Tag Archives: Auditor General’s Report 2011

RM12.5Bil double-tracking project delayed and costs RM3.6Bil more

The government faces the risk of footing heavy losses because the agreements it has signed for the double-tracking project limits the compensation that can be claimed from contractors who fail to meet deadlines.

“An audit found that the cap on liability borne by the contractor… for the Ipoh to Padang Besar (double-tracking) project is fixed at 10 percent of the contract value or RM1.25 billion,” notes the Auditor-General’s Report 2011.

This, it explains, does not bode well because an exact cap for the Rawang to Ipoh segment of the project forced the government to pay RM882.01 million in compensation.

Elaborating on this, the report states: “In 2000, the electric double-tracking project between Rawang and Ipoh was carried out by the (Transport) Ministry. The audit done in 2008 found that the government suffered an estimated lost of RM1.14 billion when the contractor failed to complete the project.

“However, the full amount could not be claimed from the contractor because, according to the (terms and) conditions, the maximum liability that can be claimed is limited to 10 percent of the contract value or RM257.99 million only.”

The more recent contract signed with MMC Gamuda Joint Venture Sdn Bhd (MGJV) has similarly failed to protect the interest of the government, states the report.

“The cap on the maximum liability does not take care of the government’s interests because (it) will be forced to bear the losses if the contractor fails to complete the project according to the schedule.”

The report further questions the 0.15 percent processing fee imposed on the government by the project’s lead lender, Bank Pembangunan Malaysia Bhd (BPMB). This amounts to RM10.05 million for interim payments made to MGJV.

“The audit is unable to determine the justification for the fee amounting to RM10.05 million (for BPMB) to process interim payments which were in fact handled by the project consultant, Keretapi Tanah Melayu Bhd and the (Transport) Ministry,” it said.

It also notes that the deadline for the project, which is to be completed by Jan 7, 2013, has been extended to Nov 7, 2014, and that this is likely to incur additional costs.

To date, the RM12.485 billion project has cost already cost an additional RM3.608 billion due, among other reasons, to land acquisition and compensation for squatter relocation.

– Malaysiakini

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Double trouble for gov’t in rail contracts
Oct 16, 2012

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Sarawak builds RM20mil bridge to nowhere, needs another RM50mil to connect somewhere

The Sarawak Public Works Department (JKR) had proposed the construction of the RM20.43 million Batang Strap Bridge in Sri Aman Sarawak, forgetting a link road to nearby villages, according to the Auditor-General Report 2011.

The result – a 182.4 metre concrete bridge that connects the nearby town Pekan Pantu to shrubs on the other side of the river.

“An audit survey on Dec 17, 2011 of the project site at Pantu, Sri Aman found that the concrete bridge project worth RM20.43 million could not fully stimulate the local economy after completion as the 10km road across the river to link the long houses and schools there had not been built,” the report reads.

Without the 10km road, it adds, some 23 long houses with a population of 3,000 and four schools have no access to the bridge and beyond to Pekan Pantu.

In a March 7 reply, the department said it will propose the construction of the road, estimated to cost RM50 million in the third rolling plan under the Tenth Malaysian Plan.

“As a temporary measure, JKR proposed to construct a 500m dirt road to connect to the logging road to the Batang Strap bridge at an estimated cost of RM500,000,” it said.

This was among several projects under a special RM1 billion allocation from the federal government for road upgrades and construction in Sarawak.

An audit at the federal level had rated the 175 projects as “less than satisfactory” due to delays and poor quality .

– Malaysiakini

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Sarawak builds RM20mil bridge to nowhere
Oct 19, 2012

Private homes furnished with Johor state govt property?

Meanwhile, in Johor, the Auditor-General’s Report 2011 found that state government property had mysteriously found themselves as new furnishing for private homes.

The total of 39 items worth RM55,360 supplied by the Johor Menteri Besar’s Office were intended for the premises of associations and organisations in Muar, Kluang and Ledang.

