Putrajaya overrules Prasarana for a third time. (Update #2)

• Update: At least one wakil rakyat has chosen to speak up so we decided to change the title of our post. Guess who it is? No point, as you already know that it is Tony Pua (since no other wakil rakyat really appear to follow these finance issues, let alone speak up)!
• Update: According to this article, the contract has actually been awarded to Colas, instead of the Bombardier-Hartasuma-SNC Lavalin consortium. However, the issues of transparency still stand. See the updated post below!

‘He that pays the piper calls (chooses) the tune’

That phrase is a simple explanation of who has authority in life … it’s often those with the money. TRANSIT takes note that the Finance Ministry (the one “paying the piper”) has ‘called the tune’ for a third time, (overruling a tender-evaluation decision made by Prasarana and awarding contracts to ‘unsuccessful’ companies).

The first time this was done was the selection of the ‘Independent’ Check Engineer for the MRT project. The second time was when the government overruled Prasarana’s pre-qualifications criteria (described as “biased” by Malay-rights group Perkasa).

Now the government has overruled Prasarana’s decision on the Kelana Jaya LRT extension, and [TRANSIT: we should have added “apparently” here] awarded the contract to a consortium of Bombardier, Hartasuma and SNC Lavalin – a decision that will increase the cost of the LRT extension, put an additional burden on Malaysian taxpayers for generations to come, and allow foreign companies and their local partners to profit handily on the backs of the Malaysian public.

Putrajaya overrules Prasarana, takes pricier LRT extension deal (Malaysian Insider, 17 June 2011)
By Jahabar Sadiq
Editor

KUALA LUMPUR June 17 — A Finance Ministry committee has ignored the city’s light rail transit LRT operator’s recommendation for the Kelana Jaya line extension project by awarding it to a company whose project price of RM890 million is almost 50 per cent higher than that of the lowest bid.

The Malaysian Insider understands the committee decision was made on Wednesday to hand the electro-mechanical system project to the Hartasuma Sdn Bhd-Bombardier joint-venture which is already facing a heavy penalty for late delivery of the RM1 2 billion 35 four-car sets to Syarikat Prasarana Negara Bhd.

The Bombardier Group was the original supplier of the 35 Mark II Bombardier Advanced Rapid Transit ART two-car trains when the Kelana Jaya line opened in 1998 The first three sets of the four-car trains finally began operation in December 2009 after being delayed from August 2008.

“All bids are technically the same but Prasarana had recommended Ingress Corp Bhd-Balfour Beatty Rail Sdn Bhd which put in a bid of RM610 million the lowest against Hartasuma-Bombardier’s RM890 million which is the highest ” a source told The Malaysian Insider.

Hartasuma is part of the Ara Group which is led by the politically connected Tan Sri Ravindran Menon who is mainly involved in infrastructure projects and now runs the Subang Sky Park.

[TRANSIT: Ironically, he did not think of opening up the Subang Depot to revenue (passenger-carrying) service to take advantage of that potential LRT link.]

The other frontrunner for the project was CMC Engineering Sdn Bhd and UK’s Colas CMC-Colas which had a RM670 million bid for the 17km-long extension from Kelana Jaya to Subang Jaya.

It is learnt the Finance Ministry committee decision has caused some disquiet among Prasarana and its consultants as Hartasuma-Bombardier has also not complied with one condition of the tender issued last year — a 10 per cent limit of liability on potential damages.

“Other bidders complied but Bombardier has refused to agree to the commercial condition. No one knows what is going on.” another source told The Malaysian Insider.

[TRANSIT: No one knows what is going on. Are there any more telling (and scary) words to hear about your own government?]

The industry source familiar with the tender said the bids did not include the price of Bombardier’s proprietary Linear Induction Motor (LIM) rail system that powers the trains.

[TRANSIT: Linear induction means that the train is pulled along by magnets located in the guide rail. Unlike a magnetic levitation system (which also uses linear induction) the Bombardier train rests on wheels.]

