Bumi quota may bloat MRT project cost, say experts

Bumi quota may bloat MRT project cost, say experts

By Boo Su-Lyn

August 24, 2011
The Malaysian Insider

The proposed site location of the MRT station near One Utama, Mall Petaling Jaya February 4 2011. — Picture by Choo Choy May

KUALA LUMPUR, Aug 24 — A 30 per cent Bumiputera quota for the Klang Valley Mass Rapid Transit (MRT) construction packages may swell the cost of the multi-billion ringgit rail project, say experts.

RAM Holdings chief economist Dr Yeah Kim Leng said some small Bumiputera contractors may not be able to leverage on economy of scale in terms of equipment and resources.

“The smaller ones don’t have that scale economy. Costs will be higher,” Yeah told The Malaysian Insider.

Prime Minister Datuk Seri Najib Razak (left) receiving a souvenir during the MRT launch of the project July 8 2011. — Picture by Jack Ooi

“The issue is (with) the efficiency of this pool of contractors. Do they have the capability and cost efficiency?” he asked.

Syarikat Prasarana Negara Bhd (Prasarana) said yesterday that the quota for Bumiputera contractors was part of the government’s “national agenda.”

Abdul Malik Azman, Prasarana’s head of MRT Procurement Management Department, said there were 18 work packages under the KVMRT, comprising eight packages for elevated civil works, eight packages for stations and two packages for depots.

Contractors leave the MRT briefing at Dewan Sivik MBPJ May 24 2011. — Picture by Choo Choy May

He said six out of the 16 packages for elevated civil works and stations, as well as the Kajang depot work package, were reserved for Bumiputeras.

Twenty-eight firms including heavyweights such as Sunway Bhd, IJM Bhd and MRCB have been shortlisted for the construction of the first phase of the MRT project.

Political analyst James Chin pointed out that the Bumiputera quota would increase costs due to a smaller pool of competitors.

“The Bumiputera portion will be confined to Bumiputeras only. If you know that the competition is for Bumiputeras only, they’ll increase prices because they (the government) cannot buy from anyone else,” Chin told The Malaysian Insider.

Prasarana’s press statement yesterday listed 16 Bumiputera contractors shortlisted for the various work packages, which were Naim Engineering Sdn Bhd, Trans Resources Corporation Sdn Bhd, TSR Bina Sdn Bhd, Ahmad Zaki Sdn Bhd, HRA Teguh Sdn Bhd, MTD Construction Sdn Bhd, Syarikat Muhibah Perniagaan & Pembinaan Sdn Bhd, Zecon Sdn Bhd, Cergas Murni Sdn Bhd, Tidal Marine Engineering Sdn Bhd, SN Akmida Holdings Sdn Bhd, Kembang Serantau Sdn Bhd, Apex Communication Sdn Bhd, Pembinaan Bukit Timah Sdn Bhd, Perkasa Sutera Sdn Bhd and Dekon Sdn Bhd.

In May, Prasarana had caved in to pressure from Malay rights groups when it revised pre-qualification criteria for several construction packages.

The project owner had said then that contractors who wanted to tender for elevated civil works, stations and depots work construction packages would be allowed to form joint ventures (JV) or consortiums among local companies.

The value for contracts under the Bumiputera category is about RM250 million per package, based on the last briefing to contractors by Prasarana in May.

Some reports have pegged the estimated cost of the country’s most expensive infrastructure project at RM50 billion, although the authorities have yet to confirm it.