Audit report exposes contract weaknesses in Malaysian Army vehicle deals
The audit highlighted delays, unclaimed fines, and improper procurement practices involving RM7.8 billion worth of armoured vehicle contracts.
Key findings from the report include a two-year delay in the delivery of 68 GEMPITA vehicles by a local contractor, resulting in an overdue fine of RM162.75 million.
The government had already paid RM7.52 billion despite the contractor missing deadlines.
Additionally, the RM53.93 million performance bond was insufficient to cover penalties.
Maintenance and spare parts delays for GEMPITA, ADNAN, and PENDEKAR vehicles led to unenforced fines of RM1.42 million.
The report also criticised small-batch procurement by Responsibility Centres (PTJs), bypassing open tender rules for purchases exceeding RM500,000.
The Defence Ministry cited Movement Control Order (MCO) disruptions as a cause for delays, but auditors stressed that timely enforcement of penalties could have mitigated losses.
The AG recommended structured contract timelines and centralised approvals for ad hoc procurements to reduce governance risks. – Bernama
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
4 days ago
- New Straits Times
Mindef claims RM162.7mil from armoured vehicle supplier
KUALA LUMPUR: The Defence Ministry issued a claim notice for RM162.75 million in penalties against its armoured vehicle supplier in January this year, the Dewan Rakyat heard today. Its Deputy Minister, Adly Zahari, said the notice for the late penalty claim was issued due to delays in the delivery of 68 armoured vehicles between 2020 and 2023. He said this in response to the Auditor General's Report 2/2025, which revealed that the ministry had failed to collect RM162.75 million in penalties imposed on its supplier for the armoured vehicle contracts. Adly also said the company subsequently submitted a response and appealed for the late penalty to be waived, citing exceptional circumstances caused by the Covid-19 pandemic and the Russia-Ukraine war. "The appeal was presented on May 6, 2025, and the company was imposed a penalty totalling RM162 million, along with a performance bond amounting to RM53 million. "The remaining penalty sum will be recovered through offset arrangements in current contracts or collected separately from the company," he said during the ministry's winding-up session on the report. On Monday, the AG's Report revealed 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 report, 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 ministry had made full payment of RM7.5 billion for the contract by June 2023. Commenting further, Adly said the ministry acknowledges weaknesses in enforcing contract terms and is currently in the process of developing a contract monitoring system to assist officers in overseeing contracts. "This is to ensure that even if we grant an extension of time, we do not delay the imposition of late penalties until the project is completed," he said.
The Sun
4 days ago
- The Sun
Defence ministry to monitor contract performance with new system
KUALA LUMPUR: The Ministry of Defence is set to develop a new contract monitoring system to enhance efficiency and transparency in managing asset and project procurement. Deputy Defence Minister Adly Zahari announced the move following findings in the Auditor-General's Report (LKAN) 2/2025, which identified weaknesses in enforcing contract terms, particularly regarding late penalties. Under the current system, penalties for delays are only imposed when extension of time (EOT) applications are reviewed, even though enforcement could occur earlier. Adly explained, 'An EOT should come with two scenarios — either with or without a late penalty. 'Sometimes EOT is granted without a penalty due to technical issues... but I believe if an EOT is to be granted, we can enforce it with a penalty.' The ministry has already taken action against delays in the delivery of 68 Gempita armoured vehicles and two non-armoured type B vehicles between 2020 and 2023. A late penalty notice of RM162.75 million was issued on Jan 15 to the supplier, who later appealed for a waiver citing force majeure due to the COVID-19 pandemic and the Russia-Ukraine conflict. Adly stated, 'The appeal was presented at the Contract Coordination Panel (CCP) meeting on May 6 and it was decided that the company would be subjected to the full late penalty of RM162.75 million.' Additionally, the ministry is recovering RM53.93 million from the performance bond and will claim the remaining penalty through set-off or direct collection. Regarding procurement via the 'breakdown' method involving RM107 million, Adly clarified that logistical challenges and varying technical expertise necessitated the approach. 'Our assets are located in places like Kota Belud, Sabah, and Port Dickson and Gemas in Negeri Sembilan, among others. That is why in this breakdown approach, we took into account those aspects, as well as the readiness of the assets,' he said. The new monitoring system aims to streamline contract enforcement and ensure timely project completion while safeguarding national security interests. – Bernama
Barnama
4 days ago
- Barnama
Defence Ministry To Develop System To Monitor Contract Performance
KUALA LUMPUR, July 23 (Bernama) -- The Ministry of Defence will develop a contract monitoring system to enhance efficiency and transparency in the management of asset and project procurement, including earlier enforcement of actions against project delays. Deputy Defence Minister Adly Zahari said the move followed findings in the Auditor-General's Report (LKAN) 2/2025, which highlighted weaknesses in the enforcement of contract terms, particularly concerning the issue of late penalties. He said that under the ministry's current procurement system, penalties for delays were only imposed when extension of time (EOT) applications were considered, even though enforcement could have taken place earlier. 'An EOT should come with two scenarios — either with or without a late penalty. Sometimes EOT is granted without a penalty due to technical issues… but I believe if an EOT is to be granted, we can enforce it with a penalty. 'We acknowledge the weakness in enforcing contract terms, so we are in the process of developing a contract monitoring system to assist officers in tracking contracts,' he said when winding up the debate on LKAN 2/2025 for the ministry in the Dewan Rakyat today. Commenting on the findings in the Auditor-General's Report (LKAN), Adly said the ministry had issued a late penalty notice amounting to RM162.75 million on Jan 15 to the supplier of 68 Gempita armoured vehicles and two type B vehicles (non-armoured), following delivery delays between 2020 and 2023. He said the company had submitted a response letter and appealed for the penalty to be waived, citing force majeure due to the COVID-19 pandemic and the Russia-Ukraine conflict. 'The appeal was presented at the Contract Coordination Panel (CCP) meeting on May 6 and it was decided that the company would be subjected to the full late penalty of RM162.75 million. 'Secondly, the performance bond amounting to RM53.93 million and the remaining penalty will be recovered either by set-off from the current contract or collected separately from the company,' he said.
