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Why Did Singapore Technologies Engineering Lose the Bid For Singapore’s Next Generation ERP Satellite System?

Singapore Technologies Engineering Ltd (SGX: S63) recently lost out on a tender to help Singapore’s government build a next-generation electronic road pricing system.

The tender was awarded to NCS and MHI Engine System and was reported to be worth $556 million. For context, Singapore Technologies Engineering, or ST Engineering, recorded $6.33 billion in revenue in 2015. Winning the tender would have had a sizable impact on the conglomerate.

But, the loss of the tender was not the only news.

It also emerged that ST Engineering’s bid was more than twice that of NCS and MHI Engine’s bid. The disparity prompted questions during ST Engineering’s recent 2015 fourth-quarter earnings briefing. Lee Fook Sun, the company’s deputy chief executive, shared his thoughts on the tender:

“In terms of whether our bid is uncompetitive or not – I think if you look at the way that we have been winning tenders and we have been securing contracts in 2015. In fact, our track record on delivering on those projects, I would say is a very good one.

The fact that we continue to secure contracts every quarter – last year, we secured $1.7 billion worth of contracts in Singapore as well as overseas. A large chunk of it coming overseas. It is a reflection of the fact that we are competitive in our bidding process. We are able to cost our cost accurately. And that we are able to deliver our projects on those cost. And, therefore we are able to come back with the margins as reported this year.”

To be sure, Lee also acknowledged that there would be lessons from this tender experience. He added this thoughts about it:

“So, from that point of view, I want to assure that the way we will go forward is that we will continue to be competitive in terms of our tendering process. But in all tenders there will be a winner, there will be losers, right?

It is no good to come out second best, we will learn something out of this tender, whether we win or we lose, we will learn the lessons, we will learn something about our competitor, we will learn something about ourselves, we will learn something about our customers. And moving forward, we would want to make use of those points and lessons to improve ourselves.”

Lee also said that the tender was not factored into ST Engineering’s outlook for 2016. As such, there is no impact from it. ST Engineering is forecasting higher revenue in the current year.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.