YOURSAY | 'Gamuda, since the Perak coup in 2009, you had near monopoly of all railway works…'

An open letter to MMC-Gamuda

Myop101: MMC-Gamuda should understand there is no free lunch. Making the government pay for the excesses means every single taxpayer in this country has to shoulder this added cost.

As it is, the government is now talking about how to sell assets and raise taxes, a bad proposition to all affected.

It is better to make these contractors to be honest with their costing, subject it to international open tender and see if it really costs so much or little to begin with.

Kim Quek: Unless the international consultant’s figures are grossly inaccurate, there is no doubt that there has been excessive profiteering in the original contract price for the underground portion of MRT2.

A further saving of RM2 billion is a moderate estimation, calculating from the figures produced by the finance minister’s political secretary, Tony Pua. It could be more if international tenders are called, particularly when the new government now obviously enjoys the trust of the potential tenderers.

The Pakatan Harapan government should stick to its guns while taking steps to mitigate the adverse impact on workers affected by this temporary suspension of construction.

Anonymous_1419577444: Even if Pua's calculation of additional RM2 billion savings is out by 50 percent, there will still be savings of RM1 billion for the country.

There is a secondary and more important underlying question: Why were former finance minister Najib Razak and the BN government overpaying by at least RM4.19 billion for the above-ground work?

Hplooi: Since the time of Abdullah Ahmad Badawi, government contracts (for turnkey projects) have been massively marked up.

While it used to be 10 to 20 percent from the 1980s up to the 1990s, it went up to 50 percent or even 100 percent by the turn of the century.

Note: Up to the 1980s, a vigorous process of competitive pricing was in place. But by the mid-to-late 1980s, the advent of 'turnkey' and "nego" started with commonly 10 percent mark-up.

Teej Dhillon: Pua stated that the independent consultant noted that there could be potential savings arising from the project cost, or rather, expect savings between RM4.19 and RM5.79 billion.

When such studies are performed, they are usually based on certain estimations that are subject to changes. For example, changes in commodity prices, inflation, taxes and other variables would cause savings estimations to change significantly.

Hence, the right questions that should be asked are:

1) Are the savings going to realistically materialise and do these savings outweigh any compensation that the government would have to pay to MMC-Gamuda due to this termination?

2) What is the indirect impact? If RM5 billion is taken away from MMC-Gamuda, this is a revenue reduction of RM5 billion.

How would this impact shareholders who consist of Employees Provident Fund (EPF), Permodalan Nasional Berhad (PNB) and other government-linked entities?

Would the government be shooting itself in the foot by exiting from this contract due to the above two issues?

3) If the government is so confident that such works can be retendered at a lower cost, where's the evidence of this? Have preliminary estimations been obtained from other international contractors?

Mind you, the ringgit is currently at one of its lowest points in the last year. Any contract with a foreign contractor might be denoted in dollars or foreign currencies, which means higher exposure for Malaysia if the ringgit depreciates further.

Despite what Pua and Finance Minister Lim Guan Eng are saying, the decision does not seem thought through and other avenues can be looked into to reduce cost to the government.

Royal Salute 21Y: The Ministry of Finance would not have made a hasty decision before consulting the Attorney-General’s Chambers.

So MMC-Gamuda is most welcome to sue the government. Gamuda, since the Perak coup in 2009 masterminded by the ex-finance minister, you had near monopoly of all railway works from KTM double-tracking to MRTs.

Anonymous: Nothing wrong to retender the projects based on initial findings of possible unnecessary cost mark-ups.

If MMC Gamuda is any good, why should it be afraid to compete? Especially now that we have a new government that is more cost-conscious.

Anonymous_1535762813: I think Gamuda has been ‘over-profiting’ from the MRT2 project and in this case, the underground portion of the contract.

It may not exactly be a popular decision to cancel the underground contract given to Gamuda but it is in the interest of the country to save money and public funds and not overpay, especially when the federal debt is so high at RM1 trillion.

I think Gamuda would have earned RM5 to RM6 billion from the underground contract but in the interest of the country, they should forgo the potential profit they would have earned if they were serious in looking after the welfare of those 20,000 workers.

Anonymous #69337042: It would be great if Pua can check on the hugely expensive Penang Transport Master Plan (PTPM), which will be largely undertaken by SRS Consortium that the Penang government is set on.

Surely all alternatives should be considered instead of embarking on this mega-project costing above RM45 billion - money which we can ill-afford.

Anonymous 2413471460628504: Isn't Gamuda part of SRS Consortium - the party undertaking most of the development of Penang's PTMP?

There are already plenty of questions about the viability of the Penang government's PTMP as proposed by the experts hired by SRS Consortium. Now, this open letter by Pua has given me more misgivings.

These developers really like to pick and choose their "experts". The Halcrow Report on the Penang master transport plan from independent experts was completely ignored in favour of the report by experts engaged by SRS Consortium.

Any expert report must always be viewed in the light of the brief given to them. Without knowing what the exact briefs were, I would trust the government's brief over that from a developer, any day.

Anonymous_6b878845: Pua, in future, please ensure government contracts are on a fixed lump sum contract.

First, you need to get independent, capable project consultants to give the project cost. Then, when tenders are called, the government has an indicator in terms of value. You can keep up to five percent variation for negotiation purposes.

Furthermore, stop giving out of advance payment against bank guarantees. This will ensure only financially strong contractors bid for jobs and complete them on time.

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