This article first appeared in The Edge Financial Daily on July 10, 2019

KUALA LUMPUR: Syarikat Dhaya Maju LTAT Sdn Bhd — an 80:20 joint venture (JV) between privately held construction company Dhaya Maju Infrastructure (Asia) Sdn Bhd (DMIA) and Lembaga Tabung Angkatan Tentera (LTAT) — has won back the second phase of the Klang Valley Double Track (KVDT2) rehabilitation contract, 10 months after it was terminated.

Transport Minister Anthony Loke announced that his ministry will enter into a new contract with Syarikat Dhaya Maju LTAT, where the JV company undertakes the project at RM4.475 billion — 15% lower from its original RM5.26 billion contract value.

“Syarikat Dhaya Maju LTAT will be appointed as the contractor to carry out the KVDT2 through another letter of acceptance and [a] new agreement,” he told reporters at the Parliament lobby yesterday. The KVDT2 contract entails rehabilitating KTM Bhd’s existing 110km railway track.

The previous Barisan Nasional government awarded the contract, valued at RM5.265 billion, to Syarikat Dhaya Maju LTAT on April 4 last year, just days before Parliament was dissolved to pave the way for the 14th general election.

Questions abound as no open tender called

The Pakatan Harapan government terminated the contract in September due to its high cost and the manner it was awarded via a direct negotiation. A fresh tender was to be called, but did not materialise.

Loke said the government’s decision to reappoint Syarikat Dhaya Maju LTAT as the contractor for KVDT2 is to mitigate any legal implications of the contract termination to the government.

“The contract was already awarded to the contractor by the previous government in April 2018, just two days before Dewan Rakyat was dissolved. So, the contractor may sue us for cancelling the contract. The government’s approach is the same as the revived East Coast Rail Link project, whereby we are open for renegotiation, to reduce the cost for KVDT2,” he said.

In September, Loke also said the seven-year completion period given to the company was too long. Thus, it is surprising the minister announced yesterday the new contract period remains at seven years.

His defence is the duration would allow the government to spread the burden of the cost in terms of development expenditure in any single year.

Prior to the new contract, Loke said the government will first enter into a settlement agreement with Syarikat Dhaya Maju LTAT to ensure the latter agrees to not make any claims for cost incurred from the KVDT2 rehabilitation project’s cancellation by the government. He added that the cancellation notice is effective on Oct 19, 2018.

Asked when this would be, Loke said it can be entered into in the next two months. “Soon, because they (Syarikat Dhaya Maju LTAT) are eager to sign the agreement as well.”

Loke, during the minister’s question time in Dewan Rakyat yesterday, was responding to Ahmad Fahmi Mohamed Fadzil (PH-Lembah Pantai) who asked the transport ministry to state the KVDT rehabilitation project’s current status for phases 1 and 2, and the latest expenditure involved for both phases.

He also asked about the government’s efforts in addressing challenges where the quality of KTM Komuter and electric train service will be affected when the KVDT projects are in progress.

Loke said as at June 30, the KVDT project’s phase 1 (KVDT1) was 80.33% completed, with the expenditure so far totalling RM1.11 billion. This comprised RM959.46 million paid to the contractor, RM32.53 million paid to the independent consultant, RM50 million in deposits and the remaining RM70.5 million as implementation guarantee fund.

The KVDT1 project involves rehabilitating a 40km stretch from Rawang to Salak South. DMIA is undertaking this project, now 75% completed, on its own.

For the KVDT2, Loke said the government has spent RM42.35 million to date. This comprised RM38.12 million paid to the contractor and RM4.24 million as implementation guarantee fund.