Government losses can reach RM28bil a year – or more due to overpayment

(The Star) – The Government could be losing billions of ringgit every year through excessive payments for contracts and procurements for a wide range of things ranging from water tunnels to IT contracts and purchase of computers.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah acknowledged that the amount is a lot but could not give an exact figure.

Estimates based on government spending indicate that if one assumes overpayment on contracts is just 20%, then the losses could come up to as much as RM28 billion a year.

Other mains points from our StarProbe are:

● Hundreds of millions of ringgit in overcharging are taking place for ICT, which is a multi-billion-ringgit industry. Contract prices can sometimes be more than 50% than if the deals were done on a tender basis.

● Project finance on favourable terms from foreign countries – the so-called soft loans – can result in contractors being restricted largely to those from the country providing financing, resulting in considerably higher costs.

● Open tenders, done properly and with appropriate evaluation, are one of the most effective ways of reducing the costs to government. At least two state governments see great benefits in open tenders.

● Malaysia falls short in comparison with other countries in terms of calling for and disclosure of open tenders and their details. There is no centralised system.

● The Government is keen to cut wasteful spending and will, as far as possible, have open tenders from now on.