Designed to Fail!

Costly blunders? Blundering the nation's coffers?

Some shocking facts about contractors who were awarded government projects:

• They lack expertise. Incompetent.
• Too ready to make a quick buck.

Projects in the spotlight recently:

• Middle Ring Road 2: Cost - RM120m (it actually cost RM238.8mil); an extra RM70m to pay for repair work paid by the govt even though it was contractor's fault.
  
• Navy Recruit Training Centre (Pularek): Cost - RM198m; extra RM13m needed, 7,032 defects and paid by govt even though it was contractor's fault.
  
• Matrade Building: Cost - RM287m; the cost kept rising until it reached that amount. Original contract value is RM167m. The extra RM120 mil is paid by govt.
  

It may sound astonishing; even ridiculous. But it is true.

Reasons for these blunders was revealed by Second Finance Minister:

(1) Projects were awarded to contractors who do not have the expertise whatsoever.

(2) Projects given to those who do not have the financial means to complete the projects.

(3) Bumi contractors sold the project for quick bucks.

(4) Consultants' grossly incompetent.

(5) The actual builder is ultimately the sub-sub-sub-sub-sui contractor. (A $200m award to the maincon becomes $80mil when it was passed down to the ultimate builder.)

Incompetent contractors, delays, cost overruns, failed projects: Lessons learnt?

The government has put in place mechanisms to avoid delays in project completion and ensure cost effectiveness. Referring to the New Sunday Times report yesterday on cost overruns in projects due to the incompetence of contractors and consultants, Minister in the Prime Minister’s Department Datuk Seri Mohd Effendi Norwawi said the mechanisms
would ensure only competent contractors were given government jobs.

He said the government had drawn valuable lessons from case studies of failed projects, as well as the successful ones.

“We have put in place new initiatives to streamline our procurement processes and to ensure projects are delivered efficiently and cost effectively.”

These, he said, included:
• Ensuring projects are awarded to competent contractors; and,
• Installing systems to monitor projects on near real-time basis to spot any delivery problems early and resolve problems immediately.

Read more HERE

Matrade Fiasco

Samy Vellu finally relented; he confirmed that the government can't sue the directors of PISB as it is now insolvent.

To this, Brendan Periera had to say: Welcome to the world of Perangsang International Sdn Bhd (PISB), the contractors who clinched the deal to build the Matrade building.

Brendan recalls the History of the Fiasco

In 1993, the PWD called for a limited tender to build the Matrade building and estimated that it would cost RM175 million and take 125 weeks to complete.

After studying the 14 bids, PWD recommended that Ireka Construction be given the job. The company promised to complete the job in 138 weeks for RM157 million. The recommendation was forwarded to the Finance Ministry and was promptly dumped.

The ministry wanted the 14 companies to re-submit their bids. But two days after it issued that directive, the Finance Ministry surprisingly ordered PWD to negotiate directly with PISB.

Why this company was given the contract still stumps the people at PWD.

From the start, there were problems. PISB obtained the development order late and it needed three extensions, delaying the completion by 686 days. When it completed 98 per cent of the project in 1999, the PWD discovered cracks in the structure and ordered PISB to carry out repairs. The contractor refused, saying that it had carried out the project according to specifications.

PWD and the Finance Ministry — now under a new minister — obtained the services of Arup Consultants. Even after the consultants concurred with PWD’s findings on the structure of the Matrade building, PISB refused to carry out remedial work.

At this point, you have to sit back, digest what has happened and ask some elementary questions.

Question number 1: Why wasn’t PISB or its directors sued in 1999 for not doing their job competently? Why wait until now to visit the possibility of taking action?

Question number 2: Were the terms of the contract so generous that the contractor could walk away without agreeing to do remedial work?

Brendan posed this question to ask: Can the money be recovered?

According to Brendan: There is a better chance of Malaysia qualifying for the 2010 World Cup than PISB paying any compensation.

And here is why: PISB was sold off to Tajuk Modal on July 19, 2004, for RM2. PISB was renamed Tajuk Construction Sdn Bhd and the latter was wound up on Jan 18 this year. In short, PISB doesn’t exist anymore. In any case, it would have been tough to go after the directors of PISB. The contract was signed with the company and unless the directors gave any personal guarantees, they would not be liable in a personal capacity.

