Avoiding conflict of interest: Consulting firm ‘should have no interest in project implementation’

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The World Bank has specific guidelines to highlight conflict of interest situations especially in procurement.

This one from the bank’s Procurement Guidelines should be of interest to us:

1.7 A firm shall be considered to have a conflict of interest in a procurement process if:

(a) such firm is providing goods, works, or non-consulting services
resulting from or directly related to consulting services for the preparation or implementation of a project
that it provided or were provided by any affiliate
that directly or indirectly controls, is controlled by, or is under common control with that firm.

Therefore, applying this guideline in the case of SRS Consortium, the project delivery partner that has come up with a 20-volume transport proposal for Penang (which has deviated substantially from the Penang transport masterplan designed by Halcrow) – my interpretation is, any member of SRS Consortium (or any of its affiliates) should not bid for any work package under the SRS proposal; otherwise a conflict of interest arises.

So Gamuda (which has a 60 per cent interest in SRS) should not bid to build the LRT or the Pan Island Link; neither should the two Penang-based property development companies (20 per cent interest each) bid for any of the components in the SRS proposal, including the sale of reclaimed land. To do so would be to create a conflict of interest which the guideline seeks to prevent.

They cannot say that if nobody else submits a bid, they should be allowed to bid. That defeats the whole purpose of this guideline – which is to prevent a consultant from coming up with a proposal that it would have an interest or undue advantage in.

READ MORE:  CRCC and the Penang tunnel-highways deal

There should be no exceptions to this procurement guideline, if the state is serious about accountability and transparency.

I believe my interpretation is shared by Gamuda founder Koon Yew Yin. Speaking about the World Bank-funded Muda irrigation scheme in the 1960s, he said:

The government engaged a reputable engineering consulting firm which has had experience with similar projects to put up a proposal and to open the project bidding to all contractors to tender. The most important thing to note is that the consulting company responsible for the tender process should be independent and should have no interest whatsoever in the project implementation…

In this case, SRS Consortium has no experience with trams and bus rapid transit, which is in the Halcrow transport blueprint that the state government adopted.

Koon added:

Never invite contractors to submit project proposals for any mega project because each contractor will submit his own planning and design which will be impossible for the tender board to evaluate. You cannot compare the cost of an apple with the cost of an orange, a banana or a pineapple.

A contractor should not be permitted to take on the role of the engineering consultant responsible for design as well as that of the role of a construction contractor responsible for the project implementation as the two roles are of conflicting interest. If the company is permitted to do so, it will lead to public perception of abuse and corruption….

Take for example the recent news report that the construction giant Gamuda Bhd is the favourite to land the job as the project development partner (PDP) to oversee the implementation of key components of the integrated transportation plan on the island of Penang.

READ MORE:  Why are vested corporate interests influencing Penang's urban planning?

Firstly, it is clear that Gamuda and all the other companies reported to be in the running for the massive multi-billion dollar project do not have any experience to be in the position of the overall design consultant.

They are not (even) engineering consultants. They are construction contractors. Gamuda might have constructed the tunnel in Kuala Lumpur but they did not design it.

Secondly, CIMB Research has found it “pleasantly surprising” that the Penang state government opted for the Project Development Partner (PDP) structure similar to that of the Klang Valley MRT which has been heavily criticised for cronyism and abuse. From the rakyat’s experience, what is “pleasantly surprising” to contractors will definitely be unpleasant and disastrous for the public.

The consulting company responsible for the tender process should be independent and should have no interest whatsoever in the project implementation…

The other area of conflict of interest relates to the 6 per cent project delivery partner fee. This is what Tony Pua said in 2012 about the PDP fee structure in relation to the KL MRT:

Given that the PDP is being paid on a percentage of contract cost and has to bear any cost-overrun beyond the 15% “allowed contingency”, the PDP which has to help the govt evaluate the various tender proposals will be incentivised to pick the bids with higher prices than the lower ones.

The simple reason is that the higher priced ones will translate into a higher fee for the PDP given the fixed 6% structure.

In the case of the Penang transport masterplan, the cost has ballooned from an earlier estimate of RM27bn to RM46bn; so the PDP fee and expenses will run into the billions.

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So there you have it – what the World Bank stipulates, what Koon Yew Yin said and what Tony Pua said. It’s not just me saying it.

This is why I believe the PDP system for Penang is fundamentally flawed and ridden with potential sources of conflict of interest. And I have said so loudly and clearly at each Penang Transport Council meeting I have attended.

