THE Auditor-General’s Report 2/2025, tabled in Parliament today, has flagged major shortcomings in the administration of contracts for armoured vehicles by the Malaysian Army (TDM), alongside governance and compliance issues in FELCRA Berhad’s acquisition of palm oil estates.
The audit revealed that between 2020 and 2023, procurement contracts worth RM7.8 billion were awarded for key military assets including the Gempita, Pendekar, Adnan, Lipan Bara and MIFV armoured vehicles. While intended to enhance the army’s operational readiness, poor contract management and delivery delays have raised concerns over value and oversight.
“A key finding was the significant delay in the delivery of 68 Gempita vehicles by a local company, resulting in a liquidated damages claim of RM162.75 million, which was only pursued on 15 January 2025—746 days after the contract expired on 31 December 2022,” the report stated.
Despite the delay, the government had already disbursed RM7.52 billion in payments. The audit noted that the contract’s performance bond, valued at RM53.93 million and expiring on 31 December 2024, was insufficient to cover the full penalty.
Further issues were reported in the delayed maintenance, repairs, and delivery of spare parts for Gempita, Adnan and Pendekar vehicles, with an estimated penalty of RM1.42 million still not imposed by the end of 2023, despite service delays of up to 227 days.
The report also criticised certain Responsibility Centres (PTJs) for engaging in procurement splitting to avoid open tenders. “Direct purchases and quotations amounting to RM107.54 million were made between 2020 and 2023, despite the requirement for open tender for any procurement exceeding RM500,000 annually,” it said.
In addition, the absence of master contracts for some platforms such as MIFV and Lipan Bara has forced PTJs to undertake ad hoc procurements, heightening the risk of mismanagement.
FELCRA Told to Re-Evaluate Estate Investments
Separately, the report urged FELCRA Berhad to reassess its palm oil estate acquisitions to ensure investments reflect sound governance and are financially sustainable.
The Auditor-General recommended that FELCRA’s board take direct responsibility for ensuring all acquisitions are in line with fiduciary duties and good governance practices.
“All changes to board decisions must be formally recorded, supported by clear new resolutions, and properly minuted by the Company Secretary in accordance with the Constitution of FELCRA Berhad,” the report stated.
FELCRA was also advised to set a minimum lead time between board approval and agreement execution to allow for proper risk evaluation. It further recommended updates to FELCRA’s Procurement Manual, in effect since September 2024, to require the appointment of qualified external consultants to conduct feasibility and market value assessments before acquisitions are confirmed.
These assessments, the audit stressed, should be presented to the board to support investment decisions.
In addition, the audit called for detailed financial analysis—covering return on investment, break-even points, hidden costs, lease liabilities, and required rehabilitation works—before any estate acquisition is approved.
“A thorough verification of movable assets must also be conducted before and during the transfer of vacant possession of any estate, ensuring physical assets match what is listed in the sale agreement,” the report added.
The audit identified governance deficiencies in four FELCRA acquisitions between 2022 and 2024, involving a combined value of RM241.76 million. The estates concerned were Telupid in Sabah, and Dabong, Sungai Raiwt 2, and Aring in Kelantan.
The full report is available at [https://lkan.audit.gov.my](https://lkan.audit.gov.my). - July 21, 2025
