Requests for proposals: Getting it right

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The Penang government and its related agencies, the Penang Island Municipal Council (MPPP) and the Penang Development Corp (PDC), have in recent months called for a string of requests for proposals (RFP) for various projects in the state.

RFPs are uncommon in Malaysia, especially in the government sector where tenders, either open or closed, are called for most projects.

The RFP is an early stage in a procurement process where an invitation is issued to interested parties to submit a proposal for a specific project or service. The RFP process brings structure to the procurement decision and allows the risks and benefits to be identified clearly upfront.

The RFP may dictate to varying degrees the exact structure and format of the responses. Effective RFPs typically reflect the strategy and short/long-term business objectives, providing detailed insight upon which the interested parties will be able to offer a matching perspective.

RFPs have been called by the state for the development of landmark projects and the restoration of historical sites.

At the top the list is the high-end integrated development of a reclaimed site in Bayan Mutiara, comprising prestigious offices, specialist medical facilities, commercial blocks, residential enclaves, retail and public spaces.

Bayan Mutiara, which was reclaimed by the Penang Development Corp (PDC), was supposed to have been the administrative capital for the Barisan Nasional state government . When the Pakatan Rakyat took over the government in 2008, the plans were shelved.  The state government is now planning to tender out the development in a bid to raise much-needed funds for its social programmes.

The RFP, inviting local and regional players, is to develop the 62-acre site located south of the Penang Bridge overlooking Pulau Jerejak.  Another 35 acres can be developed via reclamation in future after the completion of the development of the initial 62 acres.

The reserve price of the land is expected to be above RM200 per sq ft, which would mean that the 97-acre site (60 acres with 35 acres to be reclaimed) could fetch above RM870 million.Another project is to build the 70,000 sq m Penang International Convention Centre (PICC) in Bayan Baru, and upgrade of the existing Penang International Sports Arena (PISA) and Aquatic Centre nearby.

In terms of historic sites, the state government wants the iconic Fort Cornwallis, at the Esplanade, and the Crag Hotel on Penang Hill to be restored, refurbished, redeveloped and managed as unique and prestigious tourism products that will raise Penang’s profile internationally and transform Fort Cornwallis into a destination for high-value tourists.

Fort Cornwallis is a star-shaped fort situated on part of Lot 29, 30 and 31 Seksyen 24, North East District, George Town. It was built by Captain Francis Light in 1786 and was named after the British Governor General of India at that time, Charles Marquis Cornwallis. After a tender process failed to achieve the desired results, the state government has called for a fresh RFP.

The Crag Hotel, completed in 1805, was the first hotel on the hill. It was once owned by the Sarkies brothers, who founded the E&O Hotel. The 7.7-acre complex on Penang Hill comprises 22 bungalows. After changing hands many times, the Crag Hotel has not been utilised since it was acquired by the previous state government in 1977.

Another RFP has also been called for the establishment of an eco-tourism venture comprising an educational nature trail and canopy walk on Penang Hill to complement the RM64 million upgrade of the hill’s funicular railway by the federal government, which will be completed by the end of this year.

The state government has also called for  proposals to build and operate a gold and jewellery bazaar on a 0.4ha strip of land near Komtar, in a move to revitalise the area. The RFP also calls for the upgrading and revitalisation of the 59, 60, 64 and 65th floors of Komtar with total floor space of 52,000 sq ft.

As an added draw, PDC is studying a proposal for a sky-lift from the 5th floor to the 65th floor of Komtar to  encourage visits to  the top of the building in a spectacular ride.

The RFP also includes proposals for a total floor space of 205,674 sq ft on the 5th floor of Komtar, which includes an open area, food court and the Geodesic Dome.

With Komtar presently undergoing a revitalisation initiated by the state government, its surrounding properties have also undergone facelifts to upgrade and preserve their heritage value, following the listing of George Town as a Unesco World Heritage site.

As part of the revitalisation, the open area next to Komtar, which used to be a pedestrian walkway, has been identified to be developed as a gold and jewellery bazaar to promote the city as a regional gold and jewellery centre.

The state government says the projects are in line with the strategy to unlock state assets and capitalise on their sizable heritage value.

Pressed for funds, which have not been forthcoming from the federal government, the initiatives are a means for the the opposition-run state government to test the waters of public-private sector partnerships as a long-term measure for development.

