‘Pan Borneo Highway contracts to be honoured’

This article first appeared in The Edge Malaysia Weekly, on July 23, 2018 - July 29, 2018.
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THE federal government will honour all existing contracts for the RM29 billion Pan Borneo Highway project despite a push to find ways to reduce the price tag, says Works Minister Baru Bian.

This is unless there are issues raised that warrant investigation, and includes the project delivery partner (PDP) model adopted to manage the project’s implementation, Baru tells The Edge.

“Projects that had been signed and duly assigned to the appropriate contractors will be continued unless there are issues raised against them,” he says in a brief conversation.

The scrutiny of the 2,325km Pan Borneo Highway, spanning the northern coast of Borneo Island across Sabah and Sarawak, is part of a wider review of all infrastructure projects by his ministry.

Finding ways to reduce the bill is among the “fundamental” considerations driving the review, Baru adds.

However, the minister acknowledges that the government’s hands are tied for contracts already awarded. That said, he remains hopeful of finding win-win arrangements to cut cost wherever possible.

“Of course, as I look at it, once the letter of award is given and contract signed, basically we can’t do much. But if there is any possibility of agreeing [with the contractors involved] to reduce the expenses, why not? These are all possibilities being explored.”

But Baru says he has been preoccupied with briefings to get a grip on his portfolio and has yet to engage with the contractors involved on this matter.

When completed — expected by 2023 — the Pan Borneo Highway will be Malaysia’s longest highway, three times longer than the 772km North-South Expressway that spans the length of Peninsular Malaysia.

However, the project has seen some controversy, particularly the PDP model adopted to manage it and the political links of the PDP partners awarded the roles.

In a nutshell, a PDP is a private sector party roped in to assume the responsibility of ensuring a project is delivered on time and within budget in exchange for a percentage of the project cost as commission.

The Sarawak portion is managed by PDP partner Lebuhraya Borneo Utara Sdn Bhd, while the Sabah component is managed by Borneo Highway PDP Sdn Bhd.

Borneo Highway PDP is 60% owned by Warisan Tarang Construction Sdn Bhd, with the other 40% held by a joint venture between UEM Group and MMC Corp Bhd.

At the time of the PDP award, The Edge reported that Warisan Tarang’s directors included politicians from Umno Sabah.

In the case of privately held Lebuhraya Borneo Utara, it is seen as being linked to controversial businessman Tan Sri Bustari Yusuf, a media-shy tycoon closely linked to former prime minister Datuk Seri Najib Razak. Bustari is also the brother of Baru’s predecessor, former works minister Datuk Seri Fadillah Yusuf.

It is worth noting that on July 12, the Ministry of Finance restructured another large infrastructure development in the Klang Valley — the Light Rail Transit Line 3 project — to a “fixed-price contract” from the PDP model in order to contain cost overruns.

In fact, the LRT3 was in danger of being scrapped as its cost had ballooned to an estimated RM32 billion from an initial RM9 billion to RM10 billion, and in order to proceed, it had to be scaled down in size and cost, to RM16.63 billion.

Last week, Sabah Infrastructure Development Minister Datuk Peter Anthony said that using the PDP model to manage the project in Sabah is “a waste of rakyat’s money”.

“We could save up to RM1 billion if the project is managed by the Ministry of Works and Sabah’s Ministry of Infrastructure Development,” he said after meeting Baru.

So, will the Pan Borneo Highway see a restructuring push similar to the LRT3?

Baru says while he has heard of concerns raised in his individual capacity, the ministry has not received official complaints on the matter.

“It is really based on the letter of award. I don’t have all the facts on the LRT3 situation, so I would not be able to say if that [restructuring] will be applied to the Pan Borneo Highway too.

“[However], you can’t just go around stopping projects [based on hearsay], unless there is a complaint lodged with the proper channels. Then we will examine the complaint and see whether there is any legal basis to interfere.”

Generally speaking, however, Baru says he intends to propose that his ministry undertake the PDP role for future mega projects as it has the requisite professionals and expertise.

The ministry also welcomes the consolidation of oversight over all infrastructure projects in general under its roof.

Under the Barisan Nasional government, some infrastructure projects were managed by other ministries such as the Prime Minister’s Department and Ministry of Finance.

While this has not been discussed at the Cabinet level, Baru believes the current government will look into the matter. “My ministry is looking into this, and probably we will be putting this [proposal] up for consideration in the future.”

While most of the overall road length for the Pan Borneo Highway project have already been awarded, Baru says the ministry will pay close attention to the remaining packages yet to be farmed out as the government still has some freedom to decide.

For the 1,089km Sarawak alignment, 11 packages worth RM4.2 billion are already undergoing construction, leaving just 76km yet to be tendered out in the second phase.

Meanwhile, the 1,236km Sabah portion has already seen 12 packages being constructed, leaving 23 packages spanning 413km for future awards in the second and third phases.

“So these are the areas where we still have the power. We can consider whether to proceed or not to proceed,” he says.

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