“During the tender process Prasarana removed the supply of proprietary equipment from the tender scope to ensure there was fair competition for the bidders ” he said adding the LIM equipment is estimated to cost some RM50 million although Hartasuma-Bombardier have yet to give any quotes.

[TRANSIT: In other words, Prasarana created a fair set of qualifications for the LRT tender by narrowing down the project to the electro-mechanical system. The actual propulsion system is a separate tender. And since the design is proprietary, Bombardier-Hartasuma can charge a princely fee for their propulsion system.]

The source said Prasarana and their consultants have been above board in making the recommendation although the final decision lay with the ministry committee which has the power to approve projects worth more than RM300 million.

“It now appears that the Ministry of Finance is approving Hartasuma-Bombardier’s bid for a premium of RM280 million plus the cost of the LIM rail while accepting less favourable commercial terms ” he added.

[TRANSIT: Why is this Ministry of Finance committee bending over backwards to facilitate Bombardier-Hartasuma? Why did they bend over backwards for MMC-Gamuda? And most importantly, why isn’t anyone standing upright and shouting “NO, this is wrong!]

Prasarana is spending some RM7 billion for the extension of both the Kelana Jaya and Ampang LRT rail networks The Ampang network will be extended by another 17.7km.

[TRANSIT: That’s how much they plan to spend. Expect the final cost to be somewhat higher especially in the face of these sweetheart deals.]

The wholly-owned unit of the Finance Ministry was forced to cave in to pressure from Malay rights groups last month when it revised pre-qualification criteria for several construction packages for the Klang Valley Mass Rapid Transit MRT by allowing joint-ventures or consortiums.

It had on March 30 imposed additional criteria on contractors taking part in the project tender which disallowed them from forming joint ventures or consortiums. Perkasa however accused Prasarana of blocking Bumiputera contractors from participating by enforcing “strict” guidelines that would only benefited “rich non-Bumis” saying that project delivery partner MMC-Gamuda was “looting and monopolising” the project.

The MRT is expected to be the largest-ever construction project in Malaysia and had earlier been estimated to cost between RM36 billion and RM53 billion.

TRANSIT Says:

He who pays the piper calls the tune. The truth of the matter, however, is that the rakyat are the ones who are paying the piper. Not Putrajaya, not the Finance Ministry, and not the wakil rakyat. Sadly this message is lost for those “government servants” (who should think of themselves as public servants) for whom bureaucracy & office politics are the most important things.

We were promised that the Malaysian government was a new one, and that it would not allow the mistakes of the past to be repeated. But time after time, we see that the government of Prime Minister Najib has failed to stand to its principles … at least in the area of public transport.

The MRT project and the LRT extensions will go down as projects that cost too much, took too long, and failed to meet the needs of the rakyat thanks to poor planning and lack of consultation. We will remember why these projects were introduced, who stands to gain, and who stands to lose.

2 years ago TRANSIT proposed simple, effective and low-cost solutions to expand public transport in the Klang Valley. These solutions were rejected by the government, the wakil rakyat, and many among the public who did not investigate or do their research or ask questions, but simply gave their approval through inaction and allowed the government to go ahead and do what they wanted.

It’s not that they were wrong – they were sadly convinced that any public transport / infrastructure / mega-project would have to be an improvement on the current situation. Even if it cost too much. Even if it did not meet promises and expectations. Even if people ended up profiting mightily on the backs of the Malaysian people.

Basically, we all got railroaded … and we allowed it to happen.

Updated comment

This passage below really says it all:

The Singapore Straits Times quoted political analysts and industry executives as saying that the “behind-the-scenes intrigue shows how opaque and non-transparent practices that have long characterised large public-sector contract awards remain the order of the day in Malaysia.”

Calling the LRT deal “a strong test case” for Najib’s administration the ST said that the decision to override Prasarana would “likely to dull Kuala Lumpur’s efforts to attract much-needed foreign investment ”.

TRANSIT Says:

This is our fear – that despite all the talk and the policy improvements and public relations, when it gets down the real decision-making there really hasn’t been any change.