Ensuring Fair Terms in Government Contracts

17 Mr Zainal Sapari asked the Minister for Finance (a) whether there are guidelines given to Ministries or Statutory Boards to ensure (i) clauses in Government tender specifications for service contracts are fair to service providers and (ii) liquidated damages commensurate with the non-delivery of service; (b) whether there are avenues for service providers to flag out unfair or one-sided clauses in tender specifications; (c) whether there is training given to Government procurement officers to ensure fair contracts; and (d) whether an audit can be conducted on Government tender contracts to ensure fair clauses.

The Senior Minister of State for Finance (Ms Indranee Rajah) (for the Minister for Finance): Madam, Government agencies are expected to conduct procurements in a fair and reasonable manner. To guide agencies, the Ministry of Finance (MOF) provides templates on the contractual terms and conditions for common types of buys which agencies make. Agencies can choose to use these templates or adapt them accordingly to cater to their specific unique needs. From time to time, these templates are reviewed, taking into account feedback that we receive and any appropriate industrial norms. For example, following industry feedback, our IT procurement contract terms were amended so that when the original equipment manufacturer's vendor defaults, the replacement vendor is compensated at prevailing fair market value instead of having to accept the previous vendor's rates.

We have clear guidelines to agencies that liquidated damages should not exceed actual damages/losses suffered in the event of a breach. There are also contracts which do not impose liquidated damages. Whatever the case, Government agencies are advised to work closely with their contractors to resolve issues early. As far as possible, agencies and contractors are not to let problems escalate to the point where contractual non-fulfilment is reached.

There are training modules that guide officers on how to write the tender specifications or the scope of work expected of the tenderer. However, it is not possible for training to cover every scenario on what is fair or unfair, or every type of purchase that Government agencies make. The Government buys a wide variety of goods and services, and each industry has differing practices and norms. What is considered the norm and reasonable in one industry may not be so in another. For example, in the creative design industry, the industry norm allows up to three rounds of consolidated changes after the design concept has been signed off. But this does not apply to architecture design of buildings. Given the differences across industries and situation in which a procurement is made, any audit on whether the tender specifications are fair would have to take into account the context and the circumstances when the particular procurement is called.

To address concerns about appropriate contract clauses, MOF works with lead agencies for the major categories of buys that the Government spends on, and provide guidance to agencies and procurement officers. For example, we work with Building and Construction Authority (BCA) for the procurement of construction services and Infocomm Development Authority of Singapore (IDA) for procurement of IT services. Similarly, MOF is working with DesignSingapore Council to advise Government agencies on best practices for procurement of design services.

Today, every agency which intends to procure services or products will indicate the agency's contact person's details in the GeBIZ procurement notice. I would encourage suppliers who have any questions about a specific tender or quotation, whether on the tender specifications or contractual terms and conditions, to contact the agencies. Where the questions or concerns pertain to an agency's procurement practice, suppliers can also raise these to the agency's Quality Service Manager. Apart from these channels, suppliers may also give their feedback on government procurement matters to MOF's Quality Service Manager or on the GeBIZ feedback page.

Mr Zainal Sapari (Pasir Ris-Punggol): Mdm Speaker, I have two supplementary questions. First, what can the Government do to encourage fair and reasonable outsourced contracts in the private sector? Second, can the Government consider setting up a body similar to the Consumer Association of Singapore (CASE) to help mediate should there be any contractual disputes between service buyers and service providers?

Ms Indranee Rajah: May I clarify with the Member when he asked in the first question, what the Government can do to encourage fair and reasonable contracts in the private sector, does the Member mean contracts between the Government and the private sector, or does the Member mean the private sector at large?

Mr Zainal Sapari: Private sector at large.

Ms Indranee Rajah: It is a little difficult for the Government to step into that arena, as it were. What one would have to rely on are the general principles of contracts. There is obviously bargaining power; that is one of the things that you take into account. But when a contract is particularly unfair and crosses a particular line, then, in some cases, in the Courts, the Courts will strike it down. We do have the Unfair Contract Terms Act. If it contravenes the Unfair Contract Terms Act, then, obviously, certain things will not be enforced. That is a matter of general law and that has developed over time. That is fairly well-settled.

With respect to the other question of a body to encourage mediation, in fact, we do have the Singapore Mediation Centre. It hears not just international cases but also domestic cases as well. I agree with the Member that mediation or amicable resolution is something to be encouraged. There are tribunals where you can take your cases for mediation.