CLEANING OF BURAN DARAT/PULAU RENGGIT AND LAZARUS ISLANDS (Recall of tenders)

Mr Low Thia Khiang asked the Minister for Trade and Industry why there was a recall of tenders for the cleaning of Buran Darat, Pulau Renggit and Lazarus Islands; and why the awarded tender sum of the re-tender for Pulau Renggit and Lazarus Islands was higher than the initial tender sum for the three islands.

Mr Dhanabalan: Mr Speaker, Sir, Sentosa Development Corporation (SDC) is the Government's agent for the management and maintenance of offshore islands. SDC employs term contractors to maintain the hygiene and cleanliness of the islands.

SDC called for tenders in February 1992 to clean Buran Darat, Pulau Renggit, and Lazarus Islands. After the close of the tender, SDC decided to delete Buran Darat from the contract in view of reclamation works on the island. Buran Darat had been handed over to the contractor handling the reclamation, and SDC felt that the reclamation contractor should be responsible for the island's maintenance.

Since the deletion of Buran Darat from the cleaning contracts resulted in a significant reduction in the scope of work, SDC decided to recall tenders for cleaning and maintaining the other two islands.

It was expected that a re-tender would yield a lower tender price as the scope of works was reduced. Contrary to SDC's expectations, the lowest tendered price submitted during the re-tender was much higher than the lowest bid submitted in the first tender for the three islands. As SDC felt that the tender prices received were unreasonably high for just the two islands, it decided to call for a second re-tender. As it turned out, the tender prices received for the second re-tender were even higher than those received in the earlier two tender exercises. SDC then decided that further re-tendering would not necessarily result in lower tender prices, and proceeded to award the tender to the lowest tenderer of the first re-tender because that tender was still valid, and the lowest tenderer was Chua Chin Cheong Contractors at a tender price of $114,660. This tender price is $2,460 more than the lowest tendered price in the original tender for the three islands. Chua Chin Cheong Contractors was also the lowest tenderer of the second re-tender.

As you are aware, Government tender procedures are governed by strict rules to ensure that the system is fair and transparent to all. Government does have some flexibility within the procedures to decide to recall a tender if it believes that Government will benefit from its doing so. There were good reasons for calling each of the above re-tenders. It was judged that re-tender would result in lower prices. As it turned out, the officers' assessment was not borne out by the market outcome.

Mr Low Thia Khiang (Hougang): Sir, was there an omission clause in the tender contract itself for the original tender?

Mr Dhanabalan: I do not know what the Member means by an omission clause. But there are normal rules in tender that if the scope of works is reduced, it could negotiate another price. But normally, the tenderer would demand compensation for a reduction in the scope of works.

Mr Low Thia Khiang: Mr Speaker, Sir, my understanding is that, normally, there is an omission clause, which means that the owner can omit whatever work which has been tendered and pay a compensation, say, 5%. And in this particular case, if the tender was awarded to the lowest tenderer in the first tender, it would, I believe, save substantial savings instead of awarding to the lowest tenderer in the second tender. In fact, if there is an omission clause, you could invoke the omission clause for the cleansing work of the third island, which is not required.

Mr Dhanabalan: Mr Speaker, Sir, with hindsight, of course, we can be very wise. But since one of the three islands was excluded, it was a substantial reduction in the scope of works. The assessment then, which I agreed with, was that if you called for a re-tender, you would get a substantially reduced tender. Whereas, if you were to just adopt the omission method, you would have to negotiate compensation which would result in a tender price which would cover the cost of cleaning the two islands plus compensation for not cleaning the third island. If a re-tender were called and just the two islands were let out for tender, it was expected that the price would be much less. Of course, as I said, with hindsight, perhaps, if they had negotiated on the first tender, they would have got a better price. But at the time that the decision was taken to call for the re-tender, we did not have the benefit of hindsight.

Mr Low Thia Khiang: Mr Speaker, Sir, after the second re-tender was called and closed, there was still time for assessment whether to award to the lowest tenderer in the first tender. So why did the officer concerned not make the decision, after the result of the second tender was known, that possibly the Government could benefit by awarding to the lowest tenderer in the first tender?

Mr Dhanabalan: Mr Speaker, all these questions make a lot of sense when the events are finished, and you look back. But the officer looking at the case at that time had to deal with the facts as they were at that time. Naturally, any officer looking at the tender, ie, the tender price for two islands was higher than for three islands, must have thought that something seriously had gone wrong, either collusion, or some mistake. Therefore, it was decided to have a re-tender. And when the second re-tender was called, the first re-tender was still alive and that is why we went back to award to the lowest tenderer in the first re-tender.

Mr Low Thia Khiang: Does the Minister agree that actually it was a wrong decision by the officer concerned, not to award to the lowest tenderer in the first tender?

Mr Dhanabalan: Mr Speaker, Sir, it is a matter of judgement. The officer made the right judgement because it was quite logical to think that if only two islands were cleaned, the tender must be less. I am sure that if the Member himself were presented with the facts at that time, he would have made the same decision. And if the officer had recommended to me, I would also have decided that re-tender would be right. But looking at it now, after all the events have been completed, of course, one can be very wise.