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ACA should explain the lack of action against abuses of power and irregularities into the purchase of 6 Offshore Patrol Vessels (OPV) where relevant documents have been destroyed and the shocking increase of 38% or RM 1.85 billion in the contract value from RM 4.9 billion to RM 6.75 billion and waiver RM 214 million in penalties for late delivery

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Speech at DAP Sg Siput Tea Party

by Lim Guan Eng

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(Sg Siput, Thursday): ACA should explain the lack of action against the abuses of power and irregularities surrounding the purchase of 6 OPVs where relevant documents have been destroyed and the shocking increase of 38% or RM 1.85 billion in the contract value from RM 4.9 billion to RM 6.75 billion and waiver from collecting RM 214 million in penalties imposed on the contractor for late delivery. There is no point in taking action on small cases of thousands of ringgit when big cases involving billions of ringgit are ignored. 

There is no such urgency from ACA to find the truth as to how the public lost so much money in getting 6 OPVs that are either still not operational or undelivered. Clearly the Prime Ministerís efforts to promote transparency, accountability and good governance by demanding that Ministries must answer for the instances of mismanagement disclosed in the Auditor-Generalís 2006 Report is mere lip service and empty promises.  

There is greater urgency in discovering the truth of this scandal following the shocking revelation by Public Accounts Committee (PAC) Chair Datuk Shahrir Abdul Samad in Malaysiakini on 26 September 2007 that certain records have been destroyed and that PAC has not been able to get hold of sufficient company reports regarding the vessels.  Datuk Shahrir said that the records destroyed involved the first two problem-ridden vessels, which were delivered to the Royal Malaysian Navy last year after a two-year delay.  

The RM 6.75 billion OPV scandal is the largest single case of misuse of funds in the 2006 Auditor-Generalís Report. PSC-NDSB had agreed to supply 6 OPVs at RM 4.9 billion, which was arranged without an open public tender. This was subsequently increased to RM 5.35 billion in September 1998. All the 6 OPVs were supposed to be delivered by April 2007 with the first delivery on March 2004. However only 2 OPVs were delivered so far and the 2 OPVs are not fully operational as the technical specifications required are still not completely performed. 

The two OPVs were only delivered in June and July 2006 respectively had 100 and 383 incomplete works and items at the point of handing over. There were 298 complaints over the operations of the vessels. This puts the life and safety of our sailors at risk if such OPVs are put out to sea when it is not performing at optimum capacity.

A penalty of 0.5% per month based on the contract value is imposed for any delay. However such penalties can not exceed RM 53.5 million, a very generous self-imposed limit by the government. The first OPV was late by 27 months and the second OPV was late by 18 months but yet both are imposed penalties of RM 53.5 million each due to the self-imposed limit.

The other four OPVs are still not delivered. The Auditor-General Report estimated that the government can claim at least RM 214 million in late penalties for the late delivery of the 2 OPVs and non-delivery of the remaining 4 OPVs. However in another remarkable and unwarranted act of charity and generosity, the Cabinet on 29.11.2006 waived the claim of penalties.

Worse, in a continuing act of generosity and charity the government increased the contract price by RM 1.4 billion in January 2007. The cost for the 6 OPVs had risen by RM 1.85 billion or 38% from the original contract price of RM 4.9 billion to RM 6.75 billion, ie to RM 5.35 billion in September 1998 and again to RM 6.75 billion in January 2007.

The Auditor-General also criticized the monitoring by the project steering committee - led by YAB Deputy Prime Minister and an executive management committee chaired by top ministry officials. Was the YAB Deputy Prime Minister being misled resulting in Cabinet also been misled? If so, severe action should be taken against the officials involved.  

The most shocking aspect about this RM 6.75 billion scandal is why the Defence Ministry pay in advance RM 4.26 billion to the contractor by 31.12.2006, even though progress of work done only amounts to RM 2.87 billion? Would not the government lose RM 1.4 billion already paid to the contractor should the contractor abscond and flee overseas?   

In summary the ACA should focus on 6 prime investigative areas in the RM 6.75 billion OPV scandal, especially the key people who gave approval.

1.        Why were there no open tender and instead the contract awarded to PSC-Naval Dockyard Sdn Bhd - a subsidiary of PSC Industries Bhd owned by Umno associate Amin Shah Omar Shah - in 1998?

2.        What is the justification for increasing the contract value by 38% or RM 1.85 billion to RM 6.75 billion when the contractor had already failed to perform?

3.        Why did the government waive claims of at least RM 214 million in late penalties for the late delivery of the 2 OPVs and non-delivery of the remaining 4 OPVs?

4.        Why no action was taken against the contractor for sub-standard work on the two OPVs delivered in June and July 2006 respectively which failed to fulfill technical specifications with over 483 incomplete works and items and 298 complaints over the operations of the vessels risking the lives and safety of our sailors?

5.        Why did the Defence Ministry pay in advance RM 4.26 billion to the contractor by 31.12.2006, even though progress of work done only amounts to RM 2.87 billion, which is RM 1.4 billion more than the contractor is entitled to claim?

6.         Who ordered the destruction of the documents as announced by Datuk Shahrir? 

BPR must investigate how RM 6.75 billion could be lost to purchase OPVs for the defence of our naval waters that would either not be delivered or not fully operational. The 2006 Auditor-Generalís Report had provided all the necessary materials that would assist BPRís investigations and clearly spelt out that there was ďno justificationĒ for the government to approve the extra RM 1.4 billion and waiving RM 214 million in penalties for late delivery that it was entitled to claim from the contractor.  

It would be unfortunate if those that expose corruption are persecuted and punished whereas those who commit such wrongdoings can prosper and flourish. Failure to take action on this massive scandal would only confirm negative public perceptions about the role of the Anti-Corruption Agency and not help to restore public confidence in Malaysiaís commitment to establish integrity, accountability and transparency as part of Malaysian culture.  

It is this failure that has caused Malaysiaís position in the 2007 Transparency International Corruption Perception Index to be at No. 43, which though an improvement from last yearís No. 44, is still far below the No. 37th position enjoyed by Malaysia when YAB Datuk Seri Abdullah Ahmad Badawi took over in 2003.                                                                                         

 

(25/10/2007)


* Lim Guan Eng, Secretary-General of DAP

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