Newsbreak: Lobbying intensifies for Klang Valley’s next big rail job

This article first appeared in The Edge Malaysia Weekly, on April 1, 2019 - April 07, 2019.
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LOBBYING for the main contractor role of the RM5.265 billion Klang Valley Double Track Phase 2 (KVDT2) project has intensified as the government prepares to retender the job.

Among the groups eyeing the work is one comprising three independent railway contractors that are urging a break-up of the infrastructure project into smaller packages to give mid-sized players the opportunity to participate.

Led by Mohd Aizuddin Ariffin, who is also a PKR Youth executive council member, the group is of the view that, based on the length of the project, it can be divided into 10 work packages, each covering about 20km.

Measuring a total of 211km, the KVDT2 entails the rehabilitation of two existing Keretapi Tanah Melayu Bhd (KTMB) railway tracks — one from Salak South to Seremban and the other from a point between Kuala Lumpur Sentral and Angkasapuri to Port Klang.

The previous Barisan Nasional-led government had issued a letter of intent (LOI) to Dhaya Maju LTAT Sdn Bhd — a joint venture between construction company Dhaya Maju Infrastructure (Asia) Sdn Bhd (DMIA) and Lembaga Tabung Angkatan Tentera (LTAT) — to undertake the KVDT2 at a cost of RM5.265 billion.

However, the project came under scrutiny after it was learnt that Dhaya Maju LTAT had been awarded the rehabilitation contract on April 4 last year, just days before Parliament was dissolved to pave the way for the 14th general election (GE14).

Last June, Transport Minister Anthony Loke said the project would be reviewed. Three months later, in September, he announced its cancellation owing to its “excessively high” cost and the manner in which the contract was awarded.

Dhaya Maju LTAT obtained the contract through direct negotiations, which the new Pakatan Harapan-led government promised to eliminate in its GE14 manifesto. Loke also said the seven-year completion period was too long.

A fresh tender was to be called at the end of last year, but to date, this has yet to be done.

The interest in the KVDT2 is huge as it is the only major railway job still on the cards besides the East Coast Rail Link (ECRL) project, which is still being renegotiated between Malaysia and China. Several large construction companies have openly expressed their keenness to bid for KVDT2, including Sunway Construction Group Bhd and IJM Construction Sdn Bhd.

It is understood that DMIA remains hopeful that the government will award the contract to it again.

When contacted, DMIA tells The Edge that it is providing the new government with all the relevant information on the KVDT2 and that it had entered into negotiations and discussions with Putrajaya on the project as far back as 2013.

“After stringent procedures from a value management committee, which included the Economic Planning Unit, the transport and finance ministries, the Land Public Transport Commission, KTMB, Railway Assets Corp and the Public Works Department, DMIA received the contract in 2015. However, because of budgetary constraints of the previous government in 2015, the contract was split into two phases to facilitate payment issues.

“Negotiations for Phase 2 of the project (referred to as KVDT2) started in 2016 and the LOI was issued in May 2017. DMIA received the award for Phase 2 in 2018,” it explains.

To date, the rehabilitation works for Phase 1 of the KVDT project (referred to as KVDT1) is 75% completed, with full completion slated for end-2020.

Smaller in scale and awarded at a cost of RM1.41 billion, KVDT1 entails the rehabilitation of 42km of KTMB tracks connecting Rawang-Salak South and Sentul-Simpang Batu. In addition to the railway tracks, the project also involves upgrading 16 KTMB stations in the Klang Valley, including signalling, communications, electrification and station facilities.

“DMIA is proud to be the only company in the country with experience in track rehabilitation under live electrified lines. DMIA is also the owner of the biggest fleet of specialised track machinery worth RM280 million in Malaysia, including an automatic track panel laying machine, which is one of only nine in the world. This was introduced in the Asean region for the first time by DMIA,” it adds.

Mohd Aizuddin maintains that the group of independent railway contractors can undertake the project at a lower cost and within a much shorter time frame than those proposed by Dhaya Maju LTAT. The group also wants the government to keep to its word and to retender the project on an open-tender basis.

A paper dated Nov 1, 2018, which was written by railway consultants Amit Sen Gupta and Dr C T Toh and prepared for the transport minister, shows that under KTMB’s proposal for KVDT2, the rehabilitation works include replacing the existing track with new higher-grade rails and concrete sleepers; removing the existing ballast, carrying out soil treatment, installing a sand and sub-ballast layer and replacing the ballast; and improving the drainage.

However, the paper, sighted by The Edge, suggests that removing and replacing the existing ballast, introducing a sand and sub-ballast layer, and providing geotextile and soil treatments are unnecessary given the performance of the existing KTMB tracks.

The authors estimate that implementation of the full scope of works as proposed by KTMB will cost RM3.11 billion whereas the reduced-to-necessity scope proposed by the duo is estimated to cost RM1.89 billion, a saving of RM1.22 billion.

The reduced scope of works will also mean significantly less disruption to the commuter service and, with it, less loss of income for KTMB and less inconvenience for the public.

The paper also suggests that if KTMB were to purchase track machinery such as tamping, regulator, ballast cleaning and dynamic track stabiliser, and rent them to contractors, many mid-sized contractors will be able to participate, leading to more competitive tendering.

However, a rail expert who declined to be named observes that it does not make sense for any company to bid for a contract under the premise that it can use KTMB equipment.

“KTMB is not responsible for providing equipment to contractors. KTMB has to use its own equipment for the maintenance of its current rail tracks. It is not a maid coming to work in your house. Even a professional cleaning service brings its own material to work with. Anyway, why should a private entity use the government’s (KTMB) facilities?” he says.

The expert also notes that the contractor for the KVDT2 project should have reasonable financial strength.

“Malaysia should not award contracts to those who can’t show a solid financial foundation. We do not want to have to bail out companies which can’t execute the project.

“Companies seeking to execute KVDT2 should have at least working capital and project financing of RM300 million. This should be a criterion, though the first consideration is whether the company has a track record in live electrical railway works. The safety of the Malaysian public is at risk here. Don’t just give the project to anyone,” he adds.

According to a source close to the matter, KVDT2’s estimated cost was based on the 2007 price benchmark of the Ipoh-Padang Besar electrified railway double-tracking project.

“At today’s prices, the cost should easily be closer to RM10 billion. The cost of KVDT2 is dependent on the scope and specifications. The higher the scope and specification, the higher the cost. The KVDT is a brownfield project and this costs more. Similarly, if the Federal Highway were to be rehabilitated, it would cost more because the highway would have to be dug up, foundation and roads re-laid while managing traffic,” the source says.

The different lobby groups notwithstanding, rail players agree that the Klang Valley rail tracks are in urgent need of an upgrade as most are about 25 years old.

 

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