Finance minister implicated in failed Bera Hospital

AUDIT REPORT | The finance minister's role in getting an unqualified contractor to construct the Bera Hospital was highlighted in the first series of the Auditor-General's Report 2016.

The RM88 million hospital, intended to serve some 92,000 people within the Bera district and relieve overcrowding at Temerloh Hospital, some 45km away, was supposed to have been completed on Jan 9, 2015, but was only 57 percent ready as of December 2016.

Health Minister Dr S Subramaniam said in July that the Bera Hospital is only expected to be completed in 2019, after a new contractor is appointed.

Maju Jaya Prasarana Sdn Bhd (MJPSB) was appointed as the first contractor of the hospital, from a list of seven companies provided by the Finance Ministry.

This was despite at least three red flags raised by the PWD that all seven candidates were unqualified, and having repeatedly recommended to the Finance Ministry that an open tender be conducted.

The apparent attempt to scuttle an open tender for the Bera Hospital project began with contradictory decisions within the Finance Ministry.

For example, the Finance Ministry had, during the procurement committee meetings, agreed with the PWD's recommendations for an open tender for the construction of the Bera Hospital, but later issued completely opposite instructions to the PWD.

At one point, there was also a letter from the Prime Minister's Office, signed by the prime minister's private secretary, claiming that a decision had already been made to proceed with a limited tender based on the seven companies, instead of an open tender.

After dragging on from June 2010 to January 2012, due to the PWD repeatedly declaring the seven candidates to be unqualified, the finance minister ultimately decided on MJPSB, which was one of the seven.

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The audit report does not state whether it was Finance Minister I Najib Abdul Razak (photo) or the then Finance Minister II Husni Hanadzlah who decided on this.

The chronology provided by the Auditor-General's Report 2016 series 1 is as follows:

June 23, 2010 - Public Works Department (PWD) applies to the Finance Ministry to conduct a pre-qualification open tender for the construction of Bera Hospital.

Aug 16, 2010 - Finance Ministry procurement committee meeting agrees to approve PWD's application to conduct a pre-qualification open tender.

Sept 29, 2010 - The Finance Ministry, in a letter to PWD, rejects PWD's application to conduct a pre-qualification open tender, despite a completely opposite decision made at the meeting on Aug 16, 2010. The Finance Ministry instructs a "limited tender" be conducted and provided a list of seven companies.

Jan 11, 2011 - PWD issues invitation letters to the candidates based on MOF's decision.

Jan 25, 2011 - A briefing and visitation of all the candidates are conducted.

June 30, 2011 - A tender evaluation report of the candidates is prepared.

July 1, 2011 - The tender evaluation report is submitted to the PWD Procurement Board "A" with the tender evaluation committee's recommendation that none of the candidates qualified for consideration.

July 12, 2011 - The PWD Procurement Board "A" decides that none of the candidates are qualified for consideration as all of them had failed the evaluation. It recommends that the project is re-tendered through open tender.

July 14, 2011 - The PWD procurement board "A" conveys its decision to the Finance Ministry.

Sept 2011 - The Finance Ministry's government procurement division submits a memorandum of consideration, based on the PWD's recommendations to re-tender through an open tender, to the Finance Minister I procurement committee (Jawatankuasa Perolehan Kementerian Kewangan 1).

Sept 15, 2011 - The Finance Ministry procurement committee meeting agrees with the ministry's government procurement division to retender through an open tender.

Sept 21, 2011 - The Finance Ministry's government procurement division says, in a letter to the PWD, that the ministry decided to maintain the limited tender with the seven companies and instructed the PWD to proceed to the next stage for technical evaluation. PWD is also asked to submit the results of the evaluation to the MOF. This is the second time the MOF issued a letter that contradicted the ministry's own decision made at the procurement committee meeting.

Oct 12, 2011 - The PWD procurement board "A" decides a different officer should redo the evaluation of the tender candidates. The board also decided that the evaluation results should be submitted directly to the Finance Ministry for a final decision, bypassing itself.

Oct 13, 2011 - The PWD's contracts and surveying branch, in a letter, informed the decision to the department's health works branch.

Oct 24, 2011 - The PWD's tender evaluation committee redoes the evaluation and proceeded to the technical evaluation stage, during which the PWD's health works branch director declares none of the candidates were qualified for consideration. It is the second time the seven companies provided by the Finance Ministry were declared to be unqualified.

Oct 28, 2011 - The Finance Ministry's government procurement division secretary receives a letter from the Prime Minister's Office, which was signed by the prime minister's private secretary. The letter claims a meeting minutes, dated Sept 20, 2011, by the prime minister, noted that it had been agreed there should be a limited tender and that it should proceed to the technical evaluation stage. The audit report noted it was on this basis that the Finance Ministry decided to maintain the seven candidates, despite a different decision during ministry's procurement committee meeting.

Nov 29, 2011 - The PWD conducts yet another re-evaluation based on additional documents it received, but the PWD's health works branch assistant director (architect) again declares the candidates to be unqualified, making it the third time.

Dec 5, 2011 - The PWD's contracts and surveying branch submits two reports - one from the reevaluation and another from the second reevaluation based on additional documents - to the Finance Ministry.

Jan 6, 2012 - The Finance Ministry's government procurement division prepares a memorandum of consideration for a second time to the finance minister, again maintaining that the Hospital Bera construction should be re-tendered through open tender.

Jan 10, 2012 - The finance minister "agrees" for the tender to be granted to MJPSB through direct negotiation. MJPSB is one of the seven companies provided by the Finance Ministry and deemed unqualified by the PWD.

Jan 11, 2012 - The Finance Ministry's government procurement division informs the PWD of the decision in a letter.

The audit report in its feedback concluded that: "The selection of an unqualified contractor by the Finance Ministry, which failed the tender evaluation by the PWD, was among the reasons the project failed when the contractor was incapable of completing it, resulting in a termination."

According to the report, the contractor failed to complete the project despite being granted an extension of 690 days.

The 57 percent of the building that it completed behind time are also plagued by problems.

For example, it noted that skimcoat was used for the wall finishing of the X-ray unit.

The report noted that skimcoat was unsuitable as barium plaster should have been used, which is necessary for protection against radiation.

The contractor was terminated on Dec 8, 2016.- Mkini