KUALA LUMPUR, Oct 2 – Project management shortcomings in the construction of the Bakun Dam led to operator Sarawak Hidro Sdn Bhd incurring RM1.3 billion in additional costs, according to the Auditor-General’s Report 2012.

The national auditors said the decision by the government-linked corporation to extend, deviate and undertake additional works from the original plan had caused the project’s cost to increase by 45.5 per cent over initial estimate of RM2.8 billion.

“In the Audit’s opinion, the financial performance of [Sarawak Hidro] is good in that 97 per cent of the overall value of the current contract worth RM4.177 billion was spent.

“However, cost escalations of 45.5 per cent over the initial contract value are additional liabilities to the company arising from work changes, contract extensions and miscellaneous claims under the four main works packages and three additional packages,” said the Auditor-General’s report, which classified the GLC’s activity performance as “unsatisfactory”.

The biggest single contributor to the surge in cost was a RM708 million supplementary agreement signed by the Ministry of Finance in 2007 for the second Civil Works package, which auditors noted as representing 39.6 per cent of the initial project value before additional works was accounted for.

Variation orders (VO) brought on an additional 5.1 per cent to the project’s cost, tacking on an extra RM143.87 to the construction works. VO charges are incurred whenever there are any changes whatsoever from the original contract in terms of planning, specifications and quantity.

Delays and work disruptions also led to the contractor for the Electro-Mechanical package one (EM1) to file a RM130 million claim against Sarawak Hidro, representing a 28.6 per cent hike over the initial allocation for the package.

A subsequent EM2 also saw the Ministry of Finance approving RM301 million for commercial resolutions and Global Settlements, which bumped up the package’s price by over 65 per cent, according to the auditors.

The auditors also found three Related Works Projects to have increased in cost by between 33 and 49 per cent.

Work on the controversial Bakun Dam began in the 1990s but the project had been considered by the federal government as far back as the 1980s.

Current operators Sarawak Hidro was formed in the April 2000 to revive the project after it ran aground in the aftermath of the 1997 Asian Financial Crisis.

The Bakun Dam project carries an official price tag of RM7.4 billion but is expected to surpass this figure owing to cost escalations as the ones detailed above.