MRT2 underground termination highlights fundamental flaw in PDP model

The termination of MMC-Gamuda as the contractor for the RM17bn underground portion of the MRT2 project in KL highlights a fundamental flaw in the project delivery partner (PDP) model, which is also being used in Penang.

And that flaw is having a consultant, the project delivery partner, earning 6% in project fees and later possibly being involved directly as contractor for the various infrastructure projects or indirectly in other ways. This is tantamount to a conflict of interest, especially in the case of Penang.

The original transport consultant in Penang was Halcrow, which was paid just RM3m to come up with a transport masterplan for the state. Halcrow came up with a plan for a RM27bn transport network.

The Halcrow plan comprised RM10bn for public transport (including RM8bn for bus rapid transit and trams) and the balance RM16-17bn for highways (including the controversial RM6bn undersea tunnel-and-three highways that the state government wanted).

Now, SRS supporters say this Halcrow plan was “just a conceptual plan”. Yes, of course it was – hey, what do we expect for RM3m? But the Halcrow masterplan did lay the blueprint for a sustainable mobility framework.

Next, the state government came up with a ‘request for proposals’ for a so-called project delivery partner to implement the Halcrow masterplan. I wonder where they got the PDP idea from, eh? I have a good guess.

In the end, they selected SRS Consortium (comprising Gamuda Bhd 60% and two Penang-based property developers, Loy Phoy Yen Sdn Bhd and Ideal Property Sdn Bhd). If you ask, why are property developers in the consortium, I would say that is a good question. No one has given me a satisfactory answer. Similarly, if you ask what does a transport infrastructure contractor know about sustainable mobility planning….

Under SRS Consortium, the cost ballooned to RM46bn as the consortium came up with a more exorbitant proposal than the Halcrow masterplan – and radically different:

Instead of the more cost-efficient BRT and trams (which include segregated and elevated sections) that Halcrow had proposed, SRS came up with a rojak of more expensive elevated LRT, outdated monorail systems, cable car systems and whatnot.

And for good measure, it threw in the highly controversial 19.5km six-lane Pan Island Link, which was not even in the Halcrow plan. This highway alone will cost RM8bn – the same as Halcrow’s entire public transport budget for the whole state.

The Pan Island Link highway – half the length would be made up of tunnels – would link the 900-acre land reclamation off Gurney Drive in the north of Penang Island with the 4,500-acre three-island reclamation off the southern coast near the Penang airport. Not surprisingly, many see the highway as facilitating high-end property development with “sea view” condos on artificial islands in both these areas. A property play, as they say.

But SRS Consortium didn’t count on the property market overhang, which has thrown a cangkul in the works. Hence, the Penang government is now seeking a RM1bn loan from the federal government, ostensibly so that it can build both the elevated LRT and the Pan Island Link simultaneously. But it has also mentioned that if it doesn’t get the loan, the PIL could be delayed to 2027, ie after the LRT is completed. My guess is that the state would find it hard to sell reclaimed land on two islands simultaneously (as they had originally planned under Phase 1) given the high-end property glut; so now they are mulling creating just one island under Phase 1 to finance the elevated RM8bn LRT for a start.

At the Penang Transport Council, the issue of a conflict of interest inherent in the PDP model was highlighted on many occasions – but it mostly fell on deaf ears or was largely ignored.

After all, the higher the value of the work proposed, the more the PDP fees. And what if the type of work proposed (eg lots of expensive tunnels) oh, just so happens to fall within the area of expertise of one of the parties in SRS Consortium, the project consultants? Would the consultants then go on to participate in the actual construction work either directly as contractor or indirectly? At the transport council meetings I attended, they said no, but…

Even Gamuda founder Koon Yew Yin expressed concern. So too Penang Forum. Tony Pua pointed to the inherent problems of the PDP model in the Klang Valley. An international banker wrote that the PDP model was unsuitable for a large, multi-generational project such as the one in Penang.

For that matter, experienced transport planners point out you don’t plan so far ahead when so many things may change, like technology, even the population (the present total fertility rate in Penang is well below population replacement level). Planning for 15-20 years, yes… but 50 years?

This is why Penang Forum called for the SRS Consortium’s transport proposal to be reviewed by independent globally renowned experts in sustainable mobility.

This is why 17,000 Penangites have signed an online petition asking for the Pan Island Link to be scrapped and the SRS proposal to be reviewed. And why not? They don’t want an exorbitant but short-sighted contractor-developer-driven proposal.

And now, after what happened with the MRT2 project in the Klang Valley, even more serious questions will be asked about the appropriateness of the PDP model in Penang and the SRS proposal.