DRB-Hicom may have to pay sum over terminated project

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PETALING JAYA: The Government can demand for compensation from DRB-Hicom Bhd for the estimated RM1.14bil loss over the Ipoh-Rawang double track railway.

According to the Auditor-General’s Report 2008, the Gov­ernment could do so if the contract for DRB-Hicom, as the original contractor of the Ipoh-Rawang double track railway project, was terminated due to its failure to complete the package.

The project was subsequently delivered by UEM Construction Sdn Bhd.

As such, the Government should provide a certificate showing clearly the total cost incurred to complete the entire package, such as the amount paid to DRB-Hicom, the cost to be paid to UEM Construction and other monies involved.

Any difference between the cost to complete the project and its original amount should be claimed from DRB-Hicom, the original contractor.

Based on the auditors’ calculation, the Government suffered an estimated RM1.14bil loss.

The report proposed that the Transport Ministry determine the actual cost borne by the Government. However, the Government might not be able to demand the total amount from DRB-Hicom as the maximum liability allowed to be claimed was only 10% of the contract value.

As at December 2008, the implementation cost for the project escalated by RM1.43bil to RM5.77bil higher than its original contract value – RM4.34bil.

Audit check found that the cost overrun was because the government had agreed to pay a sum of RM425mil to DRB-Hicom for additional renovation works after the company forwarded an appeal with justifications to the then prime minister.

The Finance Ministry approved to pay the sum through an amicable settlement on April 20, 2006. And, as of December 2008, RM371.78mil had been paid to DRB-Hicom.

Earlier, DRB-Hicom had demanded RM808.68mil from the Government to bear the cost of renovation works.