On 5th January 2010, RPK posted an article in Malaysia Today titled “How RM2 million a year became RM21 million a year for 15 years”. The article makes reference to a proposal by Mindef for a leasing contract for the provision of ACMI system to the RMAF. Attached to the article is a letter from Mindef's Secretary General to the Defence Minister dated 2 April 2007 suggesting that the leasing contract be considered and awarded to Aerotree Defence & Services Sdn Bhd. The proposal was sanctioned by the Defence Minister on 11 April 2007, and noted that the contract was to be funded via Private Finance Initiative (PFI). Mindef Secretary General then was Dato Sri Hj. Ahmad Latffi Hashim and the Defence Minister was Dato' Sri Najib Tun Razak.
The issue that many had raised concerning the contract awarded to Aerotree Defence & Services Sdn Bhd is not whether the RMAF requires such a service, but rather the manner in which the contract was awarded, and more importantly, whether the system offered meets the required specification and requirement of the RMAF.
While one would agree that an outright purchase of the ACMI system would be too costly, given the financial constraints of the government today, a leasing contract seem to be the best option for the short term.
I am told that Mindef had already concluded a leasing contract with Aerotree Defence & Services Sdn Bhd in early January this year, and the latter is believed to have collaborated with DRS Technologies Inc, of the US for the system to be delivered within 18 to 24 months. This would mean that the system will only be available to the RMAF rightfully, towards the end of this year.
Those who are privy to this contract have raised a number of questions and concerns as follows:
1. Why was the contract done through Direct Negotiation and not through the Open Tender System? They claim that the Direct Negotiation process contradicts existing Treasury Instructions and policy statement declared by the Minister of Defence himself. The general perception that people have towards Direct Negotiation smack off cronyism and corruption.
2. The contract does not state clearly the technology to be used. If the contractor is considering a similar technology to the one used by the Royal Thai Air Force (RTAF) in Korat, Thailand, then obviously the RMAF will have to satisfy themselves with an outdated technology. The RTAF is said to be upgrading to a more capable 5th generation ACMI technology obtained from the US, and it is most unlikely that the RMAF will be offered the same upgraded technology. One only need to confirm this from Aerotree Defence & Services Sdn Bhd. It is public knowledge too that the US has recently decommissioned 2000 of the 4th generation ACMI pods, and is most likely that this will be sold to Malaysia.
3. PFI funded projects provides a means for the government to acquire certain capability. However, I am told that Treasury is directed to pay a down payment to the contractor, and this smacks of corrupt practise. In addition, awarding a long term 'firm fixed rate' service contract beyond 3 to 5 years is also abnormal. What if the contractor fail to deliver? Should the RMAF continue paying the 'firm fixed rate' even though the service provided does not meet the technological requirement of the day?
4. Because the award of contract was through Direct Negotiation, there could not have been a proper technical evaluation carried out, and the opportunity to look into other options available in the market. Besides the US and Israel, Germany and South Korea are also known to have produced the ACMI system. Why hasn't Mindef not looked into this option?
5. Many have voiced concern that the RMAF will face serious problems associated with software interface with the system fitted on the SU 30 and MiG 29, should the contractor proceed with the supply of the US 4th generation ACMI. The other serious problem will be the disclosure of Russian software technology to a third party, and this could cause a diplomatic furore.
I hope Mindef and the RMAF in particular, have done a serious in-depth study regarding the ACMI system that they are likely to get, prior to the award of contract of this highly sensitive system to Aerotree Defence & System Sdn Bhd. Should there be a failure, who then do you think will assume the responsibility of the failure? Your guess is as good as mine.
CRUSADE AGAINST CORRUPTION