KUALA LUMPUR, Dec 2 — The Ministry of Defence incurred losses worth RM10.2 million in the reconstruction of a navy college in Lumut, Perak, the 2012 Auditor-General’s (A-G) Report revealed today along with several other discrepancies that forced the audit department to deem the project “sick”.
An audit conducted on the project found that the original contractor had failed to complete the project within the stipulated timeframe and was eventually sacked from the job.
The ministry later contracted the project to a new company at an inflated cost of RM42.93 million from the original RM41.46 million, the report disclosed.
“The project has been categorised as sick and efforts to amend it have incurred losses amounting to RM10.2 million (19.74 per cent) that is RM8.73 million paid to the initial contractor and a RM1.47 million difference in the amount of the second contract,” read the report.
It further noted that the terms and the contract’s acquisition guidelines were not observed.
The project to upgrade the Royal Malaysian Navy College was divided into two separate packages with the first costing RM48.93 million and the second initially costing RM41.46 million.
The first package was tendered out to HS Development Sdn Bhd which despite a minor setback, completed the project four months after schedule.
The second package was initially given to Syarikat Ijhraa (M) Sdn Bhd, a class B contractor, on December 16, 2009.
It was subsequently categorised a "sick" project, forcing the ministry to appoint a savior, a company called JJM Integrated Sdn Bhd on October 3 last year.
The audit found that the first contractor, which had little experience in class A construction but which was allowed to take up the project had nevertheless in May 2009, been warned twice in 2012 due to its failure to meet deadline.
Despite the ministry's nod for extension, Ijhraa still failed to deliver.
The audit also noted that after Ijhraa's contract was terminated, Mindef only collected less than half of the RM2.07 million required by the company to pay as Completion Guarantee while it continued to pay the company RM8.73 million in 18 interim payments.
In the report's response section, the ministry said it is currently working on extracting compensation from the company.
The audit report reprimanded Mindef on the matter, saying it should have closely monitored the performances of the contractors.
The national auditors strongly urged the ministry to punish Ijhraa and claim back compensation.
Mindef also admitted that the cost management of the project was poorly dealt with its accounting was left incomplete after the first contract was terminated and replaced with a new one.
Mindef however, said it was working to finalise the cost calculation, including offset the costs from the compensation and fines it expected to get from Ihjraa.
