Kim Quek, Malaysiakini
Sep 13, 07 12:57pm
While the nation is still reeling from the RM4.6 billion PKFZ 'Ghost
Town' scandal, another mega bombshell hits the national screen - the
RM6.75 billion patrol vessel scandal.
A RM5.35 billion contract to build naval vessels awarded in the 90s
that has been inflated to RM6.75 billion is now teetering on failure,
under circumstances that have exposed the utter incompetence and
decadence of the Malaysian political leadership and administration.
The 2006 Auditor General's Report, tabled in Parliament on Sept 7,
has revealed astounding details that indicate dubious award of
contract to an obviously unqualified contractor, failure of technical
and financial management, hefty illegitimate contract price increases
and overpayment, unjustifiable waiver of penalties, huge undocumented
payments and complete failure of ministry oversight.
The history of this mega scandal could be traced back to the 90s when
a company owned by an Umno stalwart Amin Shah Omar Shah was awarded a
contract in September 98 to design and build six patrol vessels for
the Royal Malaysian Navy for the contract price of RM5.35 billion.
The company is PSC-Naval Dockyard Sdn Bhd (PSC-NDSB), which is a
subsidiary of Penang Shipbuilding & Construction Sdn Bhd, a company
owned by Amin Shah.
Contract breaches
Under the terms of contract, the contractor is obligated to deliver
the vessels in stages, starting from March 2004 and completing
delivery in April 2007. However, PSC-NDSB could only deliver the
first two vessels in mid-2006, and the remaining four are still
remote from their final stages of construction, with their completion
assessed at 19% to 56% at December 2006.
And even the first two vessels delivered were hardly operational, as
they were riddled with defects (298 recorded complaints) and were
found to have 100 and 383 uncompleted items respectively.
It is obvious that as far as contract performance is concerned, PSC-
NDSB is a total disaster. Its failure is attributed to serious
financial mismanagement and technical incompetence, the latter being
apparent from its track record of only having built trawlers and
small police boats in the past.
However, instead of terminating the agreement and demanding for
compensation as good governance would have so demanded, the
government has done the exact opposite.
The Defence Ministry has not only kept the contractor but also made
hefty overpayment, increased the contract price drastically and
waived all penalties, all without any justification.
The contract price was increased from RM5.35 billion to RM6.75
billion in Jan 2007, for which the auditor-general could find no
justification. Neither could he find valid ground for the generous
payment of RM4.26 billion to the contractor up to December 2006 when
value of works done was only RM2.87 billion - an overpayment of
RM1.39 billion or 48%.
Further, there was no reason for the cabinet's decision in Nov 2006
to waive the imposition of penalty for late delivery amounting to no
less than RM214 million. The AG also noted the abnormally generous
payment of RM1.07 billion as deposit, which amounts to 20% of
contract price, upon signing the agreement.
Most alarmingly, the Defence Ministry is found to have made huge
payments to the contractor without supporting documents. Between
December 1999 and January 2002, 14 progress payments amounting to
RM943 million were made, for which no payment vouchers or relative
documents were found.
In spite of these enormous overpayment and contract price increases,
the AG found the contractor in serious financial deficit and warned
the government of further losses ahead due to contractor's weaknesses.
The auditor-general criticised the project steering committee -
headed by defence minister cum deputy prime minister Najib Abdul
Razak - for failing to provide the necessary oversight over the project.
Government failure
Reviewing the entire fiasco, one cannot escape the conclusion that
this is a classical example of contemporary Malaysian mega failure
that transcends the Mahathir/Abdullah era division. It demonstrates
that the weaknesses of the Mahathir era have not only been carried
over but have further been compounded with new weaknesses
characteristic of Abdullah's leadership.
In simple words, while Mahathirism is characterised by corruption and
cronyism, Abdullah allows these characteristics to flourish and at
the same time compounding them with his unique brand of hands-off
leadership - indecision and indifference. Abdullah would let nature
take its own course. Needless to say, such policy (or the lack
thereof) would spell disaster on a mega project gone foul.
Take the present patrol vessel scandal. No doubt Mahathir is faulted
for having awarded such a huge and high-skill project without tender
to an obviously incompetent crony - a glaring case of corruption and
cronyism, but mind you, Abdullah was the leader who allowed the
failed contractor to drag on and dubiously rewarded him with contract
price escalation and overpayment, entailing all sorts of
irregularities with criminal implications, causing the public to
loose billions with no end in sight.
Agreed that the real decision-maker in this case may not be Abdullah
but Najib, but still as the prime minister, he must take
responsibility for having failed to provide the kind of leadership
that could have averted the deterioration of this disaster. In fact,
I doubt whether the cabinet has been properly briefed or consulted,
much less given meaningful deliberation over the relevant issues, in
spite of their stupendous nature in monetary terms.
I wouldn't be surprised if the cabinet is carrying on its traditional
role inherited from the Mahathir era as largely a rubber stamp,
busybody over trivial issues such as Namawee's Negarakuku, but
oblivious to massive hemorrhage of public funds through such fiascos
as this RM6.75 billion patrol vessel contract or the RM4.6 billion
PKFZ 'Ghost Town' project.
Najib must explain
There is no doubt that Najib must bear the brunt of the present
disaster. As defence minister and leader of the project steering
committee monitoring and overseeing the progress of the project, he
is responsible for major decisions and development relating to the
contract. And he must now answer the following crucial questions:
Why wasn't the contract promptly terminated when the contractor
committed a major breach through its severe failure to deliver the
vessels?
Why was the contract price increased from RM5.35 billion to RM6.75
billion? Who authorised the increase?
Why was the penalty for late delivery amounting to no less than RM
214 million waived? Who authorised the waiver?
Why was the contractor overpaid by 48% by December 2006 - being paid
RM4.26 billion for works done valued at RM2.87 billion? Who
authorized the payment?
Why were there no payment vouchers or other supporting documents
relating to 14 progress payments amounting to RM943 million made
between December 1999 and January 2002?
Unless Najib can provide satisfactory answers to the above question,
he must resign forthwith.
Meanwhile, the Anti-Corruption Agency should waste no further time in
commencing earnest investigations into the many serious
irregularities of this project, in particular, criminal collusion
with the contractor and breach of trust by top government leaders and
officials, including those relating to the award of this contract.
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