Hard look at tender issue

Malaysian Business, Nov 16, 2006 by Ooi Sue Hwei

WHEN Prime Minister Datuk Seri Abdullah Ahmad Badawi announced a slew of projects in July for implementation under the Ninth Malaysia Plan (9MP), there was much cheer and excitement from the business community, especially contractors.

Abdullah announced that 880 construction projects worth a total of RM15 billion would be tendered out. Some of them were worth RM2 million to RM3 million while others exceeded RM100 million.

Given the huge number of projects involved, there was much anticipation that everyone would get an even chance of tasting the pie. Unfortunately, days later, there was talk that more than half of the larger projects had already been `awarded' to various parties.

This, of course, led to denials by the authorities. But there have been allegations of major government projects being awarded on a negotiated basis. Often, the excuse is that they had to be implemented on a fast- track basis or were of great urgency.

So the Prime Minister's assurance that tenders should be called for every project could be falling on deaf ears. Given this, there are fears that even if tenders were invited, the selection process may not be transparent.

When Abdullah first took office three years ago in October 2003, he had promised that there would be transparency in awarding of government projects. Subsequently, he made several announcements on the implementation of projects through the tender process.

In 2004, he promised that the Government would upgrade the tender and other systems it used to procure products and services. This would be in line with its efforts to increase transparency, lower the cost of doing business and reduce corruption. The promises were repeated when he announced the development projects for the 9MP during the unveiling of Budget 2007.

So, is the Prime Minister's assurances coming to pass? Will the calls for greater transparency be heeded?

Actually, calls for the implementation of open tender exercises for government projects are not new. They have been occurring time and again. It's no secret that there have been many reports of projects awarded outside the tendering process that have gone awry. Both the Treasury and ePerolehan, which is the Government's electronic procurement system, declined to reply to queries by Malaysian Business.

President of Transparency International Malaysia, Tan Sri V Ramon Navaratnam, who once served as the Transport Ministry Secretary- General and Treasury Deputy Secretary-General, says during his civil service days, policies and guidelines were meticulously followed and not dovetailed to suit or favour any supplier.

He explains, `When Tengku Razaleigh Hamzah (then the Finance Minister) was there, the tenders were codified and required detailed information. The quotations were then evaluated based on price and quality and had to offer specifications that were general as well as generic. Since the costing was based on a bill of quantities, this resulted in a reasonable tender price.'

Malay Contractors' Association president Senator Datuk Roslan Awang Chik says the present open tender system uses the mean cut-off system. `The total number of applications for a tender is averaged out and the mean is obtained and submitted to the tender committee,' he says.

`In the past, the lowest and second lowest bidders would be given priority. However, the current system's priority is to ensure that a project is successfully completed. Thus, a tender is evaluated based on its price as well as the company's financial strength and credibility.' (See flowchart of the open tender process on page 25.)

A further 2,000 projects approved under the Eighth Malaysia Plan have been carried forward to the 9MP. According to a recent press report, they include an Islamic complex in Pahang, a veterinary complex in Perlis, three water supply projects in Kedah, Lower Court buildings and public libraries in Penang, low-cost housing projects in Selangor and Egypt's Al- Azhar University campus in Melaka.

In view of the number of projects and the costs involved, it is imperative that the projects are awarded to the most deserving through a transparent process, in particular the open tender. However, despite calls for this, many big projects are being implemented through direct negotiations. In many cases, mishandling of the projects has resulted in problems such as delays and cost overruns.

One of the biggest mismanaged projects that have come under public scrutiny is the Malaysia External Trade Development (Matrade) headquarters building in Kuala Lumpur. The project, which did not go through open tender, was delayed for nine years, during which its original cost ballooned from RM167 million to RM287.5 million, with RM64.8 million spent to repair shoddy work.

Some say the situation could have been avoided. Since the controlling officer of a project under the government contract system is the Public Works Department (PWD)'s director-general, the department should have taken remedial action when problems first started to surface.