MMC Gamuda explains ‘other associated costs’ for MRT1

KUALA LUMPUR (Dec 30): The project delivery partner (PDP) for Klang Valley mass rapid transport (MRT) Line 1 yesterday confirmed that the RM21 billion cited by the government as the project’s total cost excluded “other associated costs”.

“Besides the construction cost of RM21 billion for MRT1, there are other associated costs such as fees for engineering consultancy, quantity surveyors, system integration works, site investigations, topographical survey, overheads, contingencies and PDP fees,” said MMC Gamuda KVMRT (PDP) Sdn Bhd, a consortium comprising MMC Corp Bhd and Gamuda Bhd.

The clarification comes in the wake of opposition lawmaker Mohd Rafizi Ramli’s claim that the RM21 billion figure mentioned by the government was misleading as it excluded RM7 billion paid as “consultant fee, expenses claims and relative costs”.

In its clarification, MMC Gamuda said: “The PDP fees is 6% of the elevated portions of the project construction works which is estimated at RM750 million [on condition that the PDP delivers on time and within budget], not RM7 billion as stated by YB Rafizi Ramli.”

MMC Gamuda however did not disclose how much the other associated costs, besides the PDP fees, amounted to.

Mohd Rafizi has been continuously criticising the MRT project after Prime Minister Datuk Seri Najib Razak announced that MRT1 cost only RM21 billion, which was RM2 billion less than the targeted RM23 billion construction cost.

The PKR vice president went on to claim that the entire MRT project would incur a cost of over RM100 billion upon completion, instead of RM40 billion as stated by Najib during the Budget 2011 announcement.

MMC Gamuda, in its statement yesterday, clarified that the RM40 billion figure covered three MRT lines, and that it was a concept proposal developed in 2010 based on prices in 2009, and did not include costs for electric trains and land acquisition.

“The current final alignment for the MRT1 and MRT2 are longer in terms of length and have more stations, which have increased the construction cost of the MRT project,” it added.

The concept proposal, said the company, was for all three lines to be constructed simultaneously. Currently, the construction of the three lines is implemented in a staggered manner with one line at a time, which would result in a higher construction cost.

MMC Gamuda said the MRT project was originally proposed in the concept proposal as a turnkey project. However, the government decided to appoint a PDP to implement the project rather than run it as a turnkey project.

“Consequently, MMC Gamuda KVMRT was appointed as the PDP to manage the construction of the elevated portions of the project, and all construction contracts were awarded based on an open and competitive tender.

“For the underground package, there is no PDP. MRT Corp called for [an] international tender whereby MMC Gamuda was awarded the underground contractor based on best technical and lowest tender price. MRT Corp manages the underground works contractor,” said MMC Gamuda.

On the construction cost, the company said that research by international academics has shown that construction costs per kilometre in urban rail vary highly between projects and cities.

“It is a universally accepted practice to use construction costs which exclude engineering design and supervision, land acquisition etc.

MMC Gamuda added that reasons for the high variation in construction costs include differences in project characteristics, labour costs and degrees of emphasis on safety, health and environment.

This article first appeared in The Edge Financial Daily, on Dec 30, 2016. Subscribe to The Edge Financial Daily here.