However, some of the projects, like the PICC and the Bayan Mutiara development have raised eyebrows, with some quarters vehemently objecting to the proposals.

Other projects, like the Komtar revival  have received positive feedback as Komtar, one of Penang’s famous landmarks and once the business centre of the island, has fallen into a state of disrepair.

Chief Minister Lim Guan Eng said RFPs would offer different perspectives for the various projects, some of which are badly needed to breath new life into certain areas and buildings in Penang.

“RFPs are actually a standard international practice. But here in Malaysia  they are not used as government tenders are closed and selective. Penang is taking the lead as we believe RFPs offer us better, and more innovative, creative  proposals.

“Those submit proposals must follow the technical specifications while offering their perspective on the projects. We can explore the alternatives and at the same time get the best price with innovation, creativity and lots of flexibility.

“This is akin to an open bidding system, with the same principles, but we have the flexibility to decide based on the right price and the quality of the projects offered which will help us attain new international benchmarks and standards,” Lim said.

Most of the RFPs have been completed and submitted but none have been awarded as yet as Lim said time is needed to assess the various proposals.

Datuk Dr Goh Ban Lee, a senior fellow of the Socio-Economic and Environmental Research Institute Penang, former associate professor at the School of Social Sciences at Universiti Sains Malaysia and a columnist on issues related to urban governance, housing and urban planning, said RFPs for state-owned properties were the best way to unlock the value of viable properties.

“More importantly, it opens up creative minds. I find the RFP idea very refreshing and interesting. If it is left to state planners or architects, it will only be one design. Generally, planners working in the civil service, as government officers, follow the normal procedures and plans and rarely take risks.

“However, by opening it up to the private sector, it will provide a myriad of ideas and, with competition, the bidders strive to give their best shot — and the sky is the limit to their innovation,” Goh added.

“This is new thinking, it ... gives the state government the pick of the best proposals. Ultimately, the state government decides and picks on the best options offered. I hope this will work. It is the state government’s first attempt and, if it works well, it will set a precedent and trend.

“If it doesn’t do well, there will of course be public criticism and what usually follows is a ‘withdrawal’ by the state government, which would not be a good thing.

“I hope this will be the beginning to attract creative people to Penang. We must make Penang more creative, and the only way to do it is to attract creative people here,” Goh said.

He said, however, RFPs would not be feasible or suitable for public housing or recreational projects for which the state government already knows what it wants.

Datuk Jerry Chan, Real Estate and Housing Developers Association (Rehda) Penang chairman,  hails the RFPs, especially for Bayan Mutiara, as a step in the right direction for Penang to achieve its vision of becoming an international city.

“The state government’s move is the right thing, as it is also sourcing funds via this project. It will need to ensure that the low- and middle-income stratas of the population are not left out of the stream of development.

“It is good that there is transparency on how this is being done, and may the best man win. When looking for ‘suitors’ it is obvious one should look for the best, either locally or internationally.

“If you want to do something big that is integrated like the KLCC or Suntech City or the Marina Bay development in Singapore, you need the big boys,” Chan said.

He said an open tender would extract maximum value for the land. “The value brought in by the development should bring in more investments, create jobs and result in a lot of spillover,” Chan said.

Well-known social activist Ahmad Chik, a resident of Penang Hill, commended the state government for finally initiating the revival of the Crag Hotel.

“At last, something is being done. I have been living on Penang Hill for 21 years and I have been lobbying the state government to do something about it. It is one of the loveliest properties on the hill and since 1977, after the place was taken over by the state government, nothing has been done about it.

“It is criminal that the place has been left idle and vacant for the past 33 years. The previous state government failed badly in not doing anything about it,” Ahmad said.

He said the calling of  RFPs called for Fort Cornwallis and Penang Hill was commendable as it was an open and transparent way of doing things.

“They should be commended for doing this. Previously, all was done between the government and one party under a cloak of secrecy.

“However, the only thing I would add is that the state government should put a lot of thought and planning into the terms of reference for the RFPs. I have spoken to some people who have said that what is intended has not been made clear, resulting in some confusion it appears.

“In principle I agree with it entirely, but the implementation must be foolproof and effective. In other words, those calling for RFPs should be clear what they are trying to achieve and draft terms of reference clearly. It should be done with a lot more vigour and thought,” he said.

This article appeared in Penang Pulse page, The Edge Financial Daily, November 1, 2010.