This article first appeared in The Edge Financial Daily on April 1, 2019

KUALA LUMPUR: Finance Minister Lim Guan Eng says 121 infrastructure projects valued at RM13.93 billion that were offered through direct negotiations and limited tenders by the previous Barisan Nasional (BN) government will continue after price negotiations by the Pakatan Harapan government.

The negotiations, he said, resulted in cost savings of RM805.99 million, bringing down the total value of the projects to RM13.13 billion.

Guan Eng said the projects exclude renegotiated megaprojects such as the light rail transit 3 project costing RM31.65 billion and mass rapid transit 2 project costing RM39.35 billion. The costs of both projects have already been lowered to RM16.63 billion and RM30.53 billion respectively, resulting in total savings of RM23.84 billion.

Guan Eng, in a statement yesterday, referred to the June 29, 2018 announcement on several initial steps sought to improve the governance of government procurement and the country’s financial management, including reviewing projects offered on limited tenders and direct negotiations by the previous government.

“Based on the review, the government decided to undertake open tenders for limited tender and direct negotiation projects that have not yet been issued letters of acceptance.

“As for the 121 projects which were awarded through limited tenders and direct negotiations, but for which letters of acceptance had already been issued, supplementary agreements will be finalised at the end of March 2019 after prices are renegotiated down, as a rationalisation of the project costs, while reducing pressure on the government’s fiscal position.

“Details will be dealt with by the respective ministries that handle the projects and will not involve the MoF [ministry of finance] anymore,” he said.

Guan Eng said that being mindful of current developments, the MoF is confident that the implementation of government procurement through open tender in the near future will provide the best cost and value-added benefits to the government and the people.

“The old method of awarding contracts is maintained, but the only difference is that open tender is conducted to replace direct negotiation or limited tender award practice except for emergency factors, specific expertise needed or special reasons.

“For example, a contract offered to a Grade G1 contractor (formerly known as Class F contractor) is still the same, except that it is only conducted in open competition among Grade

G1 contractors and not as before, that is through direct negotiation or with the need to obtain a signature of consent from divisional heads of political parties.

“The MoF will always take a comprehensive initiative to ensure that government procurement abides by the principles of efficiency, accountability and transparency,” he added.