Why is this important? Because we are talking about the use of RM46bn of public funds. No chicken feed, that.

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69 Comments on "Avoiding conflict of interest: Consulting firm ‘should have no interest in project implementation’"

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David Loman
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David Loman

Anil
Did you attend this Forum Talk by Ric Francis?
Modern Trams: Are They Suitable for George Town and Penang?
Date: 30th September 2016 (Friday)
Time: 5.30pm
Venue: Penang Heritage Trust, 26 Church Street, George Town
http://www.pht.org.my/penang-forum-talk-modern-trams-are-they-suitable-for-george-town-and-penang/

Report of the forum on China Press, with picture:
http://www.chinapress.com.my/20161001/【今日北馬頭條】澳洲工程師:最理想城市公交-建/

Wan Xn
Guest

Plucking a sentence from world bank without understanding the context in which it is said is obviously bias reporting

zoro
Guest
zoro

not only that they have a photo of a empat mata fisherman protesting. like cat eating fish fisherman does not wear spec and what happen if drop into the sea often?? anil just pluck here and there like crane hook drops.

zoro
Guest
zoro

In UK, they introduce new engineering contract and down under alliance contract or people private partnership. The client, contractor and engineer work as a team. If they made a profit, it is shared. If loss, they all bare the losses. Koon. Yew based old traditional contract. We are living in tree tops when world has move forward with new understanding

LSS
Guest
LSS

Anil, can you please ask The Tokong if he will soon be kicking out Gamuda Bhd from the SRS Consortium based on the same reasons he kicked out BUCG from CZBUCG?

https://www.facebook.com/lim.siansee/posts/1853814178170701

zoro
Guest
zoro

anil tell us. not a top secret? or tokong will kick you out? or teach tun lang how to muling around. fire tokong unlike tun lang all the cannon mouth and never act.

Calvin Sankaran
Guest
Calvin Sankaran

I am wondering how is the CM can do that so easily. Is this allowed based on the contractual terms? This is certainly kind of things only happens in Third World Banana Republics where the leaders make decisions on their whims and fancies and not based on rule of law or contractual agreements.

BTW, we are still waiting for the CAT to reveal the contract…

zoro
Guest
zoro

what you know about contract? who is the employer? if calvin is not happy , he can bring up to from low court to highest court or duel in badminton. who is having a third world mind. no wonder kl air asia can fly backwards unknowingly¡¡¡

Andy
Guest
Andy
3 points: 1) I like to highlight that despite the Penang Government’s procurement procedure has not achieved the standards proposed by Koon Yew Yin, it is more transparent than BN government’s so many mega projects in the past. 2) The PTMP proposed by Halcrow (27b) underestimated the Tram construction cost (even Penang Forum acknowledged that) (by at least 4b) and was set for development up to year 2030. 3) The updated PTMP with ‘ballooned cost’ (46b), was set for development up to year 2055; replace most of the routes with LRT & Monorail + new route, this increase the public… Read more »
Calvin Sankaran
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Calvin Sankaran
1. More transparent? Care to elaborate on this point? The state govt is not even sharing any details of the project despite with the public yet came up with their projection. How transparent is this? 3. Updated PTMP: I recall clearly that LGE saying monorail to be unsuitable for Penang when this was proposed by BN during the last GE. What has changed since that make Tokong see the wisdom of monorail?Care to enlighten us ? Also what changed in the new plan that added another Rm 10b to the cost? Don’t you think that Rm46B is a little too… Read more »
zoro
Guest
zoro

bn gomen promise to fund the trams and this all malaysians pay. now bn goes kangkong and private takes over. gamuda has to give donation, entertainment with chain of handouts. building islands need dredgers and our tin ore dredges long gone in ipoh. no more ipoh mari

tunglang
Guest
tunglang

3 points: Slaps, Smacks and Pokes?
Try this harder: The Three Stooges – Slaps, Smacks and Pokes

