Dr. Lim Chong Eu has called for separate on the $10 million Batu Ferringi sewerage project tender by MPPP to be submitted by the State Secretary and State Legal Adviser to study whether to set up a Committee of Enquiry into the tender award.

By Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in Penang on Friday, 7.8.1987 after leading a DAP delegation to meet Penang Chief Minister, Dr. Lim Chong Eu, on the $10 million Batu Ferringi Sewerage Project Scandal in the Chief Minister’s Office at 9.30 a.m.

Dr. Lim Chong Eu has called for separate on the $10 million Batu Ferringi sewerage project tender by MPPP to be submitted by the State Secretary and State Legal Adviser to study whether to set up a Committee of Enquiry into the tender award.

A six-man delegation, comprising Gooi Hock Seng (MP for Bukit Bendera & Assemblyman for Ayer Itam) Peter Dason (MP for Bayan Baru) Tan Loo Jit (Assemblyman for Batu Lanchang) Lim Hock Seng (Assemblyman for Bagan Jermal), N.Shammugam (Assemblyman for Prai) and I myself, met the Penang Chief Minister, Dr. Lim Chong Eu, for an hour over the $10 million MPPP tender award for the Batu Ferrengi sewerage project and the Thean Teik Estate problem.

At the meeting, the DAP gave 15 reasons why the Penang State Government should invoke Section 165 of the Local Government Act 1976 and suspend the Majlis Perbandaran Pulau Pinang, as well as establish a full-scale Committee of Inquiry into the tender award.

Dr. Lim said that he was ‘very concerned’ about the Batu Ferringi tender award, and that he is asking the State Secretary and the State Legal Adviser to submit separate reports to him, and the State Government would consider whether to direct full investigations into the tender award. He denied a DAP allegation that the State Government had been remiss in its responsibility in allowing the $10 million Batu Ferringi sewerage project scandal to drag out for 16 months.

15 Reasons why Penang State Government should order full investigations into the improper and irregular tender award for the Batu Ferrengi sewerage project

The 15 grounds which we submitted as reasons why the Penang State Government should suspend the MPPP and institute full investigations into the tender award for gross impropriety and irregularity are as follows:

1. Rejection of lowest bid

The rejection of the bid by Syarikat Omar Merican (SOM) – one of the three short-listed companies from 18 tenderers and 29 proposals – when it was the lowest:

Bids by the three short-listed companies:
i. SOM – $9.3 million
ii. L & M Prestressing Sdn. Bhd. – $11.5 million
iii. Loh & Loh Construction – $10.4 million

The Technical Committee set up by MPPP to evaluate the three tenders supported all three bids, awarding L & M 85 points, SOM 83 points and Loh & Loh 80 points. As the technical points for the three bids were so comparable and close, the bid by SOM should have been given the award as it was $2.2 million cheaper than the bid by L & M.

2. Unjustified $2.9 million topping up of SOM’s bid

At the MPPP meeting of 17.4.1986, without knowledge of the other members of the Technical Committee, the Director of Engineering with the agreement of the MPPP Secretary, submitted a final report topping up SOM’s bid by $2.9 million on the ground that it was ‘short-designed’. As a result, SOM’s bid became $240,000 more expensive than L & M’s. the $2.9 million topping up was made without the knowledge or consent of SOM. This resulted in the disputed decision of the MPPP at the meeting to award the contract to L & M.

An Ad Hoc Committee set up by MPPP at its meeting of 8.5.1986 to investigate into the tender exercise reported to he MPPP on 19.6.1986 that the $2.9 million topping up of SOM’s tender bid was unjustified.

3. Breach of MPPP Standing Orders

The breach of Standing Orders of MPPP where the ‘decision’ of MPPP to award the contract to L & M on 17.4.1986 was implemented the very next day (by way of a Letter of Offer by Director of Engineering) on 18.4.1986, without waiting for confirmation by the MPPP at its next meeting on 8.5.1986.

4. Two letters of acceptance by L & M, both of which are invalid

There are two letters by L & M in response to the Director of Engineering’s Offer of 18.4.1986:

i. One dated 21.4.1986, accepting with conditions, which means no contract had been formed;

ii. One of similar date, but received by MPPP only on 21.5.1986, accepting without conditions the Director of Engineering’s Offer of 18.4.1986. This second letter of purported acceptance cannot cure the first letter (which because it contained conditions, does not constitute acceptance), for the Offer of 18.4.1986 was valid for only two weeks. Once the two-week period expires, the Director of Engineering’s Letter OF Offer lapses, and there is nothing left for the L & M to accept to create a contract on 21.5.1986.

