KUALA LUMPUR: Mismanagement and corruption in publicly funded construction projects have caused potential losses of up to 30% of a project’s investment value, according to the Auditor-General.
Tan Sri Ambrin Buang said a study by the Organisation for Economic Co-operation and Development (OECD) and the World Bank showed how corruption in the infrastructure and extractive sectors had led to misallocation of public funds and services that were substandard and insufficient.
“It is difficult to measure the exact cost, but it has been estimated that between 10% and 30% of the investment in publicly funded construction projects may be lost through mismanagement, and about 20% to 30% of project value is lost through corruption,” he said at the Combating Procurement Fraud in the Public and Private Sectors Forum 2017 yesterday.
The forum highlighted the issues in public procurements in Malaysia – a process where the government obtains works, goods or services from companies and one that Ambrin said is most vulnerable to corruption.
Ambrin’s speech was read out by the National Audit Department’s research, corporate and international relations division director Roslan Abu Bakar.
Ambrin also observed that procurement fraud in the public sector is a complex issue, covering a wide range of illegal activities from bid-rigging during the pre-contract award phase through to false invoicing in the post-contract award phase.
He noted that last year, the Malaysian Anti-Corruption Commission had opened up a series of investigations involving government procurements.
“One of these involved senior government officials making false claims and fraud amounting to RM20mil last year, and this was followed by a case involving a senior Youth and Sports Ministry official amounting to RM107mil.
“Another case involved a Sabah Water Department official for fraud amounting to RM153mil, and the latest arrest involved a federal ministry secretary-general,” he said.
The Auditor-General added that based on experience, he could not entirely dismiss the existence of bid-rigging in Malaysia’s public procurement.
“One of the signs is when an equipment price is quoted higher than market value.
“If procurement officers do not research market prices, they will believe that the given price is reasonable.
“For example, in the Audit Report, we highlighted significant differences in prices of certain equipment, ranging from RM1,000 to RM7,200 additional cost for the same types and specifications,” he said.
Post-contract fraud is also a common problem, and Ambrin said the department had identified cases where payment control systems were bypassed to allow for fraud to occur.