Concerns over Tender and Eventual Award of Patrol Boat Contract to ST Marine

22 Mr Leon Perera asked the Minister for Finance in respect of the tender awarded by the Ministry of Home Affairs to ST Marine for the construction of 12 aluminium-hulled patrol boats (a) why his Ministry's Standing Committee on Debarment (SCOD) did not extend the disbarment of companies from tendering for government contracts to cases where the companies or their senior executives had been convicted of corruption in private sector contracts; and (b) whether the notice of award was published no later than 72 days after the tender was awarded to ST Marine as required under the Government Procurement Regulations.

The Second Minister for Finance (Ms Indranee Rajah) (for the Minister for Finance): Mr Speaker, corruption is an offence and is dealt with strictly under our laws. Enforcement is by the Corrupt Practices Investigation Bureau (CPIB) and adjudication of liability and the imposition of penalties for breach of the laws is carried out by the courts. Companies or individuals convicted of corruption are thus penalised through the legal system. The penalties apply to cases involving both public and private sector-related contracts. The underlying rationale is because society, as a whole, is harmed by such conduct.

Debarment from participation in Government contracts is a separate and distinct exercise from court proceedings and serves a different purpose. Debarment is an administrative procedure by the Government to protect the Government’s interests as a service buyer, against those who have caused direct harm or losses to the Government. It does not duplicate the courts’ function of adjudication or punishment.

The grounds on which service providers can be debarred are made known publicly in the GeBIZ website and cover a variety of situations where Government interests have been harmed. These include, for example, failure of a supplier to meet critical contractual obligations to a Government agency, abandonment or termination of a Government contract due to contractor default, among others.

Specifically, with regard to corruption, CPIB can, where appropriate, recommend to the SCOD debarment action after a court decision which establishes that the contractor or any of its employees, directors, partners or sole proprietor had bribed a public sector officer or another person in connection with a Government agency or contract.

As can be seen from the above, there must be a nexus to Government-related contracts before debarment can be applied. The underlying rationale is to protect against suppliers who have caused direct harm or loss to the Government as a service buyer.

In the case involving ST Marine, CPIB investigations did not reveal any connection with a Government agency or contract. Hence, the circumstances in which debarment can be recommended under the policy parameters did not arise.

In this case, the charges and convictions were against the individuals involved, namely, ST Marine's former group financial controller and six other former senior executives. They were convicted in 2017 for offences committed in the period between 2000 and 2011, the most recent act thus being eight years ago. The individuals involved ceased to be employed by ST Marine since between 2004 and 2014.

The company itself, ST Marine, which is a separate legal entity, did not have any charges or convictions against it. A new Board of Directors of ST Marine was appointed as of 15 August 2018. The Police Coast Guard tender was awarded in November 2018.

The notice of award was published within 72 days from the tender award in accordance with the Government Procurement Regulations. In MHA’s reply to The Straits Times on 9 March 2019, MHA had clarified that the contract was awarded to ST Marine on 26 November 2018 and the notice of award was published on the GeBIZ website the next day on 27 November 2018. The date of award of the tender was initially incorrectly shown as 27 July 2018 on the GeBIZ website and this has been rectified.

Mr Leon Perera (Non-Constituency Member): I thank the hon Minister for her very detailed response to my question. I just have a few supplementary questions to follow up.

Firstly, what would be the rationale for the SCOD when it undertakes debarment proceedings to only consider past corruption offences relating to Government contracts rather than private sector contracts? What would be the considerations to set past corruption offences involving private sector contracts at "Nil", to provide no consideration for that, and only to consider corruption related to previous Government contracts?

Secondly, is this something – I guess depending on the answer to the first question – that the SCOD will review in future to consider taking into consideration past corruption offences by the company or its senior officials and within a reasonable time – for private sector contracts, and not only to limit debarment considerations to Government contracts.

Ms Indranee Rajah: Mr Speaker, I should clarify. Let us make a distinction between past convictions in relation to private sector contracts and past convictions in relation to public sector contracts.

So, past convictions in relation to public sector contracts – that is clear. For that, debarment would apply, and I had explained that the main purpose of debarment is to protect the interest of the Government by disqualifying suppliers that have caused the Government to suffer harm or loss from getting fresh contracts, both procurement and revenue contracts, from all Government agencies.

Now, this does not mean to say that the committees or people looking at the SCOD, looking at the contracts or whoever is awarding the tender, cannot consider past convictions of private sector contracts. You can, but that is not an exercise in debarment, under the debarment policy parameters. That would be an exercise in looking to see holistically whether there is a risk to contract performance, to contract integrity, and reputational risk. So, in other words, because the Parliamentary Question was filed with respect to debarment, and hence my response was on the policy parameters that apply to debarment.

But in terms of award of tender, the committees or whoever would be awarding the tender can look at it holistically, and take into account suppliers' track records which could include corruption convictions. But that is an exercise in relation to assessment of risk for contract performance and contract integrity, rather than an exercise of debarment.

Mr Leon Perera: I thank the Minister for her reply. Just some further clarifications. I understand the Minister has said that, specifically with regard to the procedure for debarment, Government contracts – public sector contracts – are taken into consideration, not private sector contracts and there are other mechanisms or processes in procurement where private sector corruption in the past can be taken into account.

I would just like to sort of go deeper on this point: why cannot the debarment process run by SCOD take into account past private sector corruption offences? Why is it only taking into account past public sector corruption offences? Will that be something that the Government is prepared to review, going forward?

Ms Indranee Rajah: May I enquire from the Member, when he asked if it can be taken into account, what is the actual purpose that the Member is suggesting that private sector convictions be taken into account? Is the purpose punitive? Or is the purpose some other purpose? I would be grateful for the clarification.

Mr Leon Perera: I should just thank the Minister for her response. Just to clarify on that, my purpose is for the purpose of debarment because past public sector corruption cases are potential grounds for debarment because of various risks that the Government may be exposed to if the tender is awarded to that company. So, why would not past private sector corruption cases also similarly give rise to grounds for potential debarment under the SCOD debarment procedures?

Ms Indranee Rajah: The Member may have misunderstood my question. My question was: in his context, what is the purpose of the debarment? As I have explained, the current policy rationale for the debarment is protection of the Government interest against harm or loss. So, when the Member suggests that there should be debarment in relation to private sector contracts, what is the underlying purpose of the debarment? Is it to punish the company? Is it to protect the Government because if it is to protect the Government, then there is not a nexus. So, I am just trying to understand the purpose for which he is suggesting you should have debarment so that I can address the question.

Mr Leon Perera: I thank the Minister. The purpose for which I am suggesting the debarment can be considered is essentially protection of the Government's interest because if debarment can be considered for companies involved in past public sector offences. Well, if the company has been involved in past private sector corruption offences, then, presumably, that creates a possibility, that they may also expose the Government to some risk if they take on a public sector contract. So, my purpose is basically protection of the Government, and to have a debarment process that considers both Government and private sectors past corruption offences because past private sector corruption offences may be grounds to suppose that there is some risk even if that company were to undertake a Government contract.

Ms Indranee Rajah: I thank the Member for his response and that actually fits into exactly the answer that I had given earlier.

So, if the purpose is adjudication and punishment, that is dealt with by the courts. Insofar as the purpose is to protect the Government's interest by preventing the supplier from getting fresh contracts, that is where debarment applies.

If the purpose is, as the Member has clarified, to guard against risk, that is addressed by taking into account the tender assessment holistically. As I had explained earlier, that is an exercise in assessment of risk of performance, or risk of integrity to the contract, or reputational risk. So, either way, the purpose is addressed, whether it be court, debarment or overall holistic assessment.