KUALA LUMPUR – The Malaysian Armed Forces (MAF) armoured vehicle readiness was compromised by serious procurement and contract management failures, with the Defence Ministry potentially losing millions in uncollected penalties, the Auditor-General’s Report 2/2025 revealed.
The audit, tabled in Parliament yesterday, flagged late deliveries, questionable payment practices, and violations of procurement rules in contracts worth RM7.8 billion involving five key platforms – Gempita, Pendekar, Adnan, Lipan Bara and MIFV – between 2020 and 2023.
Among the most striking findings are that the government only issued a RM162.75 million penalty notice two years after a local contractor failed to deliver 68 Gempita vehicles on time. Despite the delay, the full RM7.52 billion in contract payments had already been made, raising concerns about accountability and oversight. The performance bond for the contract, RM53.93 million, was far below the actual penalty sum.
Maintenance and support services also faced delays. The audit found that spare parts and repairs for several vehicles were up to 227 days late, yet an estimated RM1.42 million in penalties had not been imposed as of end-2023.
Beyond operational issues, the report highlighted governance lapses, including procurement splitting by several Responsibility Centres (PTJ). Contracts valued at RM107.54 million were broken down into 86 small-scale packages — allowing them to bypass the open tender threshold of RM500,000 and be awarded via direct negotiation or quotation.
This “pecah kontrak” (procurement splitting) approach was singled out by the auditor-general as a serious violation of financial rules and a high-risk practice that weakens transparency and value-for-money safeguards.
The MAF acknowledged the audit’s findings and said it was working to improve coordination and compliance across departments.
“We are tightening internal coordination to ensure all procedures are fully followed,” MAF said in its response to the report.
While the Defence Ministry attributed some delays to disruptions during the Covid-era movement control order (MCO), the audit stressed that liquidated damages should have been issued during the contract period to protect government interests.
The auditor-general recommended tighter procurement controls, prompt enforcement of penalties, and an end to ad hoc and fragmented procurement – especially in cases where no master contract is in place, such as for the MIFV and Lipan Bara.
The review was part of a wider audit involving RM48.9 billion across five projects under seven ministries. A total of 22 recommendations were issued for corrective action. – July 22, 2025