FINANCIAL and employee problems as well as an inability to complete work were not deterrent enough factors for City Hall's procurement board when choosing a contractor to build the Datuk Keramat Market Complex.

Even though these problems had been detected by City Hall's contract evaluation committee, the contractor company, Syarikat Pelaras Utara Sdn Bhd (SPUSB), was still shortlisted for tender, and awarded the RM39.12 million contract.

The result was that, even after being given seven extensions by City Hall, the contractor was unable to finish the second phase of the contract on time by June 2002, which was only supposed to cost RM34.12 million.

In the end, City Hall had to pay an additional RM26.56 million for another contractor to finish the job.

Coupled with missing and vandalised mechanical and electrical equipment and hiring a security company, the cost of making up for the initial contractor problem in this "badly managed" project was an additional RM38.46 million.
The budget had overshot by almost 100 per cent.

The Auditor-General found the excuse of extending the contract for the sake of helping a bumiputera company to be unacceptable, and advised City Hall to put in place a fair and transparent tender process in future.

In its reply, the Federal Territories Ministry said City Hall had appointed consultants to submit a draft final contractual certificate for May 2008, calculating the estimated compensation owed by SPUSB to City Hall to be RM17,591,256.37, based on a RM6,000 daily late-delivery penalty.

(This, however, amounts to less than half the extra cost City Hall had to pay to complete the project.)

City Hall's procurement board also promised it would take into account the Auditor-General's advice to ensure a fair and transparent awarding of tenders, to avoid the risk of losses by the government.