The Public Accounts Committee (PAC) has called for a standard compensation mechanism to be established, triggered by the controversy surrounding a whopping amount of compensation demanded by the aborted half-bridge project's contractor.

"This consistent standard in relation to compensation can be inserted in future contracts between the government and contractors," said PAC head Shahrir Abdul Samad after chairing a four-hour committee's meeting in Parliament yesterday.

The PAC had earlier asked the Auditor-General's (AG) Department to look into precedents in relation to compensations awarded to contractors of government projects. The move was to ascertain whether the compensation demanded by the half-bridge's contractor is justifiable.

"The AG's Department has studied three previous cases relating to payment of compensation but found there was no consistent formula in dealing with the amount of compensation to be paid out," said Shahrir, who is also the Johor Baru MP.

The three cases were all over the building of car parks in government hospitals.

Elaborating, he said the common yardstick used in determining previous compensations were the cost that had been spent for the project, and the losses suffered by the contractor as a result of scrapping the project.

Shahrir said the AG's Department was also requested to initiate discussions with the Finance Ministry and its Economic Planning Unit to set up the standard compensation mechanism.

The half-bridge's contractor, Gerbang Perdana Sdn Bhd, had asked for a RM360 million in compensation claims after the government abruptly decided to scrap the controversial project. The contractor initially demanded RM100 million.

Matrade's audited report

Many had expressed outrage over the whopping amount - including Works Minister S Samy Vellu - and questioned its justification but Gerbang Perdana had since defended its rights to the RM360 million compensation.

On this, Shahrir said: "We must have a fixed principle (standard mechanism) first, only then can we determine whether the amount is justifiable or not."

Meanwhile, the PAC has received a management audit report from the AG's Department into the construction of the Matrade building - which was completed recently after a nine-year delay and during which its construction cost went up by 70 percent.

The PAC will study the report and discuss it at its next meeting on Aug 10, said Shahrir.

Work on the building started in 1994 with completion scheduled in 1997, but the project suffered several delays and led to the appointment of a new contractor. The original cost of RM167 million shot up to RM287 million.

Why no action?

On another matter, the PAC registered disappointment with the government's inaction in dealing with the problematic construction of six high-tech offshore patrol vessels (OPVs) for the Royal Malaysian Navy.

The RM5.35 billion project was awarded to PSC Naval Dockyard Sdn Bhd - a subsidiary of PSC Industries Bhd owned by Amin Shah Omar Shah - in 1998. However the delivery of the vessels was long overdue.

"The PAC is quite disappointed because after a year since we expressed our concern, Mindef (Defence Ministry) has not made any decision whether to continue to build all six vessels or just stop at the two vessels (which are almost completed)," he told reporters.

He reminded the government that if there is no swift decision made on the OPVs controversy, it may lead to the government being drawn into the question of compensation with the contractor in future.

The PAC had stated that RM120 million would be needed to salvage the first two OPV vessels, and that the government also needed to pump in at least RM80 million to pay off local vendors, suppliers and contractors.