I would like to bring to your attention on the manner NUS appoints its’ operators, it is no longer meritocratic, and how NUS is using public funds to fund unnecessary renovations. I am aware of this case as I attended the tender briefings.
Tender information
Reference number: NUSDEP/OED/CS/15/2010
Period of contract: 3 years with option to continue for another 3 years
12 March 2010 – Tender notice
18 March 2010 – Compulsory tender briefing
5 April 2010 – Tender submission deadline
This tender was to appoint a food court and restaurant operator at NUS Yusof Ishak House. From the tender briefings, attendees were told upon enquiries, that the canteen and restaurant area were last renovated in 2004 and floor tiles last upgraded in December 2009 so NUS will only provide minimal infrastructure upgrades and bare space. Operators were expected to accept the premises on an as its and where is basis and renovate the premises to a food court and restaurant according to its proposed concept and corporate design. More than 18 people attended the tender briefing and one of the companies was Food Junction Holdings Limited. The Food Junction representative admitted when we chatted during the tender briefing that NUS had made special invitation to them to participate in the tender and was confident in their tender bid. Believing that NUS would be transparent, I took little notice of Food Junction’s confidence.
Some of my friends who attended the tender briefing and I eventually decided not to participate in the tender as it was not viable for operators to accept the premises on an as its and where is basis and to renovate the premises at our own costs. We were puzzled why NUS wanted us to renovate since the area is in a good condition. We were told that a tender bid without any renovation proposal would not be evaluated favourably. Furthermore, it was not possible to rush out the canteen in time to meet NUS 10 August 2010 deadline to operate the canteen. We were told that NUS would impose liquidated damages if we fail to meet the deadline. We were hoping for NUS to revise and recall the tender on more favourable terms due to lack of proposals in May 2010.
Recently, I learnt from industry players that Food Junction was appointed as the operator as it was the sole tenderer. But a quick check on GeBIZ revealed that this information was not posted and made publicly. Suspecting something amiss, I decided to make a few enquiries.
I discovered Food Junction was appointed but it did not comply with NUS basic requirement for operators to accept the premises on an as its and where is basis and to renovate the premises on its own.
Apparently Food Junction submitted an alternative bid for a favourable rent. Being the sole tenderer, since NUS invited them to participate in the tender exercise and due to time constraints (NUS was eager to have the canteen up soonest possible), NUS subsequently agreed to renovate the food court and restaurant according to Food Junction’s requirements and Food Junction designs concepts at NUS costs. I also gathered that Food Junction have fundamentally changed the contract terms (e.g. operational date) and specifications after receiving NUS letter of acceptance. The renovation contractor told me that the total amount of variation orders NUS is committing as a result of accepting Food Junction’s proposal is approximately $800,000.
According to the renovation contractor, there were two phases of works. First phase was in the last long school holidays in 2009 and the second phase (to renovate the canteen) in the 2010 school holidays. The renovation contractor mentioned that these variations attributed to the Food Junction deal for phase two requires additional $500,000 for the renovation contract. All these are over and above the variation orders to upgrade the canteen floor tiles in December 2009 under phase one of the works.
When I enquired whether such approval was possible, the renovation contractor told me that the NUS project manager had told them to just provide a new quote and not to worry about approvals as the NUS Vice President is personally involve in lobbying for additional funds and approvals from NUS Board. Apparently, the NUS senior management supported Food Junction deal and additional funding for additional renovation works.
This episode raised a few fundamental issues.
There is a lack of transparency and fairness in NUS tender exercise for appointing canteen operators. Potential operators were not given equal opportunities to bid for the space. NUS did not inform the rest of the potential operators that it had changed a fundamental condition that will make the tender more viable for other operators to bid for the canteen (i.e. NUS to help out on operators’ renovations). Had it done so, there could have been better response from the industry.
It does not make business sense for NUS to enter into a deal that requires additional funding of $500,000 to fund a specific commercial operator’s business without first giving equal opportunities for the market to respond. My friends and I could have given NUS a better deal! Take some of the universities and polytechnics food court and restaurants for example, it is a known industry fact that other universities and polytechnics just lease out bare space or partially furnished space (which are bare minimum) for food court and restaurant operators to fit-in in an open and transparent manner. These universities and polytechnics do not fully fund food court and restaurant renovation works, especially operator's specific design concepts. After all, operators are allowed to charge a premium for its food prices.
Using time constraints is no excuse of such tardy work. NUS had known in 2009 that was supposed to renovate the canteen. Why did it called the tender exercise to appoint an operator only in March 2010? NUS management should have called the tender earlier. Such tardiness gave everyone an impression that NUS is simply going through motion and using due process, citing time constraints, expediency of works and strategic reasons to transform Yusof Ishak House to a student centre to justify its appointed (and invited) canteen operator. Furthermore, expediency of works and time constraints are not reasonable justifications since there are so many canteens on campus and NUS can afford to have one canteen down during school term time (which is happening now).