Some options appear available to the authorities.

One: Lodge a police report, find out if the decision by the Finance Ministry was above board and pursue any wrongdoing — no matter where it leads.

Two: Urge the Selangor Government to make good the RM95 million owed to the Federal Government. After all, before it tanked, PISB was a subsidiary of the State’s investment arm. Surely, the people at Shah Alam have a moral obligation to right this obvious wrong.

Would the government learn a lesson or two from this fiasco?

Or, will history repeat itself, ...sooner rather than later?

Matrade Finally Complete?

After 9 years, and after overspending more than $120 million over and above the original budget, the project was finally completed.

A handover ceremony was held in the building in the presence of International Trade and Industry Minister Datuk Seri Rafidah Aziz and Works Minister Datuk Seri S. Samy Vellu.

Rotol-AMS-Bumi Technologies Sdn Bhd, the contractor appointed to carry out the balance works had completed 39 days ahead of schedule. The appointment of new contractors to rectify the defects saw costs balloon from an initial RM167 million to RM287.51 million, with about RM64.8 million spent on repairs.

The building was finally completed by RotolAMSBumi Technologies Sdn Bhd and Syarikat Pembinaan Anggerik Sdn Bhd together with NSC Mekanikal Fastcoll Corporation Sdn Bhd.

Believe it? The repair works costs $64 million and the outstanding works cost $56 million? The contractor must have made a fortune! Anyway, it was better than the previous contractor who had wallop $200 million and abandoned the project. The hardest to swallow is that the previous contractor, Perangsang International Sdn Bhd (PISB), is owned by the Selangor Govt.

PISB was a subsidiary company of Kumpulan Hartanah Selangor Bhd (KHSB), an investment company of the Selangor government.


The Works Ministry plans to bring former board members of Perangsang International Sdn Bhd (PISB) to court for the nine-year delay in completing the Matrade building.

Samy Vellu said he had personally investigated the company and its directors and all evidence gathered would be produced in the event of a court hearing.

Works Minister Datuk Seri S. Samy Vellu said although the company was now defunct, the ministry would not remain silent. “Although the company no longer exists, we will go to the court and take action against the directors,” Samy Vellu said. “They cannot just run away and not take responsibility,” he said, adding that construction costs went up by 70% due to the delay.

Work on the building in Jalan Duta began in 1994 and was targeted for completion in 1997. Due to several delays and the appointment of a new contractor, the original cost of RM167mil ballooned to RM287.5mil, with RM64.8mil spent on repairs.

The original contract to PISB was terminated last March and the company ordered to pay late delivery charges of RM41,750 a day for 2,276 days.

In 2004, the shares of PISB were sold to Tajuk Modal Sdn Bhd. In July, K. Hartanah announced that the group was selling Perangsang to a company called Tajuk Modal Sdn Bhd for RM2. Perangsang had net liabilities of RM7.6mil at the end of last year.

The directors of Tajuk Modal are Chong Sang and Yap Fook Sang.

K. Hartanah said it was selling Perangsang as it was in line with the group's scheme of reconstruction, which is to divest non-core businesses, and to streamline, regroup and concentrate on its property development activities.

International Trade and Industry Minister Datuk Seri Rafidah Aziz expressed regret that her ministry had to bear heavy losses as a result of the delay.

"Matrade, apart from having to rent elsewhere, also lost out in terms of opportunity cost. Total rental earnings forgone from the building’s exhibition space was an estimated RM120mil, the equivalent of building another 24-storey building," she added.

As a client, Rafidah said, she was disappointed and wanted the Works Ministry to not only take action against the former PISB directors but also look into the probability of any irregularities during the tender process. While waiting for its new building, Matrade rented premises at Wisma Sime Darby and also a small exhibition hall at Wisma PKNS in Jalan Raja Laut, Kuala Lumpur.

Matrade staff members are expected to move into the new office beginning in July.

Read the earlier article: Matrade RM167 Million Damages

Matrade Finally Completed?

After 9 years, and after overspending more than $120 million over and above the original budget, the project was finally completed.

