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Delay caused by Umno-linked contractor cost Mindef millions
Published:  Nov 24, 2015 4:51 PM
Updated: 9:40 AM

AUDIT REPORT An Umno-linked company's 'very slow performance' in building the National Defence Education Centre (Puspahanas) has caused millions in losses to the government.

According to the third series of the Auditor-General's Report 2014, the project was supposed to be completed by Oct 23 last year.

When auditors visited the site in Precinct 1, Putrajaya 282 days later on July 29 this year however, the project was only 89.3 percent completed.

In the meantime, the Ministry of Defence's Health Services Department (BPK) that was supposed to move into Puspahanas after its completion, had to extend its rental of office space it currently occupies.

“The cost of renting office space for BPK is RM95,164.75 per month. The rental contract for BPK's office space has been renewed on Jan 1, 2014 and expires on Dec 31, 2016.

“As a result of the delays in the project that was supposed to be completed in October 2014, the ministry has to bear the rental cost of RM2.47 million,” the report said.

The ministry in response to the audit findings conceded that the delays had forced the extension of the lease of office space, leading to losses.

It said it is taking proactive action to ensure that the project is completed by Feb 29, 2016 to avoid further losses.

Direct negotiation

According to the auditor-general's report, the cabinet had agreed in principle in February 1997 that Awan Megah Sdn Bhd (AMSB) was to build the RM99.37 million project.

The company had been appointed through direct negotiation, the report said.

It is owned by the Selangor Umno leader Raja Ropiah Raja Abdullah, according to Companies Commission documents dated July 2012.

The audit report said the project is paid through a land-swap of 223.33 acres of land in Templer Park, Selangor, but was construction could not proceed because the original site of the project overlapped with the construction of the Kuala Lumpur – Kuala Selangor Expressway (Latar).

The cabinet subsequently agreed to relocate Puspahanas to Putrajaya in a January 2007, and the site of the project was obtained in January in the following year.

The Valuation and Property Services Department had valued the Templer Park land to be worth RM100 million in 1995, but the auditor-general's report said AMSB had appealed for it to be reduced to RM72.50 million.

This was approved by the privatisation committee in August 2001, the report said.

“The difference of RM26.87 million, which is the difference between the land value and the project cost, is borne by the government,” the report said.

However, the land was revalued again for a supplementary agreement in June 2003, and the value of the land was raised to RM87.55 million.

The increase by RM15.05 million was supposed to be paid in cash or in kind by AMSB to the government including in the form of furniture, IT equipment, and others, but to date this has yet to be done, the report said.

Rusted brackets

The audit also found the quality of the construction to be deficient, including exposed steel reinforcement bars in the building's structure , and rusted brackets of holding pipes in place.

The Ministry of Defence responded that an investigation would be conducted on repayment procedures. It would also ensure AMSB has performed remedial action on deficient construction.

It said it is considering referring the project to the Sick Projects Committee (JKPS), but the auditors fired back that this should have been done much earlier on.

“In the auditor's opinion, the work performance of the contractor is unsatisfactory. This project should have been referred to the JKPS during the early onset of the delays.

“The Ministry should study the rehabilitation plan prepared by the contractor to ensure that it can be completed,” the report said.

It added that the ministry has failed to form monitoring teams early on, causing delays in the project's completion.

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