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Sakmongkol ak 47

Friday, 19 September 2008

A Tour of Duty at the Kitty-2

The navy’s job then was to service all the RMN’s ships and vessels. PSC as the name suggested, was a maker of vessels. It made fishing boats and maybe some marine police boats. By the way, many of the marine police boats ended up moth-balled.

It was a simple method to make money. The government appoints this home-grown company PSC-Naval Dockyard to build the NGPVs. It was also a simple extension of the Ali-Baba business type of venture played out in the international scene. PSC-ND tendered out the construction of the 27 NGPVs and whoever wins the tender , will be the main contractor to this glorified Ali Baba concern.

As the story goes, those hardworking Germans from Hitler’s country won the bid. There are several shipyards in Germany of international repute. One of them is the yard owned and operated by Blohm + Voss Meko. The company is based in Hamburg, a city of beautiful German Frauleins who will gladly say wunderbar to anyone patronising their beer gardens. The winning bid was based on the model proposed by Blohm + Voss Meko 100 design.

A contract was signed on 13 October 1998 for an initial six units, with the German consortium GNG, as the major sub-contractor. Member of the GNG, the Hamburg Blohm + Voss was to built the first two ships, while the PSC-ND was to complete the final fitting out and trials. The remaining ships were to be built at the PSC-Naval Dockyard from ship modules supplied by the GNG, with a gradual increase of local content.

The contract also involved technology transfer to PSC-ND from German side as well as to specified a local content of not less than 30 percent plus other details not necessary to put down here.

Amin shah got a sudden windfall, courtesy of the Defense Minister, Herr Najib at that time. Herr Amin Shah, was ecstatic.

“When it (PSC) paid RM300mil to take over the privatisation project, it was promised a contract of RM5bil (to complete the construction of six patrol vessels) at the initial stage, followed by another RM25bil (to build 21 more vessels) later.

But like almost all Ali-Baba types, the company developed financial indiscretions right from the beginning. Why is it the case, the tenderer will always screw up its vendors? That’s’ what the Amin Shah company did. It did not pay vendors RM180 million. It screwed up its own employees by not paying contributions to their pension fund(EPF) the sum of RM 40 million whereas the company made dutiful deductions off workers salaries. To top it, the Amin Shah company asked the government an advance of RM 180 million to complete the first two vessels. RM 120m was needed to salvage the first two vessel and RM80m to pay off vendors.

The vessels were only delivered in 2006, 18 months late than schedule. PSC-Naval Dockyard was contracted to deliver six patrol boats for the Malaysian Navy in 2004 and complete the delivery by last April. But only two of the barely operational patrol boats had been delivered by mid 2006. There were 298 recorded complaints about the two boats, which were also found to have 100 and 383 uncompleted items aboard them respectively.

The original RM5.35 billion contract ballooned to RM6.75 billion by January 2007. it was also reported that the Defense ministry had paid out Rm4.26 billion to PSC up to December 2006 although only RM2.87 billion of work had been done, an overpayment of Rm1.39 billion, or 48 percent. In addition, Malaysia’s cabinet waived late penalties of RM214 million. Between December 1999, according to the Malaysian Auditor General, 14 “progress payments” amounting to Rm943 million despite the fact that the auditor general could find no payment vouchers or relevant documents dealing with the payments.

The auditor general attributed the failure to serious financial mismanagement and technical incompetence stemming from the fact that PSC had never built anything but trawlers or police boats before being given the contract.

Who was it that argued before cabinet to pay 6.75 billion. Was the cabinet misled into making a foolish decision to bail out a sinking behemoth? The 6.75-billion-ringgit offshore patrol vessels scandal is the largest single case of misuse of funds in the 2006 Auditor-General’s Report. The report had found the value of the contract should only have been RM4.9 billion. He added that only two of the six vessels had been delivered to date, and both were defective.

Sakmongkol asks, is this inside the DPM’s blog?


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