Last Friday, the Ministry of Finance announced that MMC Gamuda KVMRT (T) Sdn Bhd will remain the contractor for the underground work portion of the second mass rapid transit line after the consortium agreed to a RM3.6 billion cost cut, compared with the previous cost-cut offer of RM2.13 billion.
This means that the construction cost (excluding interest during construction, land acquisition costs and other costs) of MRT2 has been reduced by RM8.82 billion, or 22.4%, to RM30.53 billion.
This is a good sign as the savings could be used for other purposes that benefit the rakyat.
However, the negotiation process involved unnecessary public drama and grandstanding that were seen as unbecoming of the parties involved.
Recall that after rejecting MMC Gamuda’s RM2.13 billion cost-reduction offer, the ministry said the company’s underground work contract would be terminated.
On Oct 7, it also said it would retender the work portion. It was two weeks later that the federal government agreed to go back to the negotiation table.
On MMC Gamuda’s part, it even launched a public petition to save the 20,000 jobs that it claimed would be lost. That was met with an open letter by a special officer of the ministry.
This may be seen as the thrust and parry of a tough negotiation. However, the process could have been handled and concluded with more tact and diplomacy.
Investors also suffered as Gamuda’s share price fell as much as 37% in a week after the contract termination was announced.
And questions remain: Where is the 22.4% cost-savings coming from? Will it mean the underground work portion will be of in-ferior quality? Although the cost is now put at RM30.35 billion, what about variation and change orders later on?