PETALING JAYA: The Finance Ministry's move to terminate MMC-Gamuda KVMRT (T) Sdn Bhd's contract to build the underground portion of the Mass Rapid Transit Line 2 (MRT2) will result in over 20,000 job losses from a supply chain of over 600 Malaysian companies.
Yesterday, Finance Minister Lim Guan Eng said all unfinished underground work at MRT2 will be re-tendered via an international open tender process.
“The Pakatan Harapan government holds steadfastly to obtaining ‘value for money’ on all government expenditure, especially when large borrowings are required to complete any project,” Lim said in a statement last night, adding that the billions of ringgit saved would reduce the debt and interest the federal government would need to repay.
More savings, Lim added, would be gained when the underground portion is re-tendered.
In response, today, MMC Gamuda in a statement, explained this latest move by Finance Ministry will trigger 20,000 job losses, of which over 3,000 are MMC-Gamuda joint venture staff, and of this, more than 60 per cent are Bumiputera.
"This will cause unnecessary hardship to a significant number of Malaysian work force in an already slowing market," the company said.
In addition, the termination will unjustifiably expose MMC-Gamuda to a flood of lawsuits for compensation from terminated employees, sub-contractors, suppliers and manufacturers whose contracts will similarly be terminated due to no fault of theirs.
The Finance Ministry's belief that MMC Gamuda could offer more reduction for the underground works is premised upon the review by a local engineering consulting firm, which seems to have made assumptions that are too simplistic and arising from a lack of relevant technical experience.
MMC Gamuda had refuted the consultant's proposal. Project owner MRT Corp Bhd, which has a huge staff of experienced technical experts, had also issued their own report refuting that consulting firm’s proposals on 27 August 2018.
On 8 August 2018, 21 August 2018 and 24 September 2018, MMC Gamuda urged Finance Ministry to appoint an international engineering consulting firm with the relevant experience to carry out an objective review looking into all reasonable engineering and technical requirements.
Further, MMC Gamuda remains open to further discussion with Finance Ministry. "Our perception of the latest cost gap is that it is an amount which is not unbridgeable."
"The aim of achieving savings is best done by both parties reaching an acceptable compromise instead of terminating the contract and re-tendering the remainder of the underground works," MMC Gamuda added.
When compared with MRT Line 1, MMC Gamuda explained the contract for MRT2 specified larger floor space, a five-fold increase in the underground entrance and pedestrian walkways.
MRT2 geology is complex, with the average depth of the diaphragm walls in MRT2 measuring 51 metres as compared with MRT Line 1 at 39 metres.
During the initial tender process, MMC Gamuda had submitted an alternative proposal with savings by reducing the prescriptive requirements without compromising the safety, performance and functionality of the operational railway.
However, MRT Corp elected not to accept the alternative offered by MMC Gamuda.
The reductions currently on offer to Finance Ministry include some of these alternatives but only those applicable to the balance of the underground works.
MMC Gamuda also noted given the high risk of sinkhole incidents arising from tunnelling through the extreme karstic limestone in the city centre and threading the tunnels through high-end properties, with financial losses running into hundreds of millions if affected by ground collapses, the insurance industry around the world have introduced extremely stringent risk management requirements governed by International Tunnelling Insurance Group via the British Tunnelling Society Risk Management Code of Practice BS6164:2011 and ISO 31000 Risk Management.
As of todate, MMC Gamuda had not received any complaints from MRT Corp regarding the execution of the underground works.
All 19 sites are active with 40 per cent of the works completed.
Two of the tunnel boring machines are already mining with the balance being assembled and ready to mine from next month onwards.
There is no official confirmation from MRT Corp that MMC Gamuda has been terminated as underground contractor.
In the past two months, MMC Gamuda said it has been engaging with Finance Ministry to review the MRT2.
Following that, MMC Gamuda offered to convert the Project Delivery Partner (PDP) model to a single Turnkey Contract for the elevated works with 23 per cent price reduction or RM2.3 billion to RM17.42 billion.
"We achieved this through reducing the scope of works and lowering specifications for mechanical, electrical and architectural finishes of the stations.
"We've also reduced the entrances to stations and the number of active stations constructed. From a total of 10 stations, four will currently be shelved," said MMC Gamuda.