Army urges stronger oversight in wake of armoured vehicle contract delays

New Straits Times

5 days ago

LENGGONG: The Malaysian Army has called for stronger procurement oversight and contract enforcement mechanisms.
This follows revelations that RM167 million in late penalties remain uncollected from the contractor responsible for delivering the Gempita armoured vehicles.
The issue, highlighted in the Auditor General's (AG) report, underscores ongoing weaknesses in defence procurement enforcement, particularly regarding contractual penalties for delays.
Army chief General Tan Sri Muhammad Hafizuddeain Jantan said that while the army played a key role as the end-user of defence assets, responsibility for contract enforcement lay squarely with the Defence Ministry (Mindef).
"We report delays when they happen, but the enforcement of penalties is under Mindef, as the contract manager.
"This isn't the first time such a situation has occurred, but this case was highlighted by the Auditor-General," he said.
He told reporters this after attending the closing ceremony of Exercise Keris Strike Series 30/2025 — a trilateral military exercise involving the United States Army Pacific Command and the Australian Army — held at Felda Lawin Selatan here today.
He confirmed that RM167 million in late delivery penalties linked to delays in supplying the Gempita armoured vehicles have yet to be collected.
"There's no evidence of leakage or misconduct, but clearly, procedures may not have been followed strictly.
"In the future, we will need to remind contract managers to ensure enforcement and collections are done properly," he said.
Hafizuddeain said the penalties would be collected in stages, including through the drawing of performance bonds and by offsetting the amount against future contracts with the same company.
He emphasised the reputational risks posed to the military, stressing that although the army was not directly involved in contract management, it continued to monitor procurement projects closely.
"We continuously monitor the situation because we do not want such matters to be reported and damage the reputation or good name of the army.
"It's just that perhaps the procedures weren't fully followed in managing the contract. So, in the future, we'll be more careful.
"Maybe we'll need to remind the contract managers to ensure they make the necessary collections, because we still have many ongoing projects," he said.
On July 21, the AG uncovered weaknesses in the Malaysian Army's management of armoured vehicle contracts, including the failure to collect RM162.75 million in penalties imposed on its supplier.
According to the AG's Report 2/2025, the penalties stemmed from supply delays involving 70 Gempita units delivered between August 2020 and December 2022.
The assets were delivered up to 1,048 days past the agreed schedule.
Despite the delays, the Defence Ministry had made full payment of RM7.5 billion for the contract by June 2023.