Or did the Director of Engineering waive the two-week deadline for the acceptance of the Letter of Offer, and if so, who gave the Director of Engineering the right to ‘waive’ the two-week deadline.

5. L & M not informed to suspend all work on project pending review

On 19.5.1986, the MPPP Ad Hoc Committee decided that L & M should be informed that it should suspend all work on the project pending a review by MPPP. The MPPP Secretary, although he earlier agreed with the decision, did not implement the decision, and L & M was not informed that it should not begin work on the project.

6. Breach of Treasury Regulations

The breach of Federal Treasury regulations as I understand that any tender exceeding $5 million should be referred first to the Federal Treasury.

7. MPPP not allowed to decide on tender

Following the Ad Hoc Committee’s finding that the $2.9 million topping up of SOM’s bid was unjustified, and that SOM’s bid was still the cheapest, the MPPP was not allowed to make a decision on the tender exercises as the MPPP Secretary referred the matter to the Implementation Co-ordination Unit (ICU) in the Prime Minister’s Department. The MPPP members were informed on 21.8.1986 that the ICU referred the matter back to the council, and a New Technical Committee was then formed to deal with the tender exercise.

8. Unfair opportunities given to L & M
The New Technical Committee gave L & M several opportunities to vary the tender, which was denied to SOM. L & M initially proposed a $400,000 reduction of its tender bid, but when this was rejected, acted on the suggestion by the MPPP Secretary to make a $726,000 reduction. The MPPP decided at a special meeting of 9.10.1986 to reject the second proposal and to call for new tenders for the project.

9. Bias and injustice to SOM

SOM, with its lowest bid, should have been awarded the contract on at least four occasions:
i. When it submitted the lowest id, before the Director of Engineering unjustifiably topped it up by $2.9 million;
ii. After the Ad Hoc Committee had found that the $2.9 million topping up was unjustified, and that SOM’s bid was still the cheapest;
iii. When the New Technical Committee rejected L & M’s proposal for a $400,000 reduction; and
iv. When the MPPP rejected the L & M’s proposal for a $726,000 reduction on 9.10.1986 and decided to call for new tenders.

10. MPPP decision of 9.10.1986 disregarded

The MPPP decision of 9.10.1986 calling for new tenders were never acted upon. In November, L & M sued the MPPP for breach of contract and demanded damages for $5.5 million.

11. Improper re-ward to L & M

On 17..7.1987, the MPPP decided to re-ward the Batu Ferringi sewerage project to L & M at $10.3 million in exchange for the dropping of the suit by L & M. this is most irregular as it was made without rescinding the MPPP decision of 9.10.1986 to call for new tenders, and as a result of a threatened legal suit.

12. MPPP Disciplinary Committee biased and ineffective

The three-man MPPP Disciplinary Committee is biased and ineffective, for two of the three members are directly involved in the Batu Ferringi tender award and they voted by 2 against 1 that no disciplinary action should be taken in connection with the gross irregularity and impropriety of the tender exercises.

13. The ACA investigations into million-dollar bribe

The investigations by Anti-Corruption Agency into a million-dollar briber in connection with the Batu Ferringi sewerage project.

14. The failure of the nominated MPPP system and demands of public accountability

The Batu Ferringi sewerage project scandal highlights the failure of the nominated MPPP system, where nominated councilors prove to be ineffective and important, as well as unaccountable to the ratepayers.

15. The State Government has been remiss and negligent in allowing the scandal

The State Government has been remiss and negligent in allowing the Batu Ferringi sewerage project to take place.

Section 9(1) of the Local Government Act empowers the State Government to give directions of a general character to MPPP, (which must include the conduct of a proper tender exercises).

Section 9(2) gives the State Government the right to ask MPPP to furnish ‘such returns, accounts and other information with respect to the property and activities” as required.

These provisions made it clear that State Government has a direct responsibility and authority to make sure that the MPPP operates in a ‘clean, efficient and trustworth’ manner, and if not, to check any deviations or irregularities.