An RFP is not an ‘open tender’

Open tenders use the same specification, but an RFP is subjective and open to rigging and abuse. Infrastructure projects should not be chosen by the RFP method used by the Penang state government.

COMMENT

Penang’s transport master plan calls for major road construction and a tunnel across the sea.  (File pic)

By Ahmad Hilmy and Lim Mah Hui

Malaysia’s new federal government is reviewing all mega projects with dubious economic benefits and highly inflated costs. Prime Minister Tun Dr Mahathir Mohamad and Finance Minister Lim Guan Eng have reiterated that projects not based on an open competitive tender system are vulnerable to abuse and corruption, and hence must be reviewed.

Our question is whether the “Request for Proposal” (RFP) method used by the state government of Penang to award mega infrastructure projects such as the Penang Transport Master Plan, as well as the undersea tunnel and 3 paired highways to Consortium Zenith Construction Sdn Bhd, count as open tender.

The selection of SRS Consortium as the project delivery partner was made through a Request-for-Proposal.

An apt answer to this may derive from none other than Gamuda founder Koon Yew Yin himself. According to Koon, the best way to evaluate open tenders is for a government to follow the guidelines established by the World Bank.

“Firstly, the government must engage a reputable engineering consulting firm which has experience with similar projects to put up a proposal and to open the project bidding to all contractors to tender,” he says. “All the contractors must be prequalified based on both their technical and financial ability.

“All contractors must submit tenders conforming to the original design so that the cheapest tender can be selected. If all the contractors are prequalified, the government tender board has only to look at the tendered price.

“Always award the contract to the contractor who submits the cheapest tender assuming that all the other criteria are met. It is important not to allow anybody from the government to negotiate with any contractor to avoid corruption.”

Some state governments have awarded mega projects based on RFP and claimed that they are open tenders. We need to distinguish clearly between the two as they are not the same or even equivalent. The two terms should not be used interchangeably.

In open tenders, all parties bid based on the same specifications provided by a client. The award is given to the bidder with the lowest price, other things being equal.

However in a “request for proposal”, a client does not provide a standard detailed plan or technical specifications for a project for parties to bid on. Often the client only has an approximate idea of a project they desire. They then call for a tender in the form of a “request for proposal”, leaving bidders to submit different proposals for the client to select.

No two proposals submitted under an RFP are similar.

Hence there is no standard yardstick to evaluate the different proposals. At best a ranking system is used but the client has absolute discretion to choose the one it desires. The weightage to rank a certain sector in the proposal is subjective such that this form of procurement may be prone to rigging or abuse.

A favoured proposal might be selected without clear and transparent justification. In RFP, bidders are not placed on a level playing field. The criteria for bidding under the RFP are not transparent or necessarily consistent.

Clearly, RFPs are not open tenders, and will not give taxpayers value for their money.

Infrastructure projects should be by open tender. The RFP should only be used when the government would like to invite creative solutions to a problem. Creative financing solutions should be avoided as it brings other problems with it.

There is a special need for an independent review to be made on the SRS Penang Transport Master Plan project because, through the RFP process, not only did the SRS plan deviate substantially from the Halcrow Plan, the costs ballooned from RM27 billion to RM 46 billion.

We therefore call for reviews on all large projects that have not been awarded based on open tenders. The public needs to be assured that projects proposed for their future good have been awarded to the rightful and deserving contractors.

Ahmad Hilmy is an associate professor at USM, and Lim Mah Hui is a former professor, international banker and Penang Island city councillor. -FMT