Rotol-AMS-Bumi Technologies Sdn Bhd, the contractor appointed to carry out the balance works had completed 39 days ahead of schedule. The appointment of new contractors to rectify the defects saw costs balloon from an initial RM167 million to RM287.51 million, with about RM64.8 million spent on repairs.

The building was finally completed by RotolAMSBumi Technologies Sdn Bhd and Syarikat Pembinaan Anggerik Sdn Bhd together with NSC Mekanikal Fastcoll Corporation Sdn Bhd.

Believe it? The repair works costs $64 million and the outstanding works cost $56 million? The contractor must have made a fortune! Anyway, it was better than the previous contractor who had wallop $200 million and abandoned the project. The hardest to swallow is that the previous contractor, Perangsang International Sdn Bhd (PISB), is owned by the Selangor Govt.

PISB was a subsidiary company of Kumpulan Hartanah Selangor Bhd (KHSB), an investment company of the Selangor government.

The Works Ministry plans to bring former board members of Perangsang International Sdn Bhd (PISB) to court.

Samy Vellu said he had personally investigated the company and its directors and all evidence gathered would be produced in the event of a court hearing.

“They cannot just run away and not take responsibility,” Samy said.

Are they running away? No! They are still around and those "culprits" are still managing Selangor Incorporated under the leadership of MB Khir Toyo.

Samy, will you take Khir Toyo to court? He's the chairman of Kumpulan Hartanah Selangor Bhd (KHSB), an investment company of the Selangor government of which PISB was a subsidiary company.

Even then, PISB may still win the case in court, maybe, by technicalities. The formalities of termination of the contract may be the key.

Read more here

Matrade RM167 Million Damages

"Even if it has been reduced to a one-sen company, we will go after them. We will go after the parent body and even its subsidiaries. They cannot just run away by reducing the paid-up Capital."

"We will show them what we can do."

- Samy Vellu

Samy Vellu said the government will go all out to pinned-down Perangsang International Sdn Bhd, a subsidiary company of Selangor government Incorporated, and the turnkey contractor for the Matrade Building.

Samy wants to make Perangsang pay RM167 million compensatory damages comprising $97.02 million for non-performance and $72.9 million for remedial works.

Boleh ka? How?

It's a $2 paid-up company! Didn't Samy understand what is $2?

They never reduced their paid-up capital, Samy! It was and had been a $2 company since the day the government decided to award Perangsang International the project.

How is it that the government could award a $167 million contract to a $2 company? Samy should answer!

The legal advisors in PWD should perform their duties by advising their boss about contract law and damage claims.

PWD: "You can Manage MATRADE Project NOW"

MATRADEM PROJECT

PWD DIRECTED TO COMPLETE MATRADE BUILDING WITHIN 21 MONTHS.

On problems affecting the Malaysian External Trade and development Authority building in Jalan Duta, Samy Vellu said the contract was not awarded by the PWD. The contract had been given to Syarikat Perangsang International Sdn Bhd and it had been refusing to allow PWD officials into the project since the first day.

Now, the Public Accounts Committee (PAC) has directed PWD to complete and handover the building within 21 months from the date of receiving the funds from the Government. Why? It took 10 years for the Ministry of Finance to get the project to its current state of affairs and PWD is only given 21 months to finished up the mess? I believe, it must had been a promised made by the Director-General of PWD Tan Sri Zaini who had requested RM32 million from the Treasury for PWD to complete the project. Is 21 months & RM32 million sufficient to get the project completed? I hope it does; if not, Zaini will have to burn his ass to answer for it.

During the meeting attended by PAC, the Board of Architects and the PWD represented by Tan Sri Zaini, PWD promised to take legal action against the errant contractor and recover some of the losses. What???? PWD to take legal action? Samy Vellu said the contract is not awarded by PWD; how then can they take legal action against the errant contractor? Is Samy Vellu and Zaini talking about the same subject and same contract? According to Samy, Matrade was not awarded by PWD; then how can PWD take legal contractual action? Are our Ministers and D-G going NUTs? or, are they misleading us??? Please clarify!!!!!! My God, Please sent Tan Sri Zaini back to law school!!!!!