Sunday, November 19, 2017

Dato’ Seri Najib Razak should explain why he insists on changing MRT3 project delivery model despite singing praises of the purported MRT1 “success story”

In his speech at the 2017 SME Annual Conference last week, Najib said that the MRT costs were kept “below budget” because of the “high quality of local companies” that were chosen through its “rigid and transparent tender exercise”.

If that’s the case, then why are we seeing a tender exercise for MRT3 with questionable transparency, thin on project specifications and with financing requirements that would disqualify all of the “high quality local companies” that Najib has praised?

MRT Corp announced last week that the MRT3 project would be awarded as a turnkey contract rather than the project delivery partner (PDP) model used for MRT1 and 2. This means that the tender process for MRT3 consists of a single tender estimated to be worth between RM40 - 50 billion.

By comparison, the tender process for MRT1 and 2 was made up of multiple tenders for different parts of the project led by a “Project Delivery Partner”. For MRT3, these smaller packages will all be subcontracted by the main turnkey developer.

In addition, the MRT3 tender requires any tenderer to provide financing for the project of no less than 90% with a repayment period of no less than 30 years on top of an 8 year moratorium. If the project costs RM50 billion, that means the tendering company or consortiums would need to provide at least RM45 billion in financing.

Dato’ Seri Najib Razak have argued that MRT3 may save on financing cost.  However, what is the point of lower financing cost, if the actual cost of the project becomes substantially higher resulting in much higher cost of project despite the lower financing cost?

There is no question there are no companies in Malaysia who are able to provide that scale of financing despite having all the necessary qualities and technical skill-sets to complete the project. Financing for MRT1 and 2 was undertaken by MRT Corp through DanaInfra, which freed bidding companies from having to provide their own financing options.

Worse, the tender period itself is a ridiculously short 45 days for a massive RM50 billion project.  In fact, even the MRT alignment of the line has yet to be announced by MRT Corp.

This raises a further question – is the entire MRT3 tender exercise skewed in favour of particular parties?  Why is Dato’ Seri Najib Razak going out of his way to contradict himself?

As I’ve stated previously, all the above questions only go to prove that there’s more than it meets the eye with the latest ‘mysterious’ decision to switch the project model from the much ‘praised’ PDP to the turnkey cum financing model.
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