Kuala lumpur: The Ministry of Defence has announced plans to develop a new contract monitoring system aimed at improving efficiency and transparency in managing asset and project procurement. This initiative is intended to facilitate earlier enforcement of actions against project delays.
According to BERNAMA News Agency, Deputy Defence Minister Adly Zahari revealed that the decision to develop this system follows findings from the Auditor-General’s Report (LKAN) 2/2025. The report highlighted significant shortcomings in the enforcement of contract terms, particularly regarding the imposition of late penalties.
Currently, under the ministry’s procurement system, penalties for project delays are only enforced when extension of time (EOT) applications are considered. Adly noted that there is potential for earlier enforcement, which the new system aims to address. In his statement, he emphasized that an EOT should be accompanied by scenarios that include the imposition of penalties whenever feasible.
Adly further disclosed that the ministry had issued a late penalty notice of RM162.75 million to the supplier of 68 Gempita armoured vehicles and two non-armoured vehicles due to delivery delays from 2020 to 2023. The supplier appealed for a waiver, citing force majeure conditions like the COVID-19 pandemic and the Russia-Ukraine conflict. However, the Contract Coordination Panel (CCP) decided to enforce the full late penalty.
The Deputy Minister also mentioned that the performance bond of RM53.93 million and the remaining penalty would be recovered either through set-off from the current contract or collected separately. Instructions to claim the bond from the bank were issued on June 25, 2025.
Additionally, Adly addressed issues related to procurement through the ‘breakdown’ method, involving RM107 million. This approach was necessitated by logistical challenges and varying technical expertise required for different assets. He explained that this method ensures assets remain operational in strategic locations like Kota Belud, Port Dickson, and Gemas, thereby maintaining national security.