10 September 2007

A-G: RM1.4b for patrol vessels unjustified

The Sun

Llew-Ann Phang and B. Suresh Ram

PETALING JAYA (Sept 10, 2007): The Auditor-General (A-G) sees no justification for the government to approve an additional RM1.4 billion for the acquisition of patrol vessels (PVs) for the Royal Malaysian Navy.

The A-G’s report, tabled in Parliament on Friday (Sept 7), said RM4.26 billion, including a deposit of RM1.07 billion, had been paid to Penang Shipbuilding & Construction Sdn Bhd-Naval Dockyard Sdn Bhd (PSC-NDSB), for a package of six PVs, by last December.

By then, two of the PVs had been presented to the Defence Ministry, while the construction of the remaining four PVs was between 18.5% and 55.9% done.

The four PVs are still being constructed in Lumut, Perak, and Pulau Jerejak, Penang, which are each housing two incomplete vessels. All the PVs were supposed to be handed over in April.

PSC-NDSB was contracted to design, construct and deliver the PVs, with an integrated logistics support and commercial package programme, for the navy.

"The government has agreed to increase the contract value by RM1.4 billion – from RM5.35 billion to RM6.75 billion – through a second contract signed by Boustead Naval Shipyard Sdn Bhd (formerly PSC-NDSB) in January this year," the report said.

"In the new contract, the cost to build PV1 and PV2 is RM843 million each, while the cost to build PV3-PV6 is RM1,193 million each – an increase of RM350 million for each PV. However, the (National Audit Department) cannot determine the justification to increase the contract value by RM1.4 billion," it said.

It said it could not verify 14 payments amounting to RM943.46 million made to PSC-NDSB between December 1999 and January 2002, as payment vouchers or supporting documents were missing and could not be traced from the Defence Ministry’s records.

The report also said there were initially 100 incomplete items on PV1, KD Kedah, when it was handed over in June 2006, and 383 on PV2, KD Pahang, when it was handed over in July 2006. During the audit visit in December 2006, there were still 14 incomplete items on KD Kedah and 30 on KD Pahang.

"The use of the two PVs cannot be optimised as there are outstanding items and the equipment aboard was not fixed at the appropriate locations," it said.

It added that the contractor has also yet to reimburse the government, which footed the bill amounting to RM1.09 million for the handing over of the PVs. Under the contract, the cost should be borne by the contractor.

The report said the project should be given serious attention and recommended that the Finance and Defence Ministries form a joint monitoring committee to visit the construction site and monitor the progress of work on the remaining PVs.

It stressed the need to adhere to government guidelines and regulations to prevent losses and said that in the event of a difference in the interpretation of contract provisions, they should seek legal counsel or clarification from the Attorney-General’s Chambers.

Responding to these queries, the Defence Ministry said it made the request for the additional RM1.4 billion after taking into account the remaining funds in the contract and additional requirements for the project’s completion.

In the Report on the Treasury’s Response to the AG’s report, the ministry said if the additional amount was not provided, the price of PV1 and PV2 would amount to RM2 billion each, compared with the average price of RM800 million each for all six vessels.

No comments: