could have overpaid contractors by an estimated $60,000 for two construction projects, it found during an internal review.

This is on top of the estimated $2 million it may have overpaid for building materials for Our Tampines Hub (OTH), which the Auditor-General's Office (AGO) flagged in its annual audit of public agencies.

Minister for Culture, Community and Youth Edwin Tong gave an update in Parliament yesterday on remedial steps and internal investigations by PA following the AGO's findings on two large development projects the association manages - OTH and Heartbeat@Bedok (HBB).

He told the House that the Government requires agencies to adopt full price fluctuation adjustment for developments with a contract value of more than $5 million. This refers to payment adjustments to account for the changing prices of key raw materials such as concrete and steel reinforcement over the course of the project.

Responding to Leader of the Opposition Pritam Singh (Aljunied GRC), Mr Tong said PA reviewed 31 public construction developments after the AGO report, which revealed that two projects had erroneously adopted a 70 per cent cap on price fluctuation adjustments in the past seven years - similar to OTH's main construction contract. He did not name the two projects.

PA has since ensured the provision in all such standard construction contracts is clear and fixed, he said, to ensure greater clarity and compliance on how price fluctuation adjustments should be made.

Mr Singh, Ms Foo Mee Har (West Coast GRC) and Mr Sitoh Yih Pin (Potong Pasir) also asked about lapses related to contract variations during the construction of OTH and HBB, and irregularities which arose during the operations and facilities maintenance phase at OTH.

Contract variations are mutually agreed changes to the terms of contracts that are already in effect.

Mr Tong also said PA has looked into all 252 cases of lapses related to contract variations for OTH flagged by the AGO, and is doing a full review of the remaining contract variations for both OTH and HBB beyond those audited by the AGO.

"PA is doing so to ensure that the other contract variations were carried out with appropriate approvals and proper documentation, and if not, then to take the appropriate remedial actions," he said.

Mr Tong said PA will give an update once it completes its review.

On the irregularities in documents related to payments and lapses in managing contracts at OTH, he said an internal investigation confirmed the AGO's findings.

A task force has been set up to strengthen existing processes and improve oversight of contractors and managing agents, he added.

Ms Foo said the lapses uncovered by the AGO were "disturbing", and asked if lapses in contract management are systemic across development projects for the 788 community facilities managed by PA. "The lapses, as far as we can tell, were not systemic," Mr Tong replied.

PA has appointed an external consultant from EY, formerly known as Ernst & Young, to examine its governance system and oversight functions, and will share the findings with the public when they are ready, he added.

The consultant will conduct an audit and business process review on PA's contract management of its development and facility management projects in recent years, examine the governance structure for similar integrated community complexes, and provide recommendations to strengthen the oversight of all development projects.

"The external consultant will have a broad mandate to review. It will make practical recommendations to rectify control weaknesses or any lapses noted, as well as identify areas of improvement in terms of efficiency, economy and effectiveness," said Mr Tong.

"PA will take in these recommendations, improve processes when needed and also implement better oversight."

A version of this article appeared in the print edition of The Straits Times on September 14, 2021, with the headline 'PA's review following AGO report uncovers other lapses'. Subscribe