The government saved RM5.22 billion, or 23 per cent of the cost of building the Mass Rapid Transit 2 (MRT2) project through renegotiation with MMC-Gamuda Joint Venture, the project delivery partner (PDP).
Finance Minister Lim Guan Eng said this was achieved after the Ministry of Finance, together with the Attorney-General’s Chamber, the Ministry of Transport and agencies such as Mass Rapid Transit Corporation Sdn Bhd (MRTCo) and the private sector, embarked on a cost rationalisation exercise of the MRT2 since May 2018.
“Consequently, the Cabinet on October 3 accepted an offer made by MMC-Gamuda, through their letters dated August 15 and September 7, to complete the above ground portion of the MRT2 project as a turnkey contractor at the cost of RM17.42 billion, versus the original cost of RM22.64 billion.
“This is a RM5.22 billion or 23 per cent savings achieved through a reduction in cost and rationalisation in work scope without cancelling any of the above ground stations,” he said in a statement.
However, Lim said the government and MMC-Gamuda failed to reach an agreement relating to the underground portion of the construction project, resulting in the Cabinet deciding to terminate the underground contract.
All unfinished underground work would be re-tendered out through an international open tender process.
“This decision was made after considering that the government can achieve further significant savings by re-tendering the underground work package compared with the offer made by the existing contractor,” he said.
The finance minister also said the government held steadfastly to obtaining “value for money” on all government expenditure, especially when large borrowings were required to complete any project.
“The billions of ringgit saved will reduce debt and interest that the government will need to repay, which ultimately will be borne by the people through future taxes.
He said more savings would be gained when the underground portion is re-tendered soon.
“Furthermore, the expected cost reduction for the MRT2 project, will cut the fares future rail passengers will have to pay, and boost public transport usage in the Klang Valley,” he said.
The MRT2 project was approved by the Cabinet on Feb 26, 2014 with an initial estimated cost of RM28 billion excluding consultant fees, PDP fees, interest cost and the overhead cost for MRTCo.
However, the MRT2 cost ballooned to RM56.93 billion due to the approval for a Railway Scheme that had a new line extended to Bandar Malaysia, a change in scope, depreciation of the ringgit and other factors.
The overall cost comprised of RM39.35 billion construction cost, RM6.18 billion land acquisition cost, RM0.36 billion for feeder bus and depot cost, RM1.2 billion of other costs, as well as, RM9.84 billion worth of interest expenses during construction.