AWARDING OF CONTRACTS TO LOWEST BIDDER

AWARDING OF CONTRACTS TO LOWEST BIDDER: 6.

Er Lee Bee Wah asked the Minister for Finance (a) how Government departments ensure that there will be quality in delivery before awarding a contract to the lowest bidder; (b) whether the evaluation by the Tenders Committee includes an evaluation of the ability of the

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contractor/vendor to perform; (c) over the last three years, how many Government projects were delayed as a result of winning bidders’ inability to perform after submitting their lowest bids; and (d) whether Government agencies are penalised when a tender is not awarded to the lowest bidder.

* 7. *Ms Irene Ng Phek Hoong asked **** the Minister for Finance (a) whether the Government supports the practice of best sourcing as opposed to cheap sourcing in its public tenders; and (b) whether the latest Auditor-General's Report which states that the Ministry of Education could have saved on its school cleaning contracts if it had considered contractors who were priced below the market norm, is sending the wrong signal.

The Second Minister for Finance (Mrs Lim Hwee Hua) (for the Minister for Finance): Sir, the Government procurement regime is premised on the principles of open and fair competition, transparency and Value-for-Money (VFM). When Government agencies call for tender to procure goods and services, they would stipulate their evaluation criteria upfront. These would include not only price alone, but also other criteria that would enable the agencies to assess the vendors’ ability to deliver, such as their track records for comparable contracts and their financial health, as well as criteria relating to the quality of goods and services required.

As regards the reasons why some winning bidders are unable to fulfil their contracts on time, there are many. However, there is no empirical evidence linking delays to vendors who had submitted the lowest bids. In any case, Government agencies would take any tardiness into account when assessing the track records of bidders. I would therefore like to assure the House that Government agencies do not award tenders based on price considerations alone. In fact, Sir,

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about one in three Government tenders were not awarded to the lowest bidders.

A similar approach is taken in the Best Sourcing Initiative which was launched in 2004. Under this initiative, Government agencies would identify non-strategic functions and market-test them to see if they could be performed by external parties in a more cost-effective manner. Since 2004, 292 functions have been outsourced after market-testing, with contracts amounting to around $1.9 billion.

Let me assure the House that Government agencies do not “cheap-source”. Even when agencies assess that certain functions can be more cost-effectively done by external parties, they would need to ensure that the vendors so selected are able to deliver quality services.

In this context, my Ministry agrees that vendors whose bids are marginally below market norms should not be rejected outright; instead Ministries should evaluate vendors holistically, taking into account other factors including their track records and quality requirements.

That said, the Government strives to set a good example on responsible best sourcing or outsourcing. To this end, MOF has worked with MOM and union representatives in 2008 to issue the Tripartite Advisory on Responsible Outsourcing Activities to guide employers on good practices in this area. We will continue to monitor developments in the industry to incorporate best practices into our Best Sourcing initiative.

Er Lee Bee Wah: I think my question of whether Government agencies are penalised when a tender is not awarded to the lowest bidder, is not answered.

Mrs Lim Hwee Hua: Sir, the answer is "no".

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Mdm Halimah Yacob: The Minister mentioned that there is a tripartite advisory that is disseminated to the vendors. My question is: how does the Ministry ensure that the vendors actually comply with that, particularly on the law that protects the workers and also the law on payment of CPF to the workers?

Mrs Lim Hwee Hua: Sir, indeed Mdm Halimah is correct. It will be the track record when assessing the suitability of the bidders. It will be points as what she has raised, including whether they have been paying the CPF on time, because this will result in poor work performance and will ultimately affect the ability of the workers, and therefore the contractors, to deliver on time. If there is a bad track record, that would come under strong scrutiny at the point of assessment for other contracts.