Abuse of powers and procurement procedures as well as financial mismanagement/irregularities, committed by a senior official of the Treasury


Media Conference Statement
at the Prime Minister’s office after handing over documents titled “ Keputusan Perolehan Yang Dibuat Secara Tidak Teratur / Tidak Mengikut Prinsip Dan Tidak Mematuhi Peraturan” dan “Kepincangan Pengurusan Kewangan Negara” to the Prime Minister (through Datuk Mohd Johari Bin Baharum, First Political Secretary  to the Prime Minister)
by Kerk Kim Hock

(Putra Jaya, Tuesday): I have recently received by post two sets of documents, which contain allegations of abuse of powers and procurement procedures as well as financial mismanagement/irregularities, committed by a senior official of the Treasury. 

The first set of documents titled “ Keputusan Perolehan Yang Dibuat Secara Tidak Teratur/ Tidak Mengikut Prinsip Dan Tidak Mematuhi Peraturan” contain 17 pages of information and allegations about the abuses of powers / procedures by the official, in his present Treasury position as well as while he was serving as a senior official in a different Department.


The second set of documents, which is a 5 page report titled “ Kepincangan Pengurusan Kewangan Negara” alleged that the same official has committed financial mismanagement/irregularities.


After having gone through the documents, I am most concerned about the seriousness and implications of the allegations in terms of how Malaysia’s public funds can be mismanaged and policies can be wrongly decided or  prioritized due to non-compliance with established principles, procedures and even facts manipulation, if the allegations are true.


As the Prime Minister, Datuk Seri Dr Mahathir Mohamad, has often spoken about the need and urgency to combat against abuses of powers and corruption, I have decided to hand over the documents to him and I hope that he will carry out a thorough investigation into the allegations contained in the two sets of documents.



I. Non-functioning of Check and Balance Committees


The documents reveled that YAB Prime Minister has set up certain mechanisms to be abided by the Finance Ministry, such as the establishment of various committees for the purposes of carrying out objective evaluations and serving as check and balance mechanisms.


The first set of documents alleged that of late, government procurement decisions were made in violation of the established procurement principles which are:


  1. Open competition 
  2. Best interest and values
  3. Processed in a transparent manner 

  4. Processed in a fair and just manner

  5. Based on public accountability


It was alleged that four important committees, which were set up by the Prime Minister as check and balance mechanisms, no longer functioned due to the official’s directive. These committees are:


  1. Minister Tender Committee (Jawantankuasa Tender Menteri) and Deputy Tender Committee (Jawatankuasa Tender Timbalan Menteri)

  2. Selection and Appointment of Consultants Committee  (Jawantankuasa Pemilihan dan Perlantikan Perunding) 

  3. Procurement Special Committee (Jawantankuasa Khas Perolehan)


II. Examples of cases believed to be made without compliance of the procurement principles


Some allegations made in the two sets of documents include:


1. Appointment of Perunding Pengurusan Projek (PMC)


It was alleged that the appointment of PMC was made without very clear reasons. For example, UMI –Ros Project Management Sdn Bhd which has only 15 professional, 4 management and 17 staff personnel was appointed to manage projects worth RM 2000 million at any one time.


QSC Project Sdn Bhd, which has 5 professional, 6 management and 7 staff personnel, was appointed to mange projects worth RM 1000 million. QSC was also picked to carry out Audit and Assessment for projects like Hospital Selayang, Pusat Teknologi Kulim, Institut Latihan Perindustrian Perlis, Perumahan Rakyat di Perlis, Perumahan Rakyat di Sabah, Perumahan Rakyat di Sarawak.etc


The report also alleged that many projects were implemented through direct negotiations using the Design and Build concept and with the services of the PMC. However, this has resulted in great waste of government funds because:

firstly, JKR faces shortage of works and its professional staff become idle, and

secondly, the project cost fro using the Design and Build concept is higher



2. Building of Houses for Teachers Phase II


For the above project, four contractors were awarded contracts to build 2000 units each of houses for the teachers:


  1. Muhibah Engineering (M) Sdn Bhd 
  2. Arena Proaktif Sdn Bhd
  3. ACP Industries Sdn Bhd 
  4. Nisa Consolidated Sdn Bhd 


It was alleged that the above awards were made the above  contractors on the ground that other contractors were less capable and their performance unsatisfactory. No prior consultation was carried out with the Education Ministry to find out the problems faced by these contractors.


Nevertheless, all four contractors were found to face problems in carrying out their projects.