Other than furnitures and electronic gadgets, the other items include:

BOB-KA-9000 professional digital echo mixing amplifier (RM2000)Air conditioners (RM3,000);

Laptops and desktops (RM1,700 – RM5,000);

Elecreolux range hood: E11-15024 & electrolux uilt-in hub: E-10-42299 (RM4,500);

Kitchen cabinet full high (23’x108′) (RM5,000); and,

Steamer 26″ CNI (RM1,550)

“This is against the issued guidelines and therefore the targeted groups could not benefit from these equipment,” states the report.

– Malaysiakini

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Sarawak builds RM20mil bridge to nowhere
Oct 19, 2012

Defence Ministry pays RM3.2bil instead of RM1.74bil for shoddy quarters

Shoddy quarters

A Defence Ministry contract to build living quarters for married military personnel has not only incurred a bill of RM3.21 billion, but has seen the delivery of shoddy units.

The cost for the 38 projects comprising 9,455 units of quarters ranging from flats to bungalows was initially estimated at RM1.74 billion but ballooned to RM3.21 billion – an 84 percent cost overrun, the Auditor-General’s Report 2011 notes.

The Auditor-General’s Office had audited 12 of these projects, finding that these had contributed to RM1.3 billion of the cost overrun stemming from, among others, delays of up to 1,240 days for delivery.

It found that only one of the audited projects, which were part of the 9th Malaysia Plan, had been awarded through an open tender, while the rest were by direct negotiation, limited tender or by obtaining quotations.

Six of these projects are located in the Klang Valley and were awarded to Syarikat USL, a joint venture by the Finance Ministry-owned Syarikat Perumahan Negara Bhd and the Armed Forces Fund Board Sdn Bhd.

According to the audit report, Syarikat SUL was found to be “inexperienced” and “technically incompetent” to complete the projects.

It was fined RM87.12 million for the delays, but payment was later waived by the Finance Ministry following an application by the Defence Ministry.

“The exemption of the fine … caused losses and undermined the government’s interests …,” the audit report states.

“The Defence Ministry should not have accepted the final products as it had many construction faults and damages, forcing armed personnel to stay in poor quality dwellings.”

It also recommended that the contractor should be “blacklisted” for performance failure.

Photographs appended to the audit report showed ceiling boards which had rotted through due to leaks in the roof. Leaks were also found in bungalows for higher ranking personnel.

It also found that the office unit at the Jalan U Thant quarters in Kuala Lumpur had a “bad stench” due to a “leak in the sewerage system” .

Up to 2,085 complaints of damage were made for projects constructed by Syarikat SUL, but the company did not address these.

“As such, the Defence Ministry had to appoint a third-party contractor to deal with it at an extra cost of RM1.84 million,” reads the report.

Of the 38 projects, only the one in Kinabatangan, Sabah has yet to be completed.

However, in December 2011, the audit staff found that the captain’s quarters there was being inhabited by “foreign workers and their families”.

To this, the ministry responded that the contractor has been fined RM13,314.86 for each day’s delay and that project is – as at April this year – 91 percent compete.

Past problems

The audit further noted that Syarikat USL-built airforce quarters in Subang that were completed in 2006 were in poor shape. Although the USL was responsible for repairs up to July 2008, these were not undertaken.

Despite this, the ministry had issued a ‘certificate of making good defects’ (CMGD) in February 2009, to indicate that repairs had been completed.

As at January last year, the ministry estimated the cost of repairs for the Subang quarters alone to be RM5 million.

“However, the bank guarantee of RM8.56 million by Syarikat USL to the ministry lapsed in January 2009,” reads the report.

“The ministry should have seized this bank guarantee as Syarikat SUL had failed to fulfill its responsibilities.”

Furniture provided was also of poor quality. Bed frames, chairs and tables were made of “easily-broken, low quality, thin plywood”, while some could not fit into the rooms as the items did not meet specifications.

A photograph of a “new unit” at the Kementah camp dated January 2012 showed furniture which could not be used due to “disintegration as these could not withstand a termite attack”.

– Malaysiakini

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Defence Ministry pays RM3.2bil for shoddy quarters
Oct 15, 2012

Customs officer goes on RM1.82mil shopping spree – How can this happen?

A Customs officer bought hundreds of items not allocated for, raking up a bill of RM1.82 million, the Auditor-General’s Report 2011 reveals.