Andy
Guest
Andy
Answers: Anil: Sorry, where did you get that RM4bn underestimation figure from? Answer: In the original Halcrow proposition the total tram cost (Georgetown Heritage + 3 routes) comes up to be 4.4b, based on 40m/km + 10m/km misc cost… Penang Forum newly proposed total tram cost is based on 80m/km + unknown misc cost + according to their intel, tram manufacturers quoted tram cost to be 83m/km – 115m/km + misc cost. So if you do the math, Penang Forum’s proposed tram cost would be about 80~100% more than Halcrow’s estimation. Calvin: More transparent? Answer: Yes, this is based on… Read more »
Andy
Guest
Andy
Notice how Anil did not counter any of my statements (sign of deflection) but merely commented something else. According to Penang Forum, their proposed Tram is ~4b more expensive than Halcrow’s proposal or OF COURSE apxx 2~3b cheaper than building LRT/Monorail even without adding 4th route. BUT, that is if their estimation is correct… SRS actually suggested the cost would be similar as 91% Trams would need to be elevated (Penang Forum suggested a mostly street-level tram) BRT is also part of Penang’s state plan – but Penang Forum’s BRT plan is more expansive and in my opinion, quite good.… Read more »
Andy
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Andy

I think you are wrong. Halcrow proposed a majority streel-level Tram that come up to be ~4.4b to implement (at about 50m/km), if Halcrow’s cost is based on majority elevated tram tracks, it would be ~85m/km or ~8b according to their own estimation. Then the original Halcrow Plan woul be about 31b instead of 27b…..

SRS has their own objectives, and I had not come forth to say that what they proposed is definitely better or anything like that – I am merely pointing out certain facts and incomplete points in your presentation of the issue.

Andy
Guest
Andy
Sorry I misunderstood your sentence “Nope, much of the BCF route, apart from the approach to George Town is based on elevated tram tracks, which is also what the state government’s consultants Halcrow had proposed with their est cost ranging from RM40-50m/km to RM80m/km (for elevated tracks).” I wanted to say that Halcrow’s original estimation assumed almost entirely street-level trams (thus the tram track is only cost at 4.4b)… But According to BCF, tram manufacturer’s opinion was 83m/km -115/km… and Halcrow said 80m/km for elevated tracks…. Unless BCF is proposing an almost entirely street level tram tracks, their cost will… Read more »
Andy
Guest
Andy

Based on Halcrow these are the cost
Georgetown – North Coast Tram (7km) 532m OR 76m/km
Georgetown – Air Itam Tram (13km) 720m OR 55m/km
Georgetown (Weld Quay) – Airport (22km) 1,171m OR 53m/km

So your this statement
“For the airport to Weld Quay route, Halcrow proposed a majority elevated tram route.”
is most likely false….

because the average cost is only 53m/km whereas Haclrow’s estimation said elevated tram is 80m/km

Andy
Guest
Andy
1) The cost of the tram tracks has not taken into account land acquisition and utilities relocation cost among other costs 2) The only way it can be cheaper than LRT/Monorail is if it’s not elevated. 3) Street-level Trams will disrupt traffic flow and probably make roads narrower no matter how you put it, among other things… And Penang Forum in their proposal has been ambiguous about how they want to implement the Halcrow Tram suggestion…. Based on the numbers they quote (80m/km 83m/km 115m/km) it does seem they are proposing a lot of elevated Trams… Do you understand their… Read more »
Andy
Guest
Andy

Some correction on my part:
Original Weld Quay – Airport Tram (*only* 17.4km) at 1,171m. so is 67m/km
(Based on this number, sections of it may be elevated tracks as you suggested)

New alignment Komtar – Airport elevated LRT (22km) at 4.84b so is 220m/km (estimated)

No matter what, Tram will still cost much lesser than LRT. (As long as keeping most of the tracks on street level)

But, the state still thinks LRT is the way to go. And I think as long as we have the facts right, I respect everyone’s opinion…

Andy
Guest
Andy
After going through what you mention and revisit the BCF plan, I realize that a lot of the parts I consider ambiguous can be answered by assuming the same answers provided by Halcrow proposal (detailed) about the implementation of Public Transport. I can go to say that BCF plan must be read hand-in-hand with the Halcrow Proposal Public Transport section to get the full picture, because BCF proposal itself does not provide a lot of data for reference…. BCF gave more info to substantiate the point of “why following Halcrow is better”… However I like to point out that the… Read more »
Andy
Guest
Andy
Some countries who have their elevated LRT by 2015 or later – Ethiopia – Nigeria, Lagos – Taiwan Circular Line (KMRT) – Canada (several, undercon) Accordingly, from 2001 – 2016, there are 20 Monorail systems implemented across the globe (including 1 in Malaysia). China, South Korea and Turkmenistan just had theirs in 2015 & 2016 respectively. Apparently Nigeria is getting one as well. So your statement “why even fewer countries are building monorail these days?” is FALSE. What I do notice is – due to limitation of technology, tram was the only option back in the days and is more… Read more »
zoro
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zoro

why follow europe when they have less kapcais? for 6 months kapcais have to be cold storaged. kapcais in europe are lone rangers whereas here. are all in the family. see the roti man on bike? which asian cities are having. trams? taiwan is using an existing track with extension. you never talk about hong kong which has trams for a long time. which asian trams have you been riding?

