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How to save construction cost of the East-West Rail Link?

 

I refer to the front page article “East Coast Rail Link” on all the leading newspapers. The cost of the 688 km rail link is Rm 55 billion as reported. East Coast Rail Link from Port Klang to Kota Baru will shorten the travelling time to less than 4 hours. It will unlock huge economic potential, create thousands of jobs, saving users cost in terms of time and energy.

Although all Malaysians are excited by this news, I wish to point out that our Government can save a few Rm billion if we follow the World Bank procurement guidelines.

My sole purpose of writing this piece is to advise the Government not to simply award the Rm 55 billion contract to one contractor from China without open competitive tender. Our Government must bear in mind that our local contractors can construct the whole length of railway track including all the bridges. Our local steel industry can cast all the steel rails. With the exception of manufacturing the trains, we can construct everything necessary required for the complete rail ink.

I am very confident our Government can save 10-20% of the Rm 55 billion if the Government follow the World Bank’s procurement guidelines.

Implement the World Bank’s Procurement Guidelines

The World Bank has a procurement guidelines which all the borrowers have to follow. The guidelines includes the system of calling tenders. It is a system which has helped to prevent corruption even in the most corrupted countries in the world.

The borrower must engage a reputable engineering consulting firm which has had experience with similar projects to put up a proposal and to open the project bidding to all contractors to tender. The most important thing to note is that the consulting company responsible for the tender process should be independent and should have no interest whatsoever in the project implementation. This ensures that there is no hanky panky or “insider trading”. After the contract is awarded, the consultant must make sure that the project is completed within cost and scheduled time.

All the contractors must be prequalified based on their technical and financial ability. All contractors must submit tenders conforming to the original design so that the cheapest tender can be selected. If all the contractors are prequalified, the government tender board has only to look at the tendered price.

It is important not to allow anybody from the government to negotiate with any contractor to avoid corruption.

Transparency and accountability requires that all documents on the proposal be placed in the public sphere – not just limited information but detailed and full breakdowns in accordance with international best practices. This will ensure public monitoring and curbing of cost overruns which have plagued all mega projects in the country.

On the tender opening day all contractors and the representatives of press should be invited to witness the opening of bids and their tender prices should be publicly announced.

All contractors have to submit their tender according to the original design provided by the appointed consultant.

A contractor can also submit an alternative design provided that the price is cheaper and the quality is not inferior.

Additional Safeguards

Besides the Bank’s guidelines, I would like to propose the following safeguards since open tenders alone will not ensure a fool proof no-abuse procurement system for mega projects. These additional safeguards are based on my experience as a Chartered Engineer and as a member of the Malaysian Board of Engineers for 3 two year terms. I am also one of the founders of Mudajaya, Gamuda and IJM Corporation.

Never invite contractors to submit project proposals for any mega project because each contractor will submit his own planning and design which will be impossible for the tender board to evaluate. You cannot compare the cost of an apple with the cost of an orange, a banana or a pineapple.

Prevent conflict of interest

A contractor should not be permitted to take on the role of the engineering consultant responsible for design as well as that of the role of a construction contractor responsible for the project implementation as the two roles are of conflicting interest. If the company is permitted to do so, it will lead to public perception of abuse and corruption.

For mega projects, it is cheaper to employ a really qualified consultant to design the whole project rather than to ask each contractor to provide designs for different phases. The latter is false economy and will result in ballooning of costs.

Just Say “No” to Negotiated Tenders

In summary, the whole procedure of prequalifying contractors, calling tenders, evaluating and awarding the contracts must be carried out in a transparent way to avoid any suspicion of corruption. Such a system of open procurement is effective and can bring change even to the most corrupt country.

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