THE Defence Ministry under Barisan Nasional awarded contracts to a firm linked to a former top politician despite it lacking the experience and financial capability to carry out the projects, said a special audit report on land swaps.

A team led by former auditor-general Ambrin Buang found that the company, linked to a former Selangor Wanita Umno leader, was awarded a contract to build the National Defence Institute (Puspahanas) in Putrajaya in 1993.

In letters addressed to the Finance Ministry and Economic Planning Unit (EPU) in 1994, the developer said “the proposal has already been accepted (by the government)” when the project was still at the proposal stage, said the report.

In another letter, dated September 26, 1994, the company’s director said “EPU and the Prime Minister’s Office will be tabling the Puspahanas project at the cabinet meeting in October 1994”.

“This is my first privatisation project and I really need your support,” said the director.

The letter was addressed to then deputy prime minister Anwar Ibrahim.

Anwar, who also held the finance portfolio at the time, had said the contract should not be given to the developer because proposals from three other bidders were not yet in.

His other reasons for rejecting Awan Megah (M) Sdn Bhd (AMSB) were that the project’s job scope had not yet been determined and the value of the land swap was not right for the project.

The government, however, proceeded to pick the developer over the three others.

The report said the special audit committee is “of the view that (interference by) members of the administration had led to the appointment of an inexperienced contractor and the payment of RM26.8 million to (AMSB) at a time when the contract had lapsed”.

Among the four firms, one had the most experience and the highest paid-up capital of RM108 million. In contrast, the developer that was chosen had a paid-up capital of just RM250,000.

One proposal was turned down because it was late, while the other two were rejected on the grounds that they were RM2 companies, said the report.

It said as a result of appointing an inexperienced contractor, the job was delayed, having to be extended with two supplementary agreements.

The original agreement was signed on December 29, 2005, with the project’s date of completion slated for June 7, 2008. But due to the developer’s inability to complete the project in time, a supplementary contract was signed to prolong the project.

This resulted in a delay of 177 months, or 15 years. The first supplementary agreement was inked in 2014, for an additional 72 months, while the second in 2017, for another 105 months. Both agreements were backdated 68 and 31 months, respectively.

As a result of the delays, the value of the land swap had to be readjusted twice.

And while the delays resulted in liquidated ascertained damages (LAD) amounting to RM3.1 million for the October 2014-August 2015 period, the fine was uncollected and subsequently superseded by the second supplementary agreement, said the report.

Although LAD was “waived”, the company still collected from the government RM26.8 million – the difference between the land valuation and original contract.

“The committee is of the opinion that this payment was done due to weaknesses in the terms and conditions, and was not in the government’s interest,” said the report.

One of the plots of land – 90ha in Kapar – was subsequently transferred to the developer.

The land in question is now the subject of a suit taken up by carpet trader and Rosmah Mansor associate Deepak Jaikishan, who claimed that he had been scammed.

He said after paying for the land, and another RM30 million, to former prime minister Najib Razak and his wife Rosmah, the deal soured and he did not get his land titles.

Last October, he filed a suit against Najib, Rosmah and two others for conspiracy and interfering in the property deal.

The Puspahanas project was first mooted in 1971, where the land swap involved three parcels of land in Kapar and Bukit Raja. But due to various reasons, it was put on hold until its revival by the Defence Ministry in 1993. – May 15, 2019.