DRM-HICOM wins $425 million without Arbitration

All the time, whenever there is a claim which the government disputed, the superintendent officer and the project team representing the government, stood on hard ground.

The government represented by the superintendent officer were prepared to go to court or arbitration to remedy.

But each time, when it was to be up for hearing, the government, advised by the attorney general office, would back off and sought out of court settlement; they call it compromise. In reality, they knew they would lose, because they didn't have enough supporting documents and evidence to back up their contention; impliedly, it was an admission of wrong and admission of a breach of contract.

It's no different this time.

DRB claimed variation order works for a balooned up sum of $900 million. They got $425 million bonus; courtesy of the government.

At first the S.O. stood firm to deny the claims as frivolous and vexatious. When the time to be present at the court of arbitration, they back out and sought refuge behind a compromised solution.

Why were they prepared to pay now, and such a hefty sum?

Is it the Syed Mokhtar factor?

DRB-HICOM is now in further talks with the Government on liquidated ascertained damages and the release of performance bond. It said is hopeful and positive that this matter will also be resolved soon.

DRB-HICOM Bhd, announced yesterday that the Government has finally agreed to pay RM425 million for additional works done on the Rawang-Ipoh electrified double-tracking rail project. The settlement is for the payment of variation order and loss and expense claims for the extra works, it told Bursa Malaysia Bhd yesterday.

The Rawang-Ipoh track forms part of the national railway firm Keretapi Tanah Melayu Bhd's RM14 billion project to lay parallel lines from Padang Besar to Johor Baru. DRB-HICOM, which is now controlled by tycoon Tan Sri Syed Mokhtar Al-Bukhary, began work on the RM2.6 billion rail project in mid-2000 and was at first given until the end of 2002 to complete the stretch. The deadline was later extended to December 2004. The group was reported to have completed about 88 per cent of the 179km stretch. In June, the Government terminated the contract with DRB and appointed UEM Builders Bhd, one of the sub-contractors of the project, to complete the unfinished portion of the project.

Analysing Matrade Fiasco

Samy Vellu finally relented; he confirmed that the government can't sue the directors of PISB as it is now insolvent.

To this, Brendan Periera had to say: Welcome to the world of Perangsang International Sdn Bhd (PISB), the contractors who clinched the deal to build the Matrade building.

Brendan recalls the History of the Fiasco

In 1993, the PWD called for a limited tender to build the Matrade building and estimated that it would cost RM175 million and take 125 weeks to complete.

After studying the 14 bids, PWD recommended that Ireka Construction be given the job. The company promised to complete the job in 138 weeks for RM157 million. The recommendation was forwarded to the Finance Ministry and was promptly dumped.

The ministry wanted the 14 companies to re-submit their bids. But two days after it issued that directive, the Finance Ministry surprisingly ordered PWD to negotiate directly with PISB.

Why this company was given the contract still stumps the people at PWD.

From the start, there were problems. PISB obtained the development order late and it needed three extensions, delaying the completion by 686 days. When it completed 98 per cent of the project in 1999, the PWD discovered cracks in the structure and ordered PISB to carry out repairs. The contractor refused, saying that it had carried out the project according to specifications.

PWD and the Finance Ministry — now under a new minister — obtained the services of Arup Consultants. Even after the consultants concurred with PWD’s findings on the structure of the Matrade building, PISB refused to carry out remedial work.

At this point, you have to sit back, digest what has happened and ask some elementary questions.

Question number 1: Why wasn’t PISB or its directors sued in 1999 for not doing their job competently? Why wait until now to visit the possibility of taking action?

Question number 2: Were the terms of the contract so generous that the contractor could walk away without agreeing to do remedial work?

Brendan posed this question to ask: Can the money be recovered?

According to Brendan: There is a better chance of Malaysia qualifying for the 2010 World Cup than PISB paying any compensation.

And here is why: PISB was sold off to Tajuk Modal on July 19, 2004, for RM2. PISB was renamed Tajuk Construction Sdn Bhd and the latter was wound up on Jan 18 this year. In short, PISB doesn’t exist anymore. In any case, it would have been tough to go after the directors of PISB. The contract was signed with the company and unless the directors gave any personal guarantees, they would not be liable in a personal capacity.

Some options appear available to the authorities.

One: Lodge a police report, find out if the decision by the Finance Ministry was above board and pursue any wrongdoing — no matter where it leads.

