MRT2 – govt move to cost 20,000 jobs

> Reconsider cancelling underground contract, appoint experienced consultants for cost review: MMC Gamuda

PETALING JAYA: MMC Corp Bhd and Gamuda Bhd Joint Venture (MMC Gamuda) is asking the government to reconsider its decision to terminate the underground works contract for Mass Rapid Transit 2 (MRT2) citing exposure to a flood of lawsuits, the loss of more than 20,000 jobs and a review by a local engineering consulting firm which lacked the relevant experience to do so.

In an invitation to the government to come back to the negotiation table, the group suggested that an international engineering consulting firm with the relevant experience be appointed to carry out an objective review looking into all reasonable engineering and technical requirements, to re-examine components from where savings could be derived and narrow the differences.

MMC Gamuda said the Finance Ministry’s belief that it could offer more reduction for the underground works is premised on the review by a local engineering consulting firm, of which a significant part was refuted by MMC Gamuda on technical grounds, for lack of relevant experience and being too simplistic.

“Ironically, MRT Corp which has a huge staff of experienced technical experts also issued their own report of the aforesaid consulting firm’s proposals on Aug 27 2018, which carried similar views as MMC Gamuda,” it said in a statement released yesterday.

MMC Gamuda had offered to reduce the uncompleted underground works portion of RM9.6 billion by RM2.3 billion following two months of negotiations. This was by reducing the scope of works and lowering specifications for mechanical, electrical and architectural finishes of the stations and reducing the number of entrances to stations and the number of stations constructed, from 10 to six.

In explaining the factors influencing the underground works contract pricing, the group said it was largely due to MRT Corp’s and safety requirements.

MMC Gamuda said MRT Corp’s requirements increased the work scope significantly compared with MRT1, while the high risk of sinkholes from tunnelling led to it having to meet extremely stringent risk management requirements in order for insurers to insure the project for MRT Corp.

The group said a termination at this point, when it has completed 40% of works, would unjustifiably expose it to a flood of lawsuits for compensation from terminated employees, sub-contractors, suppliers and manufacturers, among others. It would also mean immediate job losses to a workforce of over 20,000 personnel involved in the underground works from a supply chain of over 600 Malaysian companies.

“Of the 20,000, over 3,000 are made up of MMC-Gamuda JV staff, and of this, more than 60% are bumiputra. This will cause unnecessary hardship to a significant number of the Malaysian workforce in an already slowing market.”

Considering that the Finance Ministry’s requirement for the retendering is for foreign contractors, these jobs will only be given to a foreign contractor who in turn will use experienced staff from its own country.

MRT Corp awarded the undergrounds works to MMC Gamuda in 2016 following an international competitive tender that, due to the challenging ground conditions, had stringent prequalification requirements with only five contractors prequalified by MRT Corp to tender, of which MMC Gamuda was the only local bidder.

The bids were evaluated by the Reference Design Consultant, Arup Singapore Pte Ltd, appointed by MRT Corp. MMC Gamuda’s bid had the highest technical score and offered the lowest price, below even the pretender estimate prepared by Arup Singapore.

MRT Corp in a separate statement said it accepts and welcomes the government’s decision to switch the model from project delivery partner to turnkey contractor for the elevated portion of MRT2 while terminating the current contractor for underground works, and for it to be retendered.

Elevated works are 30% complete, and underground works 39%. The cost rationalisation exercise does not involve reducing the planned number of elevated stations, which is 24.