RM12.5Bil double-tracking project delayed and costs RM3.6Bil more

The government faces the risk of footing heavy losses because the agreements it has signed for the double-tracking project limits the compensation that can be claimed from contractors who fail to meet deadlines.

“An audit found that the cap on liability borne by the contractor… for the Ipoh to Padang Besar (double-tracking) project is fixed at 10 percent of the contract value or RM1.25 billion,” notes the Auditor-General’s Report 2011.

This, it explains, does not bode well because an exact cap for the Rawang to Ipoh segment of the project forced the government to pay RM882.01 million in compensation.

Elaborating on this, the report states: “In 2000, the electric double-tracking project between Rawang and Ipoh was carried out by the (Transport) Ministry. The audit done in 2008 found that the government suffered an estimated lost of RM1.14 billion when the contractor failed to complete the project.

“However, the full amount could not be claimed from the contractor because, according to the (terms and) conditions, the maximum liability that can be claimed is limited to 10 percent of the contract value or RM257.99 million only.”

The more recent contract signed with MMC Gamuda Joint Venture Sdn Bhd (MGJV) has similarly failed to protect the interest of the government, states the report.

“The cap on the maximum liability does not take care of the government’s interests because (it) will be forced to bear the losses if the contractor fails to complete the project according to the schedule.”

The report further questions the 0.15 percent processing fee imposed on the government by the project’s lead lender, Bank Pembangunan Malaysia Bhd (BPMB). This amounts to RM10.05 million for interim payments made to MGJV.

“The audit is unable to determine the justification for the fee amounting to RM10.05 million (for BPMB) to process interim payments which were in fact handled by the project consultant, Keretapi Tanah Melayu Bhd and the (Transport) Ministry,” it said.

It also notes that the deadline for the project, which is to be completed by Jan 7, 2013, has been extended to Nov 7, 2014, and that this is likely to incur additional costs.

To date, the RM12.485 billion project has cost already cost an additional RM3.608 billion due, among other reasons, to land acquisition and compensation for squatter relocation.

– Malaysiakini

Read more…
Double trouble for gov’t in rail contracts
Oct 16, 2012

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