Government tenders: What needs to be fixed?

With government money flushing the city’s advertising market, lapses in procurement are hardly a small issue. Elizabeth Low and Rayana Pandey find out what needs to change.

In August, the Auditor-General’s office published a striking report on the local government’s procurement procedures in government tenders. It found lapses in at least 10 ministries and 11 statutory boards, with slip-ups that included various contracts being awarded to preferred contractors, contracts being awarded prior to approval and duplicate payments being made amounting to several millions of dollars.

While the news caused an uproar, with Deputy Prime Minister Tharman Shanmugaratnam stepping up to defend the government’s procurement rules, these issues have already long plagued the marketing and advertising industry, well-known to marketing agencies who regularly pitch for these accounts.

Singapore’s situation is unique in that the local market is flush with these government contracts (according to Shanmugaratnam, approximately 80,000 contracts each year take place in total), and many agencies rely on such accounts for sustenance (or “bread and butter” accounts as one agency puts it).

A common complaint is these government agencies already have a chosen favourite, or that an agency has already started work on an account even before it has been officially awarded.

Considering the scale these government projects can take on, with contracts ranging from tens of thousands to several millions for a year-long project, the implications are not small.

For example, the National Environment Agency’s Clean and Green campaigns and Dengue Fever campaigns were given away for at least SG$5 million each for a year-long period, according to the government tender site.

Marketing spoke to several government agencies regarding their procedures for marketing and advertising pitches, asking if these issues took place in their pitches and if yes, what they are doing to counter them.

A spokesperson for the Economic Development Board says the procurement for the public sector is based on the principles of open and fair competition, transparency and value for money, and as a statutory board, it adhered to the same “rigorous process” in evaluating tenders.

“In our appointment of marketing agencies specifically, we ensure that we provide clear specifications on the scope of work required. The tender documents also clearly outline the evaluation processes and criteria.”

The spokesperson adds that all suppliers are given the same information to prepare their bids to prevent discrimination in favour of or against any suppliers and that third-party consultants are engaged for major tenders to ensure objectivity in the overall procurement process.

The Singapore Tourism Board (STB) also says it maintains a strict approval process and standard operating procedures to ensure the integrity and objectivity of its marketing tenders.

This included, but not limited to, having approving authorities who were independent of the evaluation panel, and dedicated procurement and legal divisions to provide counsel and support, said Sophia Ng, assistant chief executive of the marketing group for STB.

STB also conducts assessments on a regular basis to ensure hired agencies continued to meet the requirement specifications during the appointment period.

“STB recognises that strong agency partnerships take time to cultivate a better appreciation of the client’s business needs and strategies, which will in turn enable better creative work and efficient work flow,” Ng says, adding that it is the basis of STB’s current appointment of creative, digital and media agencies is awarded for a four-year (two plus two) contract.

“We have benefitted from this approach and intend to continue it.”

A Ministry of Community Development, Youth and Sports spokesperson also says its processes are the same as any other government agency as according to the Ministry of Finance procedures and that there is “no exception to the rules”.

Agencies speak up

Undoubtedly, the tender process offers a level playing field in most cases and the “open policy” approach of government provides a fair chance to any agency to pursue any government business, however, on the flip side it tends to have little or no dialogue between client and agency.

One agency professional Marketing spoke to on condition of anonymity also adds the process tends to be static and drags on for long periods. Also contract periods tend to be short and pricing low.

“While there are government departments that value great ideas and talent that are reflected in award-winning and effective campaigns most are inconsistent when it comes to pricing,” he says.

While these issues can be painful for agencies who invest much time and effort in pitching, the size of these accounts and their relative risk-free factor in that it ensures payment makes government business a lucrative proposition for agencies.

However, a pitch costs not just agencies but client organisations, time and resources, as well.

Goh Shu Fen
Principal, R3

According to estimates, an average out-of-pocket cost of pitching, excluding agency labour, would be anywhere from US$10,000 to US$30,000, and with labour costs, could range anywhere from US$60,000 onwards. And this excludes the more intangible opportunity costs.

“For client organisations, we estimate the time costs of the senior and day-to-day team to be a minimum US$60,000,” says Goh Shufen, the principal consultant of R3.

“Truth is, pitching can be a costly exercise for both agencies and clients, and a poorly managed process even costlier and less satisfying for both.”

Transparency is another issue.  Chairperson of the Better Business unit in the Association of Accredited Advertising Agents Singapore (4As), Theodore Choo, says there is no way for any agency to understand how the winning agency is chosen.

In Choo’s opinion, the clients are not discerning or have no knowledge of how to go about the selection process, which leads to these pitches becoming a “free for all,” with the only clear factor qualifying an agency to bid, being a qualification code that allows an agency to bid up to a certain amount of the billings.

As another agency professional puts it: “Sometimes it appears like too much work for too little returns as the chances of winning are limited.” Moreover, if the criterion is to have past experience with a government body then it becomes all the more difficult for new agencies to get involved.

On the positive side, the agencies Marketing spoke to lauded the government for maintaining its policy of transparency and for being accountable enough to acknowledge that the current procurement/tender process has shortcomings.

“It takes a government of true strength of character to admit it and now want to resolve these shortcomings.”

Change on the cards?

The 4As is now lobbying to have the Ministry of Information, Communication and the Arts to understand how to protect the industry. “Every (piece of) work is customised to a specific brief. And that takes effort, resources and talents/smarts. We give that ‘all away’ when we present,” reasons Choo, who also heads up local agency Gosh Advertising.

He says the 4As is working to get the minister here to speak to his peers in the ministries and the Finance Minister to review the tender process to become more fair, transparent and accountable.

“We hope to have a say in how the process can be further improved,” he says adding that it will prevent abuse and ensure there are qualified people on the client end that understand the “products” agencies propose. It will also help clients in selecting/short-listing agencies that are a better fit for their needs, aside from the price element.”

However, as a trade association, the 4As can only advise what’s good but has no ability to enforce recourse on bad behaviour and unprofessional business practices.

Requirement for regular open tenders for vendors is a rather standard practice in developed markets, and a statutory requirement for private organisations that want to drive good corporate governance.

“From our experience, the framework and intent of the government tender process is probably as robust as any other non-government tender, but requires the right expertise to manage it effectively,” Goh says.