Govt, MMC-Gamuda battle escalates with Tony Pua’s ‘open letter’

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KUALA LUMPUR, Oct 10 – The move by Finance Minister Lim Guan Eng to cancel the contract given to the MMC-Gamuda JV for the underground works for the Mass Rapid Transit Line 2 (MRT2) project, and retender it out, may not be final after all.

Prime Minister Tun Dr Mahathir Mohamad has responded to the many complaints and appeals done via social media and through other channels to the Pakatan Harapan government for the contract to be maintained.

Attending the Khazanah Megatrends Forum 2018 in Kuala Lumpur yesterday, he told reporters that Putrajaya will review its decision.

On Sunday, the finance ministry issued a statement saying it is terminating MMC-Gamuda’s contract for the underground portion of the MRT2 to save RMM5.22 billion and issue a new international tender.

Prior to this, the consortium and the government had been negotiating cost reductions for the last two months but failed to reach an agreement.

For the record, MMC-Gamuda retains the contract to complete the above-ground sections of the line that will connect Sg Buloh to Serdang and Putrajaya.

In response to the appeal by Gamuda-MMC that about 600 companies and a total of 20,000 staff employed across the project would be jeopardised by the government’s move, Lim said the workers would not be out of jobs as they would be re-employed upon the continuation of the project.

“It can also be from Gamuda or other companies,” he was quoted as saying by Bernama.

However, the revelation that of the 20,000 jobs, 3,000 were MMC-Gamuda direct hires staff, of whom more than 60% were Bumiputera seems to have hit a nerve with the government.

Gamuda playing “innocent victim”

The finance ministry is not backing down though, with Tony Pua, who is special officer to the Finance Minister, writing an “Open Letter to MMC-Gamuda” this morning.

“The obvious brazen attempt to paint yourself an innocent victim to an unjust Pakatan Harapan government requires a response to set the facts right and record straight.

“The original Underground contract was awarded for RM15.49 billion. MRT Corp awarded additional RM1.2 billion of variation orders which resulted in the revised contract value of RM16.71 billion.

“After numerous meetings and discussions, you wrote to the Minister on 15 August to offer a revised price of RM15.1 billion.  This was mostly a result of shelving the 2 underground stations at Bandar Malaysia North and South.

“Subsequently on 7 Sep, you offered to reduce the price further to RM14.58 billion for the Underground contract (making it RM32 billion for the entire MRT2 project). This represented a cost saving of RM2.13 billion or a 12.7% reduction.  In the words of the Gamuda director at the meeting with the Minister on 4 Sep – ‘we offer what we can offer, but anything beyond that will be meaningless to continue’.

“However, based on the study by the independent engineering consultant, MRT Corp should expect total savings between RM4.19 to RM5.79 billion for the estimated remaining 60% portion of works yet to be completed.  Yes, this potential savings is just for the balance of works to be completed.  Imagine the potential savings if it was for the entire contract,” Pua said.

Doubts over “hidden motives” of independent engineering consultant

The independent engineering consultant that Pua is referring to is Minconsult, a firm that had also been appointed by the previous government in 2010 to carry out a feasibility study on the then proposed RM36 billion MRT bid by the MMC-Gamuda JV.

Now, Gamuda is questioning the independence of the consultant, with some sources alleging that the firm is doing the current evaluation for free with the intention of taking over as the main consultants for the project after the new tender is given.

Still, with this move to reveal the details of negotiations and the direct response from Gamuda’s directors involved, the onus is now on the engineering giant to explain why it cannot take a bigger cut than what it offered.

The belief among those in the finance ministry is that if the company truly cares for the welfare of the staff whose jobs are on the line, then it should accept a lower margin to its bottom line while maintaining the promised payments and salaries to its sub-contractors and the 20,000 staff involved.

Pua: Gamuda trying to have Malaysians go against Cabinet

Pua also chided Gamuda for trying to pit Malaysians against the government on the issue.

“The Cabinet made the decision to honour the mandate and trust the people has given us and maximise the savings we can reasonably derive from the project?

“RM2 billion can pay for 5 hospitals, or 50 schools. RM2 billion is hell of a lot of money when I see my MoF colleagues who are struggling and scrimping to find RM50 million savings here, and RM80 million cuts there for the upcoming Budget.

“And you seriously are telling Malaysians to blame the Cabinet for the termination?” he said in his open letter to the company.

– NMT