Cynic $360 Million Claim

Gerbang Perdana’s claim balloons to RM360mil

The controversial RM100mil compensation sought by Gerbang Perdana Selatan Bersepadu Sdn Bhd for the cancellation of the Johor half-bridge project has shot up to RM360mil.

Samy Vellu said the contractor “has asked for all sorts of compensations” which the ministry could not entertain. “I have directed Public Works Department director-general Datuk Dr Wahid Omar to conduct an investigation into the claims,” Samy Vellu said.

“Everything will be done like an Anti-Corruption Agency probe. I have instructed Dr Wahid not to be afraid of anybody and do what he thinks is right, and to report only to me.”

He said Gerbang Perdana had been given until July 11 to provide all the documents to justify their claims. Gerbang Perdana had been given a RM470mil highway project in return.

Samy Vellu said it was “much less than what they asked for”. “I can't tell the amount. What we have seen from documents, payments made, cheques and personalities (involved), everything has been checked and that’s how we know the quantum. It is not RM360mil.”

Samy Vellu said that if Gerbang Perdana failed to produce all the documents by the deadline, the ministry would submit its proposed quantum to the Prime Minister and Cabinet for approval. “If they fail to submit all the documents, we will decide that they will not get any compensation or just a little.”

$360 million dollar claim for loss and expense? Original contract value is $740 million? Wow, about 50% of contract sum? Kaya lah!

Interestingly, Samy said: It is not so much! What does that mean? Is he saying: It should be slightly less than that, maybe, $340 or $300 million?

One for you and one for me.

Kautim Management. BTW, is Khairy and ECM Libra engaged to negotiate on behalf of Gerbang?

Govt says no more Design-Built. True or False?

The Pak Lah govt had promise that new projects would be by open tender.

But we are seeing that most of the projects are still Design-Built Turnkey contracts being awarded and many under negotiations.

Isn't it Cakap Tak Boleh Serupa Bikin?

Works Minister Samy Vellu announced yesterday that Realis Sdn Bhd had been appointed to build the single-carriageway road spanning 6.9km from Senawang-Putus in Negri Sembilan.

There are currently many projects under negotiation on Design-Built.

Pay to Contractors, Got Money ah?

Pak Lah tells all government bodies to pay up to all contractors.

Got money ah? Pay, pay, where's the money...

The contractors are still waiting until now...

UM V-C Rafiah Salim asked: When is the money coming?

She is not the only one asking. Go to JKR, DID, District Offices, City Hall, Health Ministry, Education Ministry and find out whether the contractors had been paid. Ask the engineers.

See, this is an abandoned ward project at University Hospital, Selangor. The project lies between University Malaya Medical Centre’s (UMMC) Menara Timur and the surau. The Obstetric Paediatric Ward project, which started in 2002, has been abandoned since 2003. The project was supposed to provide the paediatric department with a block containing nine floors and three basement floors while the obstetric department was to get a block with four floors and three basement floors (according to the notice board for the project). The new ward was aimed at providing enough beds for patients, as there is presently an insufficient number of beds to meet demand.

Yet the project has been left alone after the base structure was completed. Datuk Rafiah Salim said the project was tendered with officials from both the Finance Ministry and the Works Ministry present with all the proper paperwork done.

“We started the project in good faith and expected the rest of the money to come because approval had been given under the 8th Malaysia Plan,” said Rafiah.

Rafiah said the funds were under the Finance Ministry's control and money had been allocated for the project to continue. But where is the money?

“It’s a lot of money, that’s why there’s a lot of interest in this project.

Independent engineer E.F. Lee said the practice of building the first part of a project was both foolish and unheard of in the construction industry. “In the industry, when you start a project, you want to finish it because a few years later, the technologies and needs may have changed and the base structure would have been outdated,” said Lee.

“Starting a project when you only have partial funds, while not illegal, is very bad planning.”

Lee said although he had not inspected the site up close, from his observation the construction looked abandoned without any mitigation or protection to the completed structures.

“By leaving it unprotected, corrosion will set in and the bars will lose strength that is critical to reinforce the concrete structure,” Lee said.

UMMC director Prof Dr Ikram Shah Ismail and UMMC associate professor and consultant obstetrician and gynaecologist Prof Dr Jamiyah Hassan further clarified the situation. “The building was initiated under the 7th Malaysia Plan, with the building designed to be done in two phases because there was not enough funds in the 7th Malaysia Plan. Thus, funding for the project had to be spilled over to the 8th Malaysia Plan,” said Dr Jamiyah.

“Tender for the base structure was closed on Aug 7, 2002, and the project was undertaken and completed by the first construction company while we waited for the next part of the funding from the Finance Ministry.”

On April 22, 2004, the Finance Ministry officially told UMMC that there were not enough funds to finance the project due to the economic downturn and asked UMMC to resubmit applications for funds in the 9th Malaysia Plan instead.

Pak Lah, got money to complete this project ah?

Cakap boleh serupa bikin kah???

DRB wins $425 million settlement

All the time, whenever there is a claim which the government disputed, the superintendent officer and the project team representing the government, stood on hard ground.

The government represented by the superintendent officer were prepared to go to court or arbitration to remedy.

But each time, when it was to be up for hearing, the government, advised by the attorney general office, would back off and sought out of court settlement; they call it compromise. In reality, they knew they would lose, because they didn't have enough supporting documents and evidence to back up their contention; impliedly, it was an admission of wrong and admission of a breach of contract.

It's no different this time.

DRB claimed variation order works for a balooned up sum of $900 million. They got $425 million bonus; courtesy of the government.

At first the S.O. stood firm to deny the claims as frivolous and vexatious. When the time to be present at the court of arbitration, they back out and sought refuge behind a compromised solution.

Why were they prepared to pay now, and such a hefty sum?

Is it the Syed Mokhtar factor?

DRB-HICOM is now in further talks with the Government on liquidated ascertained damages and the release of performance bond. It said is hopeful and positive that this matter will also be resolved soon.

DRB-HICOM Bhd, announced yesterday that the Government has finally agreed to pay RM425 million for additional works done on the Rawang-Ipoh electrified double-tracking rail project. The settlement is for the payment of variation order and loss and expense claims for the extra works, it told Bursa Malaysia Bhd yesterday.

The Rawang-Ipoh track forms part of the national railway firm Keretapi Tanah Melayu Bhd's RM14 billion project to lay parallel lines from Padang Besar to Johor Baru. DRB-HICOM, which is now controlled by tycoon Tan Sri Syed Mokhtar Al-Bukhary, began work on the RM2.6 billion rail project in mid-2000 and was at first given until the end of 2002 to complete the stretch. The deadline was later extended to December 2004. The group was reported to have completed about 88 per cent of the 179km stretch. In June, the Government terminated the contract with DRB and appointed UEM Builders Bhd, one of the sub-contractors of the project, to complete the unfinished portion of the project.

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