Since there was only one tenderer for the canteen, there was no reasonable basis of comparison when NUS decided to award the alternative tender proposal from Food Junction. NUS agreement to fund additional renovation works requested by Food Junction ($800,000) and allowing changes to the contract terms (e.g. operational date) and specifications after award of contract gave everyone the perception that it is either entering into an unfavourable deal blindly or do not have the depth of commercial experience to negotiate the best possible deal. One cannot help it but wonder whether the various NUS decision makers and officers had any pecuniary interest in this deal.
While additional variation orders of $800,000 requires additional funding of $500,000 is negligible to NUS, with so many fundamental changes to the original intent and renovation tender specifications (design and fittings), one wonders whether NUS is getting the best renovation rates from the renovation contractor. Perhaps NUS should consider calling a separate tender exercise to ascertain whether such variation rates are reasonable? After all, the construction indices in 2009 March (123.5) and second quarter 2010 indices (115) revealed a slight drop of 8.5 index points in tender prices.
Even if phase two of the renovation works is only an estimated sum, I do not understand why NUS proceeded to award a renovation contract in early 2009 for the canteen upgrades (one year ahead) without first confirming with the intended canteen operator their requirements or check with industry practices on how a partially furnished food court and restaurant space should be done. From what I heard, the particular NUS Project Manager in charge is well-known to handle rush job, and also one who rewards contractors and consultants who he likes through allowing contractors to exercise flexibility in their variation order rates and convincing NUS management to approve such rates on the basis of time constraints. So I also wonder whether NUS renovation project team had any pecuniary interest in the canteen deal too.
It was also rumoured that this deal was also backed by a major NUS donor. I do not know whether this is true.
Another related question is why NUS is renovating the canteen area and some parts of Yusof Ishak House in 2009 when it had done so in 2004. From the look of it, the previous canteen should have spent $200,000 to renovate the canteen in 2004 and it is rumoured that NUS spent approximately $5 million to refurbish the entire Yusof Ishak House in 2004. Is NUS telling us that what it renovated in 2004 for the 11,000 square feet of canteen space no longer meets 2009 requirements (over such short period of time)? What the facilities planners been doing all these years?
So the current situation means all except NUS are benefiting from the canteen deal. The canteen operator secures a contract getting the best possible deal; renovation contractor gets to mark up from variation orders and additional works and renovation project consultants getting more consultancy fees from increase in contract sum. But NUS in a weaken bargining position, is left to pay more than it originally intent to and had to make concessions from its original tender canteen terms and specifications. Is there an escalation of commitment on NUS part?
The current situation is no fault of both Food Junction and the renovation contractor. Both are commercial entities and they had played by the rules. Being commercial entities, they had to ensure that they get the best possible deal within prevailing tendering rules.
I also discovered that in the process that NUS had also invested in a high class western restaurant renovation at alumni office building (kitchen equipment and furniture) but to leave the restaurant empty since March 2009. So I wonder whether it is NUS modus operandi to spend on renovations that could best be done or co-share by operators through a competitive bid, whether it is using its space properly and spending public funds wisely. Do NUS need to invest in such a high class western restaurant? Are such investments in food and beverage operations part of NUS duties?
I overheard that many long time key management staff left NUS estate and university town department this year within a short period of time. This could be an indication on the state of affairs within NUS management. Is there a top leadership and management issue? Had incompetent and inexperience officers filled these positions? Is there a lack of continuity within NUS management? Were these key management staffs made to leave due to the management style or differences?
NUS, a publicly funded university should set a high level of corporate governance and transparency. However, I am puzzled by my recent discoveries.
The information in this email may be inaccurate as it was gathered from outside sources. I would like to apologize to anyone if there are any inaccuracies on my part. However, I would be grateful if the relevant authorities overseeing NUS could investigate and make public its findings and actions. A detailed clarification is much appreciated.
It is possible that there is a failure in the checks and balances on NUS management if NUS Board supported the Yusof Ishak House canteen deal and additional renovation funding. If this is the case, it is in public interest to set the record straight since you said in the National Day rally that the government will be spending more on education.
I hope senior NUS management takes leadership responsibility of the situation and at least give every tenderers equal opportunities to bid for a job.
I am maintaining my anonymity as I do not wish this report to compromise my future business relationship with NUS.
Yours faithfully
Dave Tan
Editor’s note: This letter is addressed to MM & PM Lee, copied ot us for publication.
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