10 years, RM1b more: Audit lays bare Pan Borneo Sabah highway woes

A decade into the Pan Borneo Highway project in Sabah, and RM1 billion over its original contract cost, the National Audit Department has laid bare a catalogue of planning, implementation and monitoring weaknesses that contributed to delays in the massive project.

According to the 2026 Series 2 Auditor-General's Report released on the Parliament website today, only four of the project's 35 work packages, or 11.4 percent, had been completed as of March 31, while the remaining 31 packages, worth RM16.3 billion, were still under implementation.

This was despite management of the highway construction project being transferred from the Project Delivery Partner (PDP) to the Works Ministry on Sept 22, 2019.

"Nine work packages are classified as sick projects, 13 work packages are behind schedule, while nine work packages are ahead of schedule.

"Therefore, the objective of improving the connectivity network and providing safer access for road users in Sabah has yet to be fully achieved," the department said in its audit summary.

The Pan Borneo Highway construction began on April 11, 2016, covering a total stretch of 706km from Sindumin to Kota Kinabalu and Kudat; Ranau to Mile 32 Sandakan; and Mile 32 Sandakan to Tawau.

The project was initially scheduled for completion within 69 months, by Dec 31, 2021.

However, prolonged delays have pushed the total contract cost for Phase 1 from RM17.91 billion to RM18.96 billion - an increase of RM1.05 billion, or 5.9 percent.

The audit identified several weaknesses in project planning and implementation as contributing factors, including the failure to ensure project sites were ready before work began, weaknesses in implementation under the PDP, shortcomings by contractors and consultants, design changes and utility relocation.

The department also found that project monitoring through a Project Information System established by the PDP had been ineffective.

"Low utilisation of the system, incidents involving data loss and weaknesses in establishing policies governing its use have rendered overall monitoring of the Phase 1A project through the Project Information System ineffective," it said.

Variation orders

The audit also flagged multiple instances of non-compliance with laws, regulations and guidelines in the project.

Among them were work variation orders (WVOs) exceeding RM1 million that were approved by a committee whose authority was capped at RM1 million, instead of being referred to the Works Ministry Procurement Board or the Treasury secretary-general as required.

The audit found that 57 WVOs totalling RM513.99 million, involving 15 Phase 1A work packages, had been approved by a committee chaired by the Superintending Officer (SO) beyond the approval limit prescribed by the Treasury.

"Of the 57 WVOs, 11 totalling RM14.16 million were not submitted to the Works Ministry Procurement Board for approval, while 46 totalling RM499.83 million were not submitted for approval by the Treasury secretary-general," it revealed.

Among other financial irregularities, the audit found that RM6.03 million in government funds had been paid towards CIDB levies that should have been borne by contractors.

It also found irregular payments totalling RM163.64 million that exceeded the permitted limit due to delays in finalising contract documents.

Recovery measures

The audit department recommended a series of measures to the Works Ministry and Sabah Works Department to address the problems identified.

The agencies were told to ensure that measures to resolve issues involving project site preparation and compensation, utility relocation, design changes, contractor appointments and project recovery were carried out according to the prescribed timelines.

"This is to ensure that the project can be completed in accordance with the prescribed recovery plan," the department said.

On the WVO issue, it called on the ministry and state agency to ensure that all WVOs are submitted to and approved by the appropriate approving authority in accordance with Treasury guidelines.

They were also urged to review contracts that are still in force and take appropriate action to align their approval limits with Treasury requirements through valid contract amendments, subject to the agreement of the parties involved and legal review.

The department also called for project monitoring through the Project Information System to be optimised if an extension of the system's service is approved.

This, it said, was necessary to ensure that the project's objectives are achieved and that the government obtains the best value for money.

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