Andy
Guest
Andy

Since you decided to do comparison only for “these days” which is not the last 16 years, which according to you is “these days = 5 years”… and must only those completed… Let’s do this (Haih…)

Monorail
Last 16 years 20
Last 5 years TOTAL 5

LRT
Last 16 years 29
Last 5 years 4

Tram
Last 16 years 61
Last 5 years 25

The ratio of Monorail : LRT : Tram
for past 16 years was 18% : 26% : 56%
for past 5 years is 15% : 12% : 73%

Europe has 8 Trams in the past 5 years and in general more than 90% are Tram in the past.

zoro
Guest
zoro
Shenzhen not long completed their MRT comprehensively or LRT. it is a city started not do long after black or white cat catch the mice. Again Deng favour CAT. My friend went to zhangjijie the avatar to see the highest and long bridge in the world. He left hk early in the morning by hk mrt, change to shenzhen mrt to catch the high speed train. In latter afternoon, he was at Avatar!! Try walking like in olden days of Wong Fei Hoong? One encounter bandits along the way. Why People complain about progress but the very same persons are… Read more »
peter pang
Guest
peter pang

So refreshing to hear you engage Anil Kapoor with facts, however, Your assumption that BCF has the same objectives as the Halcrow reports is debatable, because Penang Forum and all the NGOs are all ready to Oppose Oppose Oppose the Tunnel and the 3 Highway projects , which Halcrow clearly states are critical for Penang’s future transport needs. But of course, Penang Forum people do not need these projects because they all own houses in the center of Georgetown.

zoro
Guest
zoro

Andy, fully concur. When cornered, they try to deflect and pour scour grapes and blame on others like Halcrow. They can watch over others but others have no right to watch over them.

zoro
Guest
zoro

the state assest is fixed if the area is fixed. if land is limited, things will be expensive due to limited supply. also one cannot have industries since they will be close to houses. so what kind of thinking? air asia flying backwards. investors are dumping money to increase the assets. once more land investors may leave the heritage and hill lands alone

Calvin Sankaran
Guest
Calvin Sankaran
Andy, 1. Transparency – what transparency you are referring to? The state govt has been either misleading or refuse to divulge any information about these mega projects and it is only due to the tireless work of NGOS and people like Anil we even know about it. As I recall, the KVMRT projects have been announced years before and all the details and alignments were shared publically and the SPAD/Prasana folks even had roadshows on it. The design was also by the government planners and not something pushed out by some private companies. BTW, the request for contract details for… Read more »
zoro
Guest
zoro

of course federal wants to control everything. it is not a federal or national transport. just look at pg ferry. what has anil and ngos did for the ferry? none because they may be invited to kamunting resort for nasi kandar by amno. but it is easy to chew and grind state gomen like amno pressing the ph button when goes wrong.

Andy
Guest
Andy
Dear Calvin, 1) Transparency – I think we are looking at the same thing and you think it’s not transparent; while I think it is (more transparent compared to BN projects). You’ve given your reasoning; while my reason is because I can get so much more info on Penang projects readily compared to BN projects. Our opinion differs because of that. 2) Both of us also agree that LGE changed his mind on use of monorail. While you think that means “he doesn’t know what he was/is saying and depend on private companies to tell him”; I think it’s common… Read more »
Calvin Sankaran
Guest
Calvin Sankaran
Andy, I respect you rational and objective style of engagement and speaking with facts and data which is atypical of the DAP supporters. 1. As for transparency, you cannot say that Penang is more transparent than BN as DAP places itself on a higher plane in terms of governance. This is akin to claim that oh well I am more humble than Trump, which isn’t saying much. 2. Monorail – it reflects badly on LGE to backtrack after making such boastful claim to denigrate monorail system. back in 2013 I can’t recall LGE explaining the rationale behind his sudden change… Read more »
zoro
Guest
zoro

we have non amno ministers who has no authority. transport minister has no control over spad and cannot give green light to operate lrt brt or even run a school bus

