Lukewarm response to LRT3 rolling stock tender

THE weak ringgit has caused a new problem. The tender for the rolling stock for the third light rail transit (LRT3) project has seen only one party submit a bid that is causing a headache for the project delivery partner (PDP).

MRCB George Kent Sdn Bhd, which is the PDP for LRT3, is said to be in a dilemma. Accepting the tender will mean that it has no wriggle room to determine if the tender for the rolling stock is what the “competitive price” should be.

Should the tender for the rolling stock go through a fresh process, then there is a likelihood of further delays to the completion of the project. In both cases, the outcome can be detrimental to the PDP. Prasarana is said to have the final call in whether to proceed to call for a fresh tender.

When contacted by StarBizWeek, Prasarana managing director Datuk Seri Azmi Aziz declined to comment pertaining to the rolling stock tender, citing confidentiality and the Government’s procurement policy.

As the tender for the rolling stock has been postponed three times, any further hiccups can mean a delay in completing the LRT3, which is targeted to commence operations on Aug 31, 2020.

The tepid interest in the LRT3 rolling stock tender is a contrast to the interest shown for the mass rapid transit line from Sungai Buloh to Kajang, which received a much better interest and response from the industry as three bids were received for the supply of rolling stock. Three pre-qualified companies chose not to partake in the tender bid.

The tenders for the RM9bil LRT3 were conducted by Prasarana Malaysia Bhd, together with the PDP MRCB George Kent Sdn Bhd. The latter is a joint venture between Malaysian Resources Corp Bhd (MRCB) and George Kent (M) Bhd.

LRT3, which will consist of 26 stations (25 elevated and one underground), is projected to generate an economic internal rate of return (EIRR) of 21% and the new rail network is estimated to benefit 74,000 commuters daily and 500,000 city dwellers along the alignment.

The PDP for LRT3 line will earn a management fee of 6% of the total project cost. Upon completion of the project, Prasarana will take over from MRCB George Kent and assume responsibility for the operations of LRT3.

With a fee for the PDP pre-determined, a high cost of the tender than what MRCB George Kent has forecast would mean a hit to their margins. But should there be a reboot to the tender process, then other potential companies might be able to price their tender in ringgit terms, with the element of hedging, instead of US dollars.

Based on information received by StarBizWeek, the trend of weakening ringgit seems to be the source of the problem, which prevented other parties to register their interest in bidding for the tender.

It is said the fact that the tender price for LRT3’s rolling stock was to be quoted in the US dollar may have prompted many companies to avoid bidding for the tender.

This is because with the appreciation of the greenback, coupled with the downtrend of the ringgit, the bidders would have to fork out more for the successful completion of the tender and thus effectively eroding their profit margin.

It is believed that the only party which submitted its bid is a consortium comprising two China-based entities and a Malaysian company. The two China companies are CRCC ZhuZhou Locomotive Co Ltd and Siemens Ltd China, while their Malaysian counterpart is Tegap Dinamik Sdn Bhd.

CRCC ZhuZhou Locomotive is a key subsidiary of China Railway Construction Corp Ltd (CRCC), which is one of the world’s largest construction companies.

CRCC made headlines earlier in Malaysia as it teamed up with Iskandar Waterfront Holdings Sdn Bhd to buy a 60% stake in 1MDB’s Bandar Malaysia for RM7.41bil. It is also the engineering, procurement and construction (EPC) contractor for Penang’s mega-scale project, which covers a 6.5km undersea tunnel linking Penang to Butterworth and three expressways.

The corporation is also reported to be keen in bidding for the high-speed rail (HSR) project between Singapore and Kuala Lumpur, which was recently agreed by both the governments of Malaysia and Singapore.

In June 2016, Prasarana which is a state-owned urban public transport operator, announced the completion of the pre-qualification stage of LRT3’s competitive tendering. A total of 96 companies were selected out of 124 interested entities as potential tenderers.

The rolling stock is required to consist six cars accessible end-to-end and able to travel at a maximum speed of 80 km per hour with a waiting time of only two minutes. The rolling stock is also expected to support an hourly passenger capacity of 36,720 per direction.