PETALING JAYA: The federal and state governments are losing billions of ringgit every year through over-priced contracts for things ranging from huge water tunnel projects to the outsourcing of information technology services.
Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah has acknowledged the amount that is lost is “a lot” but could not give an exact figure.
He said the government needed to curb wasteful spending by having competitive bidding for tenders in order to get more bang for its ringgit.
Precise figures are difficult to come by where government spending is concerned, but conservatively developing countries such as Malaysia would have to spend between 10% and 20% of annual gross domestic product (GDP or the sum of goods and services produced) on government procurement.
That would mean between RM70bil and RM140bil was spent on large infrastructure projects through to the procurement of supplies and outsourced services last year based on a GDP at current prices of around RM700bil.
Even if the overpayment is just 20%, the amount that the government loses can come up to between RM14bil and RM28bil a year. It could be much more than that if the overpayment is higher – as it often is.
According to the Auditor-Gene-ral’s report for 2007 and 2008, delays in the completion of projects were one of the main factors for the cost overruns. The reports also highlighted weaknesses in the procurement of various items ranging from vehicles to furniture for various government bodies and initiatives.
The general view is that if the jobs were contracted out through an open tender, instead of the oft-abused and much maligned direct negotiation system, there can be much savings.
According to estimates by two sources, costs could be as much as 50% lower if these jobs were tendered out through a by-the-book public tender.
On the other hand, some argue that government contracts were awarded at higher costs due to several reasons, including more rigorous safety specifications of the Public Works Department or the failure to review market prices especially when the costs went down.
Even with the higher specifications, a number of projects have been shown to be lacking in quality or safety aspects over the years. In recent times, this would include the infamous Matrade building, which was supposed to be completed in 1997 but was only ready in 2006 and which eventually cost RM287.5mil against an initial estimate of RM167mil, after taking into account a further RM64.8mil for repairs.
Other instances of shoddy workmanship include the then brand-new RM270mil Jalan Duta court complex’s cafeteria being flooded after a pipe burst in May 2007 while late last year, the Putrajaya Corp building sprang leaks on the roof during a high profile business meeting.
The list of projects also includes the recently completed RM300mil Stadium Sultan Mizan Zainal Abidin in Kuala Terengganu, the roof of which collapsed in early June and the overall damage estimated at RM35mil.
Another reason for the higher costs is that small or Class F contractors, who are often inefficient and lack economies of scale, bill the federal and state governments higher.
According to a source, the job might be the only substantial one they have for the year.
As the public outcry gets louder over the billions of ringgit that have been lost in projects that make no business or economic sense, the government initiated key result areas (KRAs) and key performance indicators (KPIs), where ministries not only have to meet their budgets but also be required to produce results for the funding.
Husni said that since March 2008, all big government projects – except military or security contracts – have been awarded through the open-tender system. StarProbe understands that there is a threshold for open tenders, which starts at RM500,000.
However, even public tenders risked being abused as evidenced by the tender for Tourism Ministry’s pavilion for the 2010 World Expo in Shanghai.
Venturepharm Asia Sdn Bhd, which was awarded the RM19.99mil project, is mired in allegations that it was given the job despite its bid not being the lowest nor it having the expertise but because of political connections.
In addition to the contract, it was also involved in another multi-million ringgit project from the Scien-ce, Technology and Innovation Ministry to develop poultry feed known as biofeed.
If all the projects worth at least RM500,000 were to put through open tender, then questions must be raised over the Pahang Selangor Raw Water Tunnel project, which was awarded earlier this year.
Apparently, the government had “pre-qualified” three consortia for the project, with the initial phase costing RM1.3bil to be built by the Shimizu-led consortium.
The project was awarded via a restricted tender to a consortium led by Japan’s Shimizu Corp and Nishimatsu Construction Co Ltd, which own 30% each in the project. IJM Corp Bhd and UEM Builders Bhd equally share the balance stake.
The entire water transfer project would cost over RM8bil, of which about half would be financed with a cheap loan to the government from the Japan Bank for Interna-tional Cooperation.
Industry sources allege that because of the Japanese soft loan, the pre-qualification shut out others who were quite capable of undertaking the project, leaving the field to Japanese companies. – The Star Online
