Contract Management Weaknesses Affect TDM's Preparedness – AG Report 2/2025

KUALA LUMPUR, July 21 (Bernama) -- The Auditor General's (AG) Report 2/2025 has revealed significant weaknesses in the procurement management and administration of the Malaysian Army's (TDM) armoured vehicle contracts, which could potentially expose the government to the risk of loss.

According to AG Report 2/2025 tabled in the Dewan Rakyat today, there were contracts worth RM7.8 billion involving major armoured vehicles during the audit period from 2020 to 2023, namely GEMPITA, PENDEKAR, ADNAN, LIPAN BARA and MIFV.

The contracts were supposed to support TDM's readiness to become a modern land force capable of defending Malaysia's sovereignty, but delays and administrative weaknesses have undermined the achievement of that objective.

“Among the key findings was a significant delay in the supply of 68 GEMPITA vehicles by a local company, which resulted in a fine of RM162.75 million which was only claimed on Jan 15, 2025, 746 days (two years and 15 days) after the contract expired on Dec 31, 2022.”

“The audit also found that the government had made the full payment of RM7.52 billion despite the company failing to comply with the agreed delivery schedule, while the contract performance bond of RM53.93 million which expired on Dec 31, 2024 was also found to be insufficient to cover the amount of the fine,” the report said.

The review for the same period also found delays in maintenance, repair and spare parts supply services for GEMPITA, ADNAN and PENDEKAR vehicles, with an estimated fine of RM1.42 million still not imposed as of end 2023, despite the service being 227 days late.

“The report also reprimanded the implementation of procurement in small batches by several Responsibility Centres (PTJ) which violated financial regulations, involving direct purchases and quotations totalling RM107.54 million for the period 2020 to 2023, while procurement exceeding RM500,000 per year should have been through open tenders,” the report said.

In addition, the absence of major contracts for several types of vehicles such as MIFV and LIPAN BARA during the audit period forced PTJs to implement ad hoc procurement, thus increasing governance risks.

The Ministry of Defence explained that the delays were due to factors beyond their control including the implementation of the Movement Control Order (MCO), but the audit stressed that measures such as issuing fine notices should have been implemented while the contract was still in force to protect the government’s interests.

The audit also recommended that contracts be established within a reasonable period and any procurement during the absence of contracts should not be implemented in small batches at PTJ level, but rather submitted to the Ministry of Finance through the controlling officers for special approval.

-- BERNAMA