This article first appeared in The Edge Malaysia Weekly on May 24, 2021 - May 30, 2021

SOME of the companies that have tendered for a RM400 million aerotrain system at Kuala Lumpur International Airport (KLIA) are understood to be unhappy with the bidding process undertaken by Malaysia Airports Holdings Bhd (MAHB).

The tender — called “Design, Supply, Installation, Testing and Commissioning for Automated People Mover (APM) and Associated Works at KLIA International Airport” — was via a letter of invitation to participate, given out at the end of July last year, while tender documents were distributed shortly after that in early August. The tender closed on Nov 2.

The Edge understands that the tender attracted as many as five bidders: MMC Corp Bhd partnering Japan’s Mitsubishi Heavy Industries; Malaysian Resources Corp Bhd (MRCB) in a tie-up with Leitner-Poma of America Inc; Pestech International Bhd in a joint venture with Canadian outfit Bombardier; privately held Hartasuma Sdn Bhd in partnership with Austrian company Doppelmayr Seilbahnen GmbH; and local outfit SMH Rail Sdn Bhd.

Some of the bidders are understood to have proposed self-propelled aerotrain systems, while others are looking at cable-propelled or pulley models, which were also acceptable, according to the tender documents.

The current aerotrain, which uses self-propelled technology, was put to work in 1998 and underwent an upgrade in 2011. The cable-propelled mechanism is being utilised in several large airports around the world.

However, MAHB, via a letter in March this year to the bidders, is said to have made amendments to the tender, specifically asking for bids with cable-propelled systems as well, as opposed to self-propelled and other accepted systems.

The letter, sent after the tender was closed, seems to have created some uncertainty.

One source says, “The tender called for a system which complies to Automated People Mover Standard, that is, American Standards of Civil Engineers, which caters for self-propelled and cable liner systems. When the tender already caters for self-propelled and cable systems, why is there the need for an amendment?

“Why was it necessary for MAHB to send out a clarification, post-bid submission, requesting bidders to propose an alternative to self-propelled (APMs)?

“It seems obvious that in their (MAHB) mind, Automated People Mover Standard is only applicable to the self-propelled system, at least until the clarification came out, which was after the completion of evaluation … These are proprietary systems and it’s very unlikely one system provider will agree to provide the system of another party (thus making two bids),” the source says.

MAHB, when asked why there was an amendment to the original tender document, replied, “In general, any amendment issued during a tender is to clear any confusion or doubt that may arise in the employer’s requirements. MAHB’s governance limitations ensures that issuance of such amendment notice is done in compliance with the tender policies and procedures.

“All tender-related information is confidential and will be duly communicated on an equal basis to the participating tenderers. On the specific matter as referred above, our objective was to ensure that participating tenderers were given every opportunity to offer a comprehensive proposal,” MAHB said in explaining its position.

To its credit, MAHB had also offered an extension of time to any bidders looking at submitting a new bid, but from what The Edge understands, no new proposals were submitted.

On the allegations by the tenderers, The Edge asked MAHB if the tender process was done in an above-board manner. MAHB, in which Khazanah Nasional controls 33.21% equity, said, “As the tender involved a highly technical and complex work scope, MAHB was committed to ensuring that all participating tenderers were given equal access to all relevant information and had understood fully the employer’s requirements. MAHB’s tender process is designed to promote fair competition and good governance, as well as ensure that the best interests of the company are safeguarded. The tender for APM complied strictly with the company’s approved procurement procedures.”

One of the tenderers The Edge spoke to said that they were hoping for a re-tender of the entire exercise, due to the uncertainty brought about by the March letter.

In an email response on whether a re-tender was possible, MAHB said, “The tender process had been conducted in accordance to set governance, approved procedures and policies, and there is no cause for a re-tender.”

While some may have been put off by the tender, specifically MAHB’s letter in March, others are understood to be excited about the terms being offered.

The Edge understands that there were three options provided to the bidders; where MAHB pays for the job upfront; where 40% of the contract value is paid upfront and the remainder at later date; and where the bidding party bears all the costs and undertakes the designing, building, operating and maintain and transfer and will be repaid over a five- or 10-year duration, on a staggered basis.

The third option, which is generating considerable interest, requires little capital outlay from MAHB but will require the bidders to have a strong balance sheet to undertake the project.

For its financial year ended December 2020, MAHB suffered a net loss of RM1.12 billion from RM1.87 billion in revenue. For FY2019, MAHB chalked up net profits of RM537.04 million on the back of RM5.21 billion in revenue.

The airport operator had cash and bank balances of RM973.66 million and long-term debt commitments of RM4.55 billion, while short-term borrowings were at RM94.3 million. Retained earnings stood at RM1.94 billion.

With the outcome of the tender likely to be announced soon, all eyes will be on the winning bid.

MAHB closed last Friday at RM5.25, giving it a market capitalisation of RM8.71 billion.

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