JKR Fails to Call On RM15.77 million in the Form of Performance Bonds for Terminated Projects.

AG report: 21 projects cancelled but PWD fails to recoup RM15.77mil

KUALA LUMPUR: The Public Works Department has yet to recoup RM15.77mil in the form of performance bonds for 21 terminated projects, states the Auditor General's Report 2012 on Tuesday.

A performance bond is a form of guarantee submitted by any contractor who obtains a Government contract.

It can be retracted by the Government if the contract is breached or if the contractor fails to complete or terminate the contract.

Audit checks revealed that only 30 performance bonds amounting to RM20.97mil had been fully recouped, while 21 bonds were partially recouped (RM26.08mil).

Terminated projects are based on contract terms, whether on mutual termination or unilateral termination.

Based on an observation report, 160 projects have been terminated as of Sept 2012, with a total contract value of RM3.137bil from 2007 to 2012.

The Audit suggested that PWD reclaim the amount not recouped from contractors whose performance bond had been obtained through the Guarantee Performance Fund (Wang Jaminan Pelaksanaan) method.

In response, the department said it had issued a letter in March this year to begin claiming the amounts, as suggested.

The AG report also stated that the department had failed to reclaim RM4.89mil advance payment for three terminated projects from banks, financial or insurance companies.

"The Audit believes this should not have happened as the department should consistently monitor advance payment, and should have filed claims before the bonds expire," the report read.

The department responded by saying it had impressed upon its officers the importance of filing claims before the respective expiry dates.

THESTAR