Andy
Guest
Andy
Hi Calvin, 1) In a way I agree with you. As I only say that Penang Gov is doing slightly better in the transparency department. It’s good enough for me as I personally feel the ease in getting key information at the right timing (there are times I have to wait it out a bit but in general I’m good). So this is a situation where some of the relatively more demanding people wants MORE transparency – I get that.. 2) I’m sure it reflect badly on LGE for some people (or at minimal given some an excuse to attack… Read more »
Calvin Sankaran
Guest
Calvin Sankaran
This is the problem with DAP – preacher of democratic ideals and good governance at Putra Jaya while practitioner of cronyism, nepotism and an abuser of power at home. The concept of PDP is not just risky in terms of conflict of interests but also biased against the interests of people. While it did work at the new LRT/MRT lines at Federal level, it came with a price. In case of Penang, we can bet that in order to meet the project goals, the PDP and the state government will steamroll over all environmental and heritage concerns. We also can… Read more »
zoro
Guest
zoro

why no objection and silent night from you when amno implement pdp and only make noise at dap gomen show your one side. backside

tunglang
Guest
tunglang
Wan Azizah calls for action against guilty parties in Penang graft case https://sg.news.yahoo.com/wan-azizah-calls-action-against-153758119.html PERMATANG PAUH: Action should be taken against anyone who is guilty in the case of alleged graft involving a DAP assemblyman’s father, said PKR President Datin Seri Dr Wan Azizah Wan Ismail. “We don’t need to hide anything, if guilty, then be it,” she told reporters after opening PKR Permatang Pauh’s annual convention here here, today. Wan Azizah, who is also the MP for Permatang Pauh and Opposition leader, said she would leave the matter to the investigation authorities. The Penang state assemblyman’s father has been remanded… Read more »
glissantia
Guest
glissantia
We have been over this topic before. Talking about the hypocritical and subjective standards and regulations of “international” agencies is a waste of time. They follow the dictates of their Western masters and make devious exceptions. Why do you think the TPP itself is now stalled? They support the most tyrannical regimes. They finance the most destructive projects. They insist that “developing” countries accept dangerous laws, industries, methods and products. Their motto of globalisation brings corruption, tsunamis of hot money flowing in and out, useless development and neo-colonialism. Their worship of wealth will destroy civilization in 10-20 years. Let us… Read more »
tunglang
Guest
tunglang
When the world is on the edge of self-destruction via economic-political-military-cultural ‘piranhas’, the masses will look to the wilderness (forest, outbacks, jungles, kampongs) for self-sustainance & safe refuge. The bags of money & gold + silver & rows of houses will be rendered worthless compared to jungle foods & natural water, yes water. Only if one has gone thro’ the pangs of hunger, the dryness + cracks of lips from thirst & bodily weakness in survival training does one appreciate what is more valuable in times of survival crisis. Cosmopolitan cafes & restaurants will be ravaged for whatever little scraps… Read more »
zoro
Guest
zoro

please lead the way the solution way

tunglang
Guest
tunglang

La,la,la,la,la,la…

peter pang
Guest
peter pang
Useless suggestion ! Where got “Neutral Party” with extensive experience with handling big transport projects in Malaysia ? Anil Kapoor should be pushing for a more equal, fair and comprehensive transport master plan that covers the entire island and mainland with fast public transport, unlike the Better Cheaper Faster which “”FOCUSES”” on the Heritage Zone and pretends Air Itam, Tanjong Bungah and Paya Terubong do not “”Exist””. No point arguing here, with these kind of petty arguments on useless things like “Neutral Party” , Penang people can continue to quietly suffer in silence for thew next 50 years as these… Read more »
Damien
Guest
Damien

Guidelines as it is a guide. UN should insist as Rulelines that must be strictly adhere to. But then UN is just a lame cat or dog can always get veto by the $trong Nations.

Likewise the Cats can be bullied … when dedak runs out.

Kim Teng
Guest
Kim Teng

It’s partner, OK? Now with all kind of hybrid project management, with all kind of confusion jargons… its actually incestuous contractual relation.

zoro
Guest
zoro

Report to anti corruption and see if tun lang says it is a CAT or D.O.G.?

Tan Wee Theng
Guest
Tan Wee Theng

Hi, Anil, please share with us the State Government’s respond every time you raise the conflict of interest issue during the Penang Transport Council meeting. Does the Chair give you an intelligent reply based on CAT?

Kim Teng
Guest
Kim Teng

It’s partner, OK? Now with all kind of hybrid project management, with all kind of confusion jargons… its actually incestuous contractual relationship..

zoro
Guest
zoro

1MDB partnership is even better. International, FBI and CIA.