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Estimates based on government spending indicate that - if one assumes overpayment on contracts is just 20% - the losses could come up to as much as RM28bil a year, according to a probe by national daily, The Star. Malaysian Mirror
Water tunnels, IT contracts and buying computers – billions of ringgit are being over-spent on these and other things every year, denoting poor financial management at every level of government. Estimates based on government spending indicate that - if one assumes overpayment on contracts is just 20% - the losses could come up to as much as RM28bil a year, according to a probe by national daily, The Star.  Second Finance Minister Ahmad Husni Hanadzlah acknowledged that the amount is a lot but could not give an exact figure.
The paper’s investigation team found, among others: ● Hundreds of millions of ringgit in overcharging are taking place for ICT, which is a multi-billion-ringgit industry. Contract prices can sometimes be more than 50% than if the deals were done on a tender basis. ● Project finance on favourable terms from foreign countries – the so-called soft loans – can result in contractors being restricted largely to those from the country providing financing, resulting in considerably higher costs. ● Open tenders, done properly and with appropriate evaluation, are one of the most effective ways of reducing the costs to government. At least two state governments – Johor and Penang - see great benefits in open tenders. ● Malaysia falls short in comparison with some other countries in terms of calling for and disclosure of open tenders and their details. There is no centralised system. How Johor does it.... Johor Mentri Besar Abdul Ghani Othman said the issue of non-transparency does not arise in the state when awarding public projects or tenders to successful bidders or contractors as it is done via an open tender. He said the guidelines and procedures are based on directives stated circulars by the Treasury Department (circular No: 5, 2007) and the Works Department (Circular No: 4, 1993). He said the tender notice for projects would be advertised in major newspapers and that contractors had 21 days to tender their applications to the Works Department.  Ghani said the Works Department would also submit the estimated cost of the projects which would be used as a yardstick for awarding the contracts.
All applications would be opened and verified by two members appointed by the state Works Department director and applications (only the bidding prices and not the name of the contractors) would be posted on the notice board for public viewing. “The open-tender system practised by us is to get projects with the most competitive cost. However, it does not mean that we have to offer the tender to the lowest bidder,’’ he told StarProbe. Ghani said awarding of a tender was based on comparing one tender against another and also the estimated cost of the project submitted by the Works Department. Others factors taken into account include good track record, financial capability, technical ability and time taken to complete the project. Ghani said Johor was strict when awarding projects to contractors to ensure that there would be no “short cuts” or “cutting corners” or else they would deliver inferior projects. He said it would be better to have a small number of competent and reliable contractors than to have many who were not able to perform satisfactorily. ...and Penang too shows the way Penang chief minister Lim Guan Eng said the cost of a state government project can differ by over 50% in an open tender. Citing a recent state government project in Seberang Prai, he said the difference between the highest and lowest bid was about RM100mil. “The highest bid was over RM160mil, while the lowest and winning bid was RM75mil. If the project was not openly tendered, the state would have had to spend about RM100mil more for the same project,” Lim told the paper. “The lack of visibility in the tendering process is a key reason why previous state government projects were expensive. Now that we have adopted an open bidding process, a substantial amount of money has been saved,” he said.  Guan Eng said the state government would usually seek advice from an in-house consultant on the cost of a project.
Under the current state government’s transparency system, details of these jobs and their costs are posted on the state government website, www.penang.gov.my. Meanwhile, the Auditor-General’s Report for 2008, which was tabled in Parliament on Oct 19, reveals that weaknesses highlighted in previous years’ reports continue to be a thorn in the side of proper financial management in the government. Delays in project completion seem to be a perennial problem and the lack of oversight by various ministries and departments in the procurement of goods and services continue to cost the Government hundreds of millions of ringgit. Report shows non-compliance of regulations Auditor-General Ambrin Buang said in the preface to the 2008 report that the audit revealed the non-compliance of various financial regulations in the management of Federal Government finances. Among projects and programmes named as showing weaknesses of government spending were: - Kolej Kemahiran Tinggi Mara Balik Pulau in Penang paid RM84,640 for two laptops or RM42,320 per laptop and spent RM2.08mil on computer software that was not used, among other things. - Over RM15mil was spent by the Perak government on buying cars and maintaining them over the past four years and still not being able to manage its vehicles properly. - The Finance Ministry’s public infrastructure maintenance programme, basic infrastructure programme and parliamentary constituency rural development projects involving RM4.59bil for 92,687 projects from 2005 to November 2008 are not satisfactorily implemented. There were delays in project completion, work not done in accordance with the original scope of works, increased project costs due to the inclusion of procurement of equipment and assets in the scope of works, un-utilised facilities upon completion, improper payments made for works not done and shortage of officers in project supervision. -The Agriculture and Agro-based Industry Ministry’s Tanjung Manis integrated deep-sea fishing port in Mukah, Sarawak, built at a cost of RM313.62mil, did not achieve its “main objective” because of project delay, unsatisfactory work quality and non-completion or non-construction of certain basic facilities. - The Rural and Regional Development Ministry’s Infodesa programme was also singled out for mention due not only to the perennial problem of project delays but also to the delay in operating the completed Infodesa Centres. A total of RM68.38mil had been spent on the programme as at Dec 31, 2008, but 156 completed centres were still not registered in the name of the Federal Land Commissioner. The programme has been ongoing since the Eighth Malaysia Plan (2001 to 2005). - The Works Ministry’s poor planning of the Federal Government administrative centre in Muadzam Shah, Kedah resulted in the complex not occupied earlier. “As at Dec 31, 2008, 95% of the Federal Government administrative centre was completed and a total of RM243.53mil was spent. -Weaknesses were also noted in the Science, Technology and Innovation Ministry’s human capital development programme where targets of schemes were not fully achieved, payments were made to unqualified recipients as well as inefficient monitoring and evaluation of the programme. The programme cost the Government RM153.73mil from 2006 to 2008.
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