Malaysia’s construction sector is at the threshold of an extremely exciting era following the Government’s approval of a mass rapid transit project for the Klang Valley.
The project will be the biggest infrastructure ever for the country. The construction of a modern Mass Rapid Transit (MRT) system will involve an array of jobs ranging from massive tunnelling works and construction of underground stations to the installation of a system with the latest technology for the trains to run.
Besides delivering to the citizens of the Klang Valley a modern and efficient public transport system, the MRT project will create 130,000 jobs and generate between RM3bil and RM4bil in direct gross national income (GNI) contribution from construction and operations from next year to 2020.
With the spillover effect from construction taken into account, the additional GNI contribution is expected to be between RM8bil and RM12bil per annum.
Based on late 2009 prices and the original proposed alignment, the estimated cost of the project is RM36bil excluding land acquisition and the cost of rolling stock.
But whatever the final estimate will be, it would have to go through thorough scrutiny and targeted for reduction via a mechanism called value management study.
For a project of this massive scope, the Government has been forced to think of new ways to ensure that it is delivered on time, at the lowest cost possible, and with the maximum benefits realised. A strong governance structure will also have to be put in place to oversee the smooth running of the project.
To ensure project delivery the Government has decided to move away from the traditional methods of using turnkey contractors or relying solely on the services of project management consultants.
As such, a hybrid called the Project Delivery Partner (PDP) was created. A PDP is an experienced contractor that will have the single point of accountability and assume responsibility for delivering the entire project within an agreed time and cost. Any cost overrun and delays in project completion will be borne by the PDP. This may require the PDP to step in and get its hands dirty by doing the work itself.
The experienced contractor must have the critical skills crucial for effective and efficient delivery of complex projects including competency in commercial procurement strategies, skills in interfacing and coordinating many different contractors.
The PDP will be responsible for packaging the works for the project, tendering and evaluating bids with the Government.
The award of contracts will be through open tenders and decided by the Government.
The PDP will NOT get “the entire project” as it will not be allowed to participate in the tenders of any of the work packages except for tunnelling.
In the case of the tunnelling works package, MMC-Gamuda Joint Venture Sdn Bhd will be allowed to participate by virtue of it being one of the few local companies to have vast experience in tunnelling.
Allowing it to participate in the tunnelling package not only allows the project to tap on this expertise, but will also prevent any unnecessary outflow of funds from the country if only foreign companies can bid for this job.
The PDP arrangement may sound new to Malaysians but it is a common global practice now. Some of the projects using this similar project management arrangement are the Crossrail Project in London and the projects related to the London Olympics 2012 and the Korea High Speed Rail project in South Korea.
Another interesting mechanism being used for the MRT project is the value management study (VMS) where an independent party will scrutinise the project plans and ensure that the optimum value is derived.
For example, the VMS will help decide on the selection of the alignment and station locations to make cost most effective but at the same time, also consider the factor of helping to unlock the full potential of real estate values of locations where the stations are located.
The VMS will also design a procurement policy which will ensure cost saving and prevent any extravagant spending.
One of the most interesting outcomes of the VMS will be the early identification of non-fare box revenue. Such revenue will include rental or sale of property surrounding stations which can significantly contribute to future expansion of the network.
With all these steps being taken by the Government, it is hoped that the MRT project will be delivered to the rakyat on time for them to enjoy its full benefits at the lowest possible cost.
