MMC-Gamuda PDP deal will inflate costs, says Pua

By Yow Hong Chieh

February 13, 2012

KUALA LUMPUR, Feb 13 — MMC-Gamuda’s project delivery partnership (PDP) deal will encourage the consortium to go for higher tender bids for Klang Valley Mass Rapid Transit (KVMRT) jobs, Tony Pua said today.

This was because MMC-Gamuda would still receive its fee — six per cent of all packages tendered out for the Sungai Buloh-Kajang (SBK) line — even if it exceeded the project’s target cost, the DAP publicity chief said.

According to a Bursa Malaysia filing made by Gamuda Bhd on Friday, the target cost comprises the value of all awarded works packages, a 15 per cent contingency amount and reimbursable to MMC-Gamuda.

“Despite the supposed role of the PDP having to bear any cost overrun for the KVMRT, the PDP has managed to negotiate into its contract a 15 per cent ‘allowed contingency’,” Pua said in a statement.

“This means that if the cost of the overall project were to increase by up to 15 per cent, the PDP will still collect every sen of its fee, including six per cent of the 15 per cent ‘allowed contingency’.”

He said this would “incentivise” MMC-Gamuda to inflate costs as the contingency would allow the consortium to incur RM2.7 billion in extra costs without penalty, based on the RM18 billion projected value for the SBK line.

Pua (picture) also characterised the six per cent fee for the project as “almost unheard of”, noting that this would translate to approximately RM1.08 billion for MMC-Gamuda.

He blamed the high fees on the lack of any competitive tender for the PDP job and Putrajaya’s decision to start work on the SBK line even before the deal with MMC-Gamuda had been formalised.

“Any ordinary man on the street will know that it is ridiculous to ask a contractor to start the kitchen renovation without first agreeing to the cost,” the Petaling Jaya Utara MP said.

The consortium will also be reimbursed for overheads, fees for engineering consultants, quantity surveyors, system integration works, site investigations and topographical surveys to the tune of RM2.85 billion, Pua said.

“Adding reimbursables to the estimated PDP fee of RM1.08 billion, the PDP will effectively collect RM3.93 billion for playing the role of a project manager,” he said.

This would lead to higher fares for KVMRT users in future and would have an “overbearing impact” on Malaysia’s financial position as the project will be financed entirely by debt, Pua added.