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MMC-Gamuda on Hook if MRT Stalls, Blows Budget


KUALA LUMPUR, March 28 - The Project Delivery Partner (PDP) for the new KL MRT, Gamuda-MMC, will be have to pay financial penalties if the project experiences any delays or cost overruns said the Land Public Transport Commission (SPAD) today.

It also said that if Gamuda-MMC bids for the MRT tunnelling works, it cannot be part of the tender evaluation committee.

SPAD, however, also came out in defence of the appointment of the Gamuda-MMC consortium as the PDP, saying that having an experienced contractor as a project manager offers significant benefits. This comes as critics have questioned the selection of Gamuda-MMC as the government’s partner without an open tender and whether the consortium would gain an advantage over other vendors when bidding for the tunnelling works.

ASPAD CEO Mohd Nur Kamal acknowledged that the size and complexity of the MRT project carries significant risks of delays and cost overruns, but the government has planned to take the delivery risk, including timing and cost, out of the project to protect public interest.

He added that the PDP concept is an enhancement of the project manager role with certain built-in incentives and penalties that are designed to align the interest of PDP with the government

“In the case of the PDP, the risk of delays and cost over-runs is now borne by the PDP for a fee,” said Mohd Nur in a statement to the media. “The PDP provides a single point of accountability to deliver the entire project within agreed time and cost targets, or face financial penalties, something a pure engineering consultancy has no financial capacity or management capability to bear.”

The commission’s chief said that as the risk takers and the party responsible for the overall health of the project, it was “crucial” that MMC-Gamuda as the PDP be vested with the necessary authority to carry out its responsibility of managing all aspects of the project including packaging of works, calling for tenders, evaluating the bids, recommending the contractors and jointly awarding of contracts and ensuring the performance of each and every contractor appointed — even the powers to step-in and take-over delivery of contracts that are behind schedule where necessary to ensure targets are met.

He assured the public, however, that there will be additional oversight and that MMC-Gamuda would only act within agreed guidelines and in consultation with the government and the government’s appointed VMS (Value Management Study) Consultant, McKinsey, who will scrutinise project plans and specifications to ensure optimum value and cost efficiency.

An independent checking engineer (ICE) will also be appointed to monitor and perform verification works to ensure the project is delivered according to plans and specifications. “Ultimately, the government will have the final say,” he stressed.

Nur Kamal also addressed fears that MMC-Gamuda would have an unfair advantage over other contractors when bidding for the tunnelling works, which is the only portion of the MRT project that it is allowed to bid for.

Analysts such as CIMB Research had said in December last year that Gamuda-MMC has an edge in the bid for the RM13-14 billion tunnelling portion of the work especially since the prime minister had highlighted that an exception should be made in the case of awarding the tunnelling works and it is the only local contractor with experience.

He said that all works packages will be subject to competitive bidding and all bidders will be given the same project information and evaluated on the same basis including technical expertise, track record and financial terms.

“The PDP would have the opportunity to bid as it is the only Malaysian group with the expertise and track record to do so,” he said.

“To bar the PDP from bidding, though it has the capability, would mean that only foreign contractors will be involved, which is not necessarily in our national interest.”

The head of the commission also said that the appointment of experienced contractors for large and complex projects is a common global practice, especially for project owners that have not built up internal capabilities to manage large projects.

Among the global projects cited by Nur Kamal were the US$12 billion (RM36 billion) Crossrail project managed by Bechtel/Systra, the US$10 billion London Olympics managed by Laing O’Rourke and the US$16 billion Korea High Speed Rail project managed by Bechtel/Hyundai.

Nur Kamal also said that a large experienced contractor had advantages over pure engineering consultancies as they had better competency in commercial procurement strategies, highly developed skills interfacing and co-ordinating many different contractors, strong tender management and award skills, well-developed supply chain management skills and sufficient balance sheet strength to take on the risk of cost overruns and delays.

“Allow me to reiterate the government’s commitment to closely scrutinize the costs and delivery of this crucial national infrastructure project for the benefit of the Malaysian public,” he said.

MMC-Gamuda had first mooted the idea of a MRT system for the capital city in the middle of last year and the Najib administration later adopted the proposal as part of the 10th Malaysia Plan.

It was later appointed as PDP following its proposal to be project manager for the entire system.

The KL MRT has been touted as the country’s most expensive construction project but is also seen as a much needed initiative to help the city catch up with its regional rivals in terms of city rail investment and relieve congestion.

The project’s plans are now on public display and comment can provided via email to feedback@kvmrt.com.my or through the SPAD toll-free line at 1-800-82-6868.

Disclaimer: Such news and article is a verbatim copy from other websites and is solely for the purpose of providing general information about the proposed KL MRT, it may be changed by the Project Owner of the KL MRT at any time and must not be relied upon in connection with any investment decision. The website owner should not be held liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein.

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