Cost-saving terms for MRT2 project

Getting back on track: According to Lim,? the? MRT2 underground project

PETALING JAYA: The government and the principal player in the construction of the second phase of the Klang Valley Mass Rapid Transit (MRT2) project has come to new terms of agreement to complete the infrastructure project.

Under the new terms, MMC Gamuda Joint Venture (MMC-Gamuda), which was given the mandate to see through the public transportation job in February 2014 at a cost of RM28bil, would see through the completion of the above-the-ground portion at RM17.42bil.

Under the original terms, MMC-Gamuda was appointed as the Project Delivery Partner (PDP).

Under the PDP concept, MMC-Gamuda was to complete the job within time and cost.

The project owner and funder is MRTCorp Sdn Bhd, an entity owned by the government.

Under the new terms, MMC-Gamuda would complete the above-ground works at RM17.42bil as a turnkey contractor.

This effectively means that MMC-Gamuda has to ensure completion of the project within the specified cost and hand it to the government on time.

Another major difference in the new MRT2 contract is that the government has decided on an open tender for the underground works.

According to a statement by the Finance Ministry, the Cabinet decided to terminate MMC-Gamuda’s underground contract on the MRT2 and retender all unfinished underground work through an inter­national open tender.

This came after both the federal government and MMC-Gamuda failed to reach an agreement relating to the underground portion of the project.

Minister Lim Guan Eng said that with the decision, the federal government could achieve significant savings by retendering the underground work compared to the offer made by the existing contractor.

He also said the government would be able to garner RM5.22bil or 23% in savings through a reduction in cost and rationalisation in work scope without cancelling any of the above-ground stations.

This came about after the Cabinet accepted an offer made by MMC-Gamuda on Oct 3, through their letters dated Aug 15 and Sept 7, to complete the above-ground portion of the MRT2 project as a turnkey contractor for RM17.42bil versus the original RM22.64bil.

“There is already a RM5.22bil or 23% saving made from the above-ground portion of the MRT2 project.

“More savings will be gained when the underground portion is retendered soon.

“Furthermore, the expected cost reduction will cut the fares passengers have to pay and boost public transport usage in the Klang Valley,” he said.

The Finance Ministry had embarked on a cost rationalisation exercise on the MRT 2 since May, with the cooperation of the Attorney General’s Chamber, Transport Ministry, Mass Rapid Transit Corporation Sdn Bhd (MRTCo) and the private sector.

An engineering consultancy firm was engaged to conduct the cost rationalisation.

The MRT2 project was approved by the Cabinet on Feb 26, 2014 with an initial estimated cost of RM28bil.

However, Lim said the figure did not include consultant fees, PDP fees, interest costs and the overhead cost for MRTCo.

The Cabinet also agreed to the appointment of MMC-Gamuda Joint Venture as the PDP to manage and complete the project.

Lim noted that the MRT2 cost increased to RM56.93bil 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 various other factors.

The overall cost comprised RM39.35bil construction cost, RM6.18bil land acquisition cost, RM0.36 bil for feeder buses and depot costs, RM1.2bil of other costs as well as RM9.84bil worth of interest expenses during construction.

The MRT2 and Light Rail Transit phase 3 (LTT3) projects came under review following the change in govern­ment on May 9.

The phase 3 of MRT and the High Speed Rail projects were deferred.

The project owner for LRT3 is Prasarana that has seen changes at the top after the Finance Ministry revealed that the cost of the project rose to RM31bil from its initial RM10bil.

The LRT 3 project is now to be completed at RM16.6bil.

As for MRT2, this is the first time the government has come up with a detailed review on the cost of the project.

The MRT2 line runs from Sungai Buloh to Serdang and ends in Putrajaya. It is to complement the existing MRT1 line that runs from Sungai Buloh to Kajang.

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