The officer, who is not named in the report, had placed a verbal order for the items, some of these costing several thousands of ringgit, without the procurement division’s approval, leaving the Treasury to foot the bill.

He had ordered:

An extra 50 GPS navigation systems when he was only authorised to order 30, costing RM6,174 each;

An extra 100 search lights, when he had obtained approval to order only 50, costing RM1,292.60 each;

60 beacon lights at RM1,311 each;

250 rechargeable torchlights at RM1,217.16 each; and

100 walkie-talkies at RM5,259 each.

The officer had not been authorised to order any of the last three items.

According to the audit report, the purchases were made in 2007 but the supplier, True Target Resources, could not be paid as the bill went beyond the procurement budget of the Royal Customs and Excise Department.

It added that the Treasury in in 2010 approved the payment and an investigation into how the breach of regulations had taken place was started.

The Finance Ministry on Dec 22, 2010, issued a directive to the Customs Dpartment to lodge a police report against the errant officer.

“However, no action was taken against the officer involved as he had given a 24-hour notice of resignation on Feb 26, 2008,” the audit report states.

On May 24, 2012, the Customs Department lodged a police report against the errant officer.

– Malaysiakini

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Customs officer goes on RM1.82mil shopping spree
Oct 15, 2012

RM53,525 maintenance contract for one dot matrix printer!

Printer

LQ300 dot matrix printer

The humble dot matrix printer, among the cheaper computer printing options, is under the auditor-general’s spotlight after it was found that the Lahad Datu General Hospital was paying an exorbitant amount maintaining it.

According to the Auditor-General’s Report 2011, the Health Ministry is spending RM53,525 – nearly the cost of a 1.6 manual Proton Waja – for a five-year maintenance contract for each of the Epson LQ300 printers it owns.

The report doesn’t state how many such units are owned by the hospital, but it did state that it cost RM738 per unit and thus maintaining a single unit for five years was 72.5 times the purchase price.

This is however the tip of the iceberg as there are many items on the establishment’s hospital information system (HIS) inventory which recorded highly suspicious maintenance costs.

For example, another printer, the more expensive and advanced Lexmark E332n laser printer which cost RM1,916 a unit, required RM16,455 in maintenance cost for a five year period.

One company, five hospitals

In contrast, maintenance cost of similar equipment in government hospitals in Keningau, Pekan, Sungai Petani and Selayang was a fraction of the price paid by the Lahad Datu hospital.

In a reply to the audit team on June 15 this year, the Health Ministry justified the maintenance cost, stating that the ministry had a “back to back” agreement with the supplier which includes a “comprehensive” maintenance scope.

“The maintenance cost not only includes a ‘planned preventive maintenance’ but also includes corrective (measures) and replacements of the same make or better,” said the ministry.

The Health Ministry also suggested that the variance in cost of maintaining the Epson LQ300 printer could be because the supplier for the Lahad Datu hospital obtained the contract through direct negotiation.

Of the 12 hospitals involved in the HIS maintenance work, a single company – Systematic Conglomerate Sdn Bhd – received directly negotiated contracts to work on five hospitals.

Other than the Lahad Datu hospital, the four others maintained by Systematic Conglomerate were not part of the audit. Contracts for the other seven hospitals were awarded through open tender.

Ministry: We lowered the amount

The total value of tendered contracts is RM334.02 million. Of this amount, two-thirds or RM222.19 million worth of work was given to Systematic Conglomerate.

According to the Health Ministry’s explanation, the direct negotiations with Systematic Conglomerate were done by the Finance Ministry.

“However, the (health) ministry had negotiated for a lower amount of RM222.81 million, which is lower then the price of RM483.78 million sought by the contractor.

“The (health) ministry had on Oct 13, 2011 and Feb 22, 2012 appealed to the Finance Ministry to ensure that future HIS maintenance contracts be awarded through open tender,” the Health Ministry told the audit team.

In view of this, the government had on July 9 decided not to proceed with the option to extend Systematic Conglomerate’s contract by another three years.

– Malaysiakini

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Printer maintenance is 72 times purchase price
Oct 16, 2012 – Malaysiakini