Thursday, May 24, 2012

Transport Minister Must Clarify Increase in RM12.5 billion Double Tracking Project Cost

The Business Times has reported yesterday that MMC-Gamuda is due to submit a RM1.5 billion variation order to the government for cost overruns in the Ipoh-Padang Besar Electrified Double Track (EDTP).

The report quoted an unnamed source claiming that “the civil works are 70 per cent completed, and the systems side, only 30 per cent. There are still land issues and other unresolved matters on MMC-Gamuda JV’s part.”

However, MMC-Gamuda has subsequently refuted the report, but admitted that it will be seeking claims for “expenses and losses” caused by the government.

Its Project Director, Datuk Paul Ha said that “MMC-Gamuda’s claim will be in accordance with the terms as stated in our contract, but it is too early at this point to even determine the amount and it will be nowhere near RM1.5 billion as stated in the New Straits Times.”

The value of the EDTP is worth RM12.49 billion and an increase of RM1.5 billion will mean a significant 12% increase in the cost of the project.  These additional claims has raised fears and concerns that the Ipoh-Padang Besar stretch of the EDTP will suffer the same fate as the Ipoh-Rawang segment where the cost of the project increased from RM4.2 billion to RM6.6 billion, or by more than 50%.

The Auditor-General has also in its 2009 report criticised the management of the project which involved a mid-term change of contractors – from DRB-Hicom which could not complete the works to MMC-Gamuda.  Despite failing to complete works agreed in the contractual terms, the Government had paid the DRB-Hicom consortium RM425 million as compensation or settlement for the termination of the agreement.  The Auditor-General had queried as to why the Government had not claimed liquidated and ascertained damages (LAD) from DRB-Hicom for failing to carry out its obligations in a time fashion.  The fiasco also resulted in a delay of the Ipoh-Rawang project by more than 5 years.

Therefore to prevent another repeat of the Ipoh-Rawang scandal, the Minister of Transport must explain the truth behind the above contradictory claims to ensure that the contractor, MMC-Gamuda is not attempting to conceal a possible variation order as an excessive “expenses and losses” claim against the Government.

Datuk Seri Kong Cho Ha must view the matter seriously to prevent it from becoming the second big cost-overrun scandal under his watch after the new low-cost airport, KLIA2 saw its construction cost balloon from an initial RM1.7 billion to a whopping RM3.9 billion.  He must not become MCA’s most famous “don’t know anything” minister who knows nothing about the projects under his watch.

In fact, to ensure all matters are above board, and to demonstrate the transparency preached by the Prime Minister’s Government Transformation Programme (GTP), the Transport Minister should take the initiative to call upon the Auditor-General’s office to conduct an audit on the project.  Weaknesses identified could then be rectified and the recommendations could be implemented immediately.

We should not wait until the projects are completed at substantially higher costs and delays, before the Auditor-General starts his audit.  By then, like the case of the Ipoh-Rawang EDTP or the RM12.5 billion PKFZ mega-project scandal, it will be too late to prevent the abuse of the tax-payers’ funds.
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