A CONTROVERSIAL procurement contract for “non-existent” light attack helicopters for the army, initially estimated to be worth RM300 million, is now believed to be in the region of more than RM350 million.
Defence industry sources believe that the procurement package, secured via direct negotiations four years ago, was handled under “suspicious circumstances”.
One source told the New Straits Times that many details in the procurement package were “very hazy” and dubious in nature.
“We believe there were a lot of hidden expenses and financial irregularities. A lot more is expected to be known as investigators dig deeper into the case.”
A news portal had previously reported that six McDonnell Douglas MD530G light scout attack helicopters had been ordered for RM300 million, during the previous Barisan Nasional administration.
The deal was allegedly secured during the Langkawi International Maritime and Aerospace (LIMA) exhibition in 2015.
However, it was alleged that the army never took delivery of the helicopters. The news report said a contract for the helicopters was signed in November 2016, with delivery supposed to be made in two batches by last year.
It also claimed that a local agent had already been paid 35 per cent of the contract value, amounting to some RM113 million.
In an immediate response, the Defence Ministry said it had initiated an internal investigation into the procurement package.
Defence Minister Mohamad Sabu told New Straits Times that a high-level team of investigators were carrying out due diligence on the issue.
“The team is now carrying out a detailed investigation to ascertain if there was foul play and if proper procurement procedures were conformed with.
“We expect the findings to be forwarded to other agencies like the police and Malaysian Anti-Corruption Commission for further action,” he said, declining further comment.
NST has since learnt that Mohamad has briefed Prime Minister Tun Dr Mahathir Mohamad on the developments.
This marks the second scandal to hit the Defence Ministry’s previous leadership.
Earlier this month, Mohamad had unveiled a land-swap controversy involving the ministry.
Investigators had found that there were losses in excess of RM500 million in 16 land swap projects involving 1,286ha of the ministry’s land, worth RM4.756 billion and involved development costs of RM4.886 billion.
The 16 projects were on a design-and-build basis where the cost would be borne by the private sector.
Mohamad said many discrepancies were found, including the sale of land at lower prices, while other land swap projects were given to unqualified developers.
MACC recently said it would be summoning former defence ministers Datuk Seri Hishammuddin Hussein as well as Datuk Seri Ahmad Zahid Hamidi to have their statements recorded.
KUALA LUMPUR: Military helicopters bought during the previous administration for over RM300 million have yet to be delivered to the Royal Malaysian Army, a source close to investigations into allegations of corruption and mismanagement in the purchase of defence assets told FMT.
It is understood that six MD530G light scout attack helicopters, manufactured by MD Helicopters of US aerospace giant McDonnell Douglas, were ordered in 2016 by the defence ministry (Mindef) then headed by Hishammuddin Hussein.
The helicopters, better known as “Little Birds”, had reportedly impressed Mindef officials during a demonstration at the 2015 Langkawi International Maritime and Aerospace (Lima) exhibition.
But an investigation into the deal has revealed more startling details, including the fact that the Malaysian army never took delivery of the helicopters.
“It was found that the helicopter which performed at LIMA 2015 wasn’t really an MD530G but another variant, the MD530F (with the serial number N369FF),” the source told FMT.
FMT contacted Mindef for more details but was told that investigations are still ongoing.
The ministry recently published its findings on suspicious “land swap” deals involving military land, and urged the Malaysian Anti-Corruption Commission to investigate what it said could be discrepancies resulting in the loss of some half a billion ringgit involving 16 projects.
FMT now understands that after Lima 2015, a local company with strong ties to “a very senior” Mindef official (“Company A”), which was the appointed agent in Malaysia for MD Helicopters, had made a proposal to Mindef to acquire the six MD530G.
The proposal was then submitted to former prime minister and finance minister Najib Razak for approval.
It is understood that the finance ministry gave the green light for the acquisition from Company A through direct negotiations.
It is also learnt that the Economic Planning Unit exempted the deal from undergoing value management checks.
A contract was signed in November 2016, in which the helicopters were to be delivered in two batches with the second batch scheduled to arrive by last year.
As per the contract, Company A was paid 35% of the contract value, amounting to some RM113 million.
“The main issue is that no real due diligence was done with the government,” said the source, adding that the approval was given just about four months after submission of the proposal.
“The decision-making process for vital military assets would take time so that market research, due diligence, and value management checks could be done.”
The source said in the absence of due diligence, Mindef was not aware that at the time the agreement was made with Company A, it had already been terminated as the local agent for MD Helicopters over its failure to meet financial obligations.
“This was very irresponsible because it opened up the government to the risk of financial losses and a failure to obtain the helicopters.”
There were also concerns among the top brass of the Malaysian Air Force about the ability of the MD530G.
“One complaint was that it did not have a combat-proven record,” a retired air force official told FMT.
The contract was also “vague and lacked key details”, including issues over military specifications and the certificate of airworthiness (CoA), required by helicopters in order to operate.
There was also another major problem with the deal.
In 2015, Company A sent a proposal to Hishammuddin worth US$60 million.
“Just three months later, it submitted another proposal, this time over US$70 million,” the source told FMT.
“In just three months, the price inexplicably went up by over 20%.”
A separate investigation into Company A found that it was financially weak before the deal was struck, having suffered losses in 2015 and 2016.
The deal is also believed to have been the first contract for the company, which had no experience in implementing a multi-million ringgit agreement.
“It only owned computers, furniture and office supplies valued at under RM50,000. Mindef could have gone directly to MD Helicopters and saved millions in taxpayers’ money.”
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