Millions lost due to Works ministry failure to recoup money from terminated contractors

The Public Works Department failed to recover RM15.77 million in performance bonds despite terminating 21 government projects.

The Auditor-General’s report which was made public today stated that the department fully recovered 30 performance bonds amounting to RM20.97 million, while only half of another 21 bonds totalling RM26.97 million were recovered.

The amount from the outstanding bonds that were yet to be recovered totalled RM15.77 million.

A performance bond is a surety bond submitted by a contractor who obtains a government contract, as a form of guarantee.

This surety can be withdrawn by the government if there is a breach of contract or if the contractor fails to complete the project. The termination of projects can be done via mutual or unilateral termination.

The report also states that following an audit check, 160 projects, with a contract value of RM3.137 billion, were terminated between 2007 and 2012.

“The department has also failed to reclaim RM4.89 million in advance payments from three terminated projects from banks, financial institutions and insurance companies,” the report stated, adding that this would not have happened had the department monitored the advance payments and filed claims before the bond expired.

“The appointment of contractors to complete three projects were also never done via tender nor referred to the ‘Jawatankuasa Penyelamat Projek Sakit’.”

It also stated that there are weaknesses in the process of issuing reminders to the contractors to claim the payments following the termination of contracts.