Two: Urge the Selangor Government to make good the RM95 million owed to the Federal Government. After all, before it tanked, PISB was a subsidiary of the State’s investment arm. Surely, the people at Shah Alam have a moral obligation to right this obvious wrong.

Would the government learn a lesson or two from this fiasco?

Or, will history repeat itself, ...sooner rather than later?

Matrade Finally Complete?

After 9 years, and after overspending more than $120 million over and above the original budget, the project was finally completed.

A handover ceremony was held in the building in the presence of International Trade and Industry Minister Datuk Seri Rafidah Aziz and Works Minister Datuk Seri S. Samy Vellu.

Rotol-AMS-Bumi Technologies Sdn Bhd, the contractor appointed to carry out the balance works had completed 39 days ahead of schedule. The appointment of new contractors to rectify the defects saw costs balloon from an initial RM167 million to RM287.51 million, with about RM64.8 million spent on repairs.

The building was finally completed by RotolAMSBumi Technologies Sdn Bhd and Syarikat Pembinaan Anggerik Sdn Bhd together with NSC Mekanikal Fastcoll Corporation Sdn Bhd.

Believe it? The repair works costs $64 million and the outstanding works cost $56 million? The contractor must have made a fortune! Anyway, it was better than the previous contractor who had wallop $200 million and abandoned the project. The hardest to swallow is that the previous contractor, Perangsang International Sdn Bhd (PISB), is owned by the Selangor Govt.

PISB was a subsidiary company of Kumpulan Hartanah Selangor Bhd (KHSB), an investment company of the Selangor government.


The Works Ministry plans to bring former board members of Perangsang International Sdn Bhd (PISB) to court for the nine-year delay in completing the Matrade building.

Samy Vellu said he had personally investigated the company and its directors and all evidence gathered would be produced in the event of a court hearing.

Works Minister Datuk Seri S. Samy Vellu said although the company was now defunct, the ministry would not remain silent. “Although the company no longer exists, we will go to the court and take action against the directors,” Samy Vellu said. “They cannot just run away and not take responsibility,” he said, adding that construction costs went up by 70% due to the delay.

Work on the building in Jalan Duta began in 1994 and was targeted for completion in 1997. Due to several delays and the appointment of a new contractor, the original cost of RM167mil ballooned to RM287.5mil, with RM64.8mil spent on repairs.

The original contract to PISB was terminated last March and the company ordered to pay late delivery charges of RM41,750 a day for 2,276 days.

In 2004, the shares of PISB were sold to Tajuk Modal Sdn Bhd. In July, K. Hartanah announced that the group was selling Perangsang to a company called Tajuk Modal Sdn Bhd for RM2. Perangsang had net liabilities of RM7.6mil at the end of last year.

The directors of Tajuk Modal are Chong Sang and Yap Fook Sang.

K. Hartanah said it was selling Perangsang as it was in line with the group's scheme of reconstruction, which is to divest non-core businesses, and to streamline, regroup and concentrate on its property development activities.

International Trade and Industry Minister Datuk Seri Rafidah Aziz expressed regret that her ministry had to bear heavy losses as a result of the delay.

"Matrade, apart from having to rent elsewhere, also lost out in terms of opportunity cost. Total rental earnings forgone from the building’s exhibition space was an estimated RM120mil, the equivalent of building another 24-storey building," she added.

As a client, Rafidah said, she was disappointed and wanted the Works Ministry to not only take action against the former PISB directors but also look into the probability of any irregularities during the tender process. While waiting for its new building, Matrade rented premises at Wisma Sime Darby and also a small exhibition hall at Wisma PKNS in Jalan Raja Laut, Kuala Lumpur.

Matrade staff members are expected to move into the new office beginning in July.

Read the earlier article: Matrade RM167 Million Damages

Police HQ Project in Tronoh

It took 18 months to build the $19.183 million Bandar Baru Seri Iskandar Police HQ project in Tronoh, Perak, to this state and it looks completed.

But this project was abandoned in July 2002.

Arcadia Architect's partner, Zulkiflie Amir Samad told Prime Minister Abdullah Badawi that the 11ha project needed a major make-over after vandalism and the ravages of nature caused extensive damages.

It now needs another 15 months to be made fit for occupation after being left dormant (abandoned) since July 2002.

The project architect is Arcadia Architect & Associate.