3. School Computerisation and Physical Infrastructure Project


In 2000, five contractors were approved to build a total of 2400 schools in the country. The contractors were:


  1. Pintar Technologi- Burmiasa J/V Sdn Bhd
  2. Perkhidmatan Rundingan Industri Malaysia Sdn Bhd
  3. CS Tech Venture Sdn Bhd
  4. Bellgrand Sdn Bhd
  5. Time Communication ( M )  Sdn Bhd
  6. Telekom Smart School Sdn Bhd


The projects could not be completed as targeted because the contractors faced various problems like limited revolving capital and being awarded contract values which were too high. Besides, they were not contractors who were registered with the Construction Industry Development Board (CIDB) and Pusat Khidmat Kontraktor (PKK) and hence they should not have been awarded contracts to build schools through the Design and Build concept.



4. Deferred Payment Scheme


Although it is a common knowledge that the project cost for deferred payment scheme is too high, the Finance Ministry still persists with such practice. Most of the companies appointed were not registered with CIDB or PKK.



5. Appointment of Unregistered Contractors


Among the projects awarded by the Ministry through direct negotiations, some companies appointed were not registered with CIDB and this is in violation of the CIDB Act 1994 (Act 520).


It was also alleged that some companies were not registered with PKK. The power to grant exemption from being registered with CIDB is vested in the Works Minister, and not the Finance Ministry. The power to grant exemption for non-registration with PKK is vested in the Entrepreneur Development Minister, and not the Finance Ministry. 



6. Appointment of Contractors for School Building Project


JKR is responsible for calling for limited tender on the building of schools. It is also responsible for making recommendations to the Finance Ministry names of contractors who should be appointed.


However, the Finance Ministry has appointed contractors who did not take part in the tender exercise. Such practice has breached the procurement principle and is unfair to the contractors who have spent time and money participating in the tender exercise.



7. Awarding of Contracts through Direct Negotiations


Although eh former Financial Minister had decided in 2000 that all development projects must be implemented through open tender and that direct negotiations were no longer allowed, the Finance Ministry is still active in direct negotiations. In fact, direct negotiations should be an exception rather than a rule, but the reality is the reverse.



8. Design and Build Concept Projects


It was alleged that the implementation of Design and Build and Turnkey projects on a rampant basis and the appointment of contractors through direct negotiations have resulted in increasing project cost. School projects built in the conventional way cost less than RM 70,000 per classroom but the Design and Build concept has escalated the building cost to go up by as high as 100 %. This is because many government agencies have taken cue from the over zealousness of the Finance Ministry to implement projects through Design and Build Concepts and have adopted similar approach and implemented their projects in a” posh “ manner without referring to the Standard and Cost Committee as required in the Pekeliling Am Bil 2 Tahun 1995.



9. Early Closing of Account for Financial Year 2002


On 25.1.2003, I had issued a press statement (see attachment) to highlight the plight faced by government suppliers and contractors. The suppliers and contractors had complained that the Melaka Federal Accountant Department was not able to make payment to them according to the usual time frame of less than 10 days upon their payment vouchers being submitted to the Department.


Upon checking, I was informed that the delay problem was not confined to Melaka only and in fact, it was a national problem and the Treasury caused the delay. I was never given any satisfactory answer or explanation but what is contained in the documents received has probably revealed the answer that I was seeking.


It was alleged that the Treasury had issued a memorandum to all federal agencies that their accounts for financial year 2002 must be closed by 8 January 2003, and not the usual deadline of 15, January.


It was alleged that such directive to bring forward the closing date was motivated by the need to ensure that the accounts would not show excess expenditures. However, such directive caused tremendous plight to the contractors and suppliers.


Subsequently, the problem was rectified and the agencies were directed to make the necessary payment .The Federal Accountant Department was asked to create a Suspend Account.


 Such action in creating a Suspend Account (using current national revenue) raises the question of legality as the Federal Constitution stipulates that all government revenues must be deposited into the Consolidated Account (Akaun Kumpulan Wang Di Satukan) and all expenses under such an account should have been first approved by the Parliament.



III. Other Allegations


The two sets of documents contain more allegations substantiated by concrete and specific details. Among other allegations involved:


  1. the application by the Defence Ministry to replace the helicopter WASP TLDM where it was alleged that the recommendation of the Procurement Management Division was overruled without valid reasons
  2. awarding of contract for Total Healthcare Information System where it was alleged that views of the Health Ministry were not given due consideration
  3. recommending the delaying of some projects in favour of certain  projects which have no allocation or ceiling


Both sets of documents were undated but contain detailed description of the alleged abuses and irregularities. It appears that the first set was written some time ago . The second set, however, was written recently as it has described issues and actions which have happened recently.



IV. “ Amanah, Bersih dan Cekap” Slogan 


The Prime Minister has recently spoken about corruption being poison. Financial mismanagement/irregularities and abuses of powers/procedures are equally poisonous too.


I hope that the Prime Minister who began his Prime Ministership 22 years ago with the slogan “ Amanah, Cekap dan Bersih” will pay his personal attention to the allegations contained in the two sets of documents submitted to him and direct a high level and urgent investigations into the allegations.



* Kerk Kim Hock, DAP Secretary General & MP for Kota Melaka