MMC-Gamuda JV keen to renegotiate underground job

The JV is committed to further discussion with the MoF to reach an agreeable cost cut


MMC-Gamuda KVMRT (T) Sdn Bhd is keen to further negotiate with the government on the remainder portion of the Mass Rapid Transit Line 2 (MRT2) underground works contract before any decision is made to allow other parties to participate via a fresh international open tender process.

“It is our express hope that the government would invite us back to the negotiating table as part of that review process,” the MMC-Gamuda joint-venture (JV) company said in a statement yesterday, adding that it will appoint an international engineering consulting firm towards this end.

The consultant will be in the best position to re-examine where cost savings for the project can be derived, it said.

“Our request, in return for the open-book approach, is that our intellectual property rights and commercially sensitive information are duly respected as such by the said reviewing consultant and all reviewing parties during the review process.”

MMC-Gamuda said it is committed to further discuss with the Ministry of Finance (MoF) and will cooperate to reach an agreeable cost reduction. The statement was issued after Tony Pua addressed an open letter to the JV yesterday.

The Damansara MP’s letter noted that the government-appointed independent engineering consultant opined that RM4.19 billion to RM5.79 billion in savings could be made on the underground portion of works on the public rail project.

This was significantly higher than the RM2.3 billion cost reduction offered by MMC-Gamuda.

Pua, who is also the political secretary to Finance Minister Lim Guan Eng, said the RM2 billion in additional savings can be redirected for other needed infrastructures and help trim government expenditure ahead of the upcoming budget.

In an earlier statement, MMC-Gamuda refuted the government-appointed project consultant’s findings that cost savings as high as RM5.79 billion could be achieved.

“A significant part of the review findings was refuted by MMC-Gamuda on technical grounds as being too simplistic and arising from a lack of relevant experience,” it said.

MMC-Gamuda said the appointment of an international engineering consulting firm would help narrow the differences between the expected cost savings.

It added that the MoF did not indicate an acceptable target figure for the cost rationalisation and that no official confirmation of the termination from project manager MRT Corp Sdn Bhd has been received.

To recap, MMC-Gamuda was appointed the project delivery partner for the MRT2 project back in 2015 with the underground package awarded a year later.

The 50-50 JV company agreed earlier this month to deliver the aboveground works at a reduced rate of RM17.42 billion — 23% lower than the original RM22.64 billion cost — as a turnkey contractor.

The government and MMC-Gamuda, however, failed to reach an agreement for the underground portion of the rail line and the latter’s contract was subsequently terminated.

The total construction costs for the underground works are estimated at RM16.71 billion, while the awarded contract price is at RM15.47 billion.

To date, 40% of the underground works have been completed, leaving RM9.6 billion in contracts yet to be awarded.

MMC-Gamuda offered a RM2.3 billion cost reduction, representing 24% of this value.

The 52.2km MRT2 was first approved by he then Barisan Nasional-led government on Feb 26, 2014, at an estimated cost of RM28 billion. This figure then ballooned to RM56.93 billion with an additional line to Bandar Malaysia, a change in project scope and the ringgit depreciation.