12 September 2007

YAB Datuk Seri Najib Tun Razak,

Timbalan Perdana Menteri/Menteri Pertahanan Malaysia,

Kementerian Pertahanan Malaysia

Jalan Padang Tembak,

50634 Kuala Lumpur.                                                          DENGAN TANGAN

Yang Amat Berhormat,

Royal Commission of Inquiry to determine whether Cabinet was misled into making a foolish decision to approve the increase by 38% or RM 1.85 billion in the contract value of the 6 Offshore Patrol Vessels (OPV) from RM 4.9 billion to RM 6.75 billion and waive RM 214 million in penalties for late delivery

DAP proposes a Royal Commission of Inquiry to determine whether Cabinet was misled into making a foolish decision to approve the increase by 38% or RM 1.85 billion in the contract value of the 6 Offshore Patrol Vessels (OPV) from RM 4.9 billion to RM 6.75 Billion and waive RM 214 million in penalties for late delivery. 

YAB Prime Minister Datuk Seri Abdullah Ahmad Badawi has today directed all Cabinet ministers to go through the Auditor-General’s report in detail and to fully explain anything that is questionable. YAB Deputy Prime Minister appears to promote transparency, accountability and good governance by demanding that Ministries must answer for the instances of mismanagement disclosed in the Auditor-General’s 2006 Report released in Parliament last week.  

DAP hopes that YAB can show leadership by example and take his own advice that Ministries must answer fund mismanagement and misuse disclosed in the Auditor-General’s 2006 Report by explaining the RM 6.75 billion scandal of 6 Offshore Patrol Vessels(OPV) that has either not been delivered or not operational.  

The RM 6.75 billion OPV scandal is the largest single case of misuse of funds in the 2006 Auditor-General’s 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 nopn-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 and an executive management committee chaired by top ministry officials. Was YAB misled resulting in Cabinet also been misled? If so, severe action should be taken against the officials involved.

The public is asking why Cabinet approved the increase in the contract price twice from RM 4.9 billion to RM 6.75 billion or 38 % even though the OPVs were either not delivered or not operational. Further why did Cabinet surrender and waived the government’s claim for late penalties of RM 214 million. More importantly why is the government continuing to throw money to the contractor even though they have failed to perform and deliver on their contracts.

The most shocking aspect about this RM 6.75 billion scandal is 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. Would not the government lose RM 1.4 billion should the contractor abscond? Such behaviour is reckless, imprudent and irresponsible.  

Clearly Cabinet is not only wrong to continue to throw good money after bad but also foolish in doing so. Despite the allegations by former Prime Minister Tun Dr Mahathir Mohamad of half-past six Ministers in Cabinet, YAB should prove Mahathir wrong by giving a full explanation or admitting that Cabinet was misled into making a wrong decision that is likely to cost Malaysians RM 6.75 billion in losses.  

Public interest requires a Royal Commission of Inquiry as to 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. 

Yours faithfully,

LIM GUAN ENG

SECRETARY-GENERAL

(12/9/2007)