Tony Pua has just said the project delivery partner (PDP) model for major infrastructure projects is likely to end soon.
Let’s see who else has said that the PDP model for huge infrastructure projects is problematic.
Well, there’s me. I have always maintained that the PDP model presents an inherent conflict of interest, especially if contractors and developers are the project delivery partner and if they get involved in the planning side of things. They can hardly be expected to be independent consultants advising or proposing to the government the most cost-efficient way forward for the rakyat with the least harm to the environment.
Let’s see who else has said the PDP model is not a good idea:
Well, there’s Tony Pua again – back then, as an opposition MP, when he criticised the PDP model for pretty much the same reasons he is doing now. So he has been consistent.
Gamuda founder Koon Yew Yin has said it.
Penang Forum’s Lim Mah Hui and USM academic Ahmad Hilmy have said it.
A Concerned International Banker has said it: “Firstly, a project delivery partner is used only for relatively small (in comparison), well-specified projects with very clear deliverables and timelines when the public contracting authority does not have the technical/financial capacity to implement these projects.”
A RM46bn intergenerational proposal certainly doesn’t fall into that category.
And now Tony Pua, this time as special officer in the Ministry of Finance, has come out strongly against the PDP model once again:
The award of big infrastructure developments to project delivery partners (PDPs) by the government is likely to come to an end after incidences of cost overruns affected its budget, said Tony Pua, special officer to the finance minister…
“There are some benefits from PDPs, especially if there are delays and cost overruns and these are borne by them, but instead of pricing cost overruns into their contract, we are paying more for the same thing we would get.
“[In PDP] contracts, they get 6% of the cost of the project. The incentive is for the project manager to inflate the cost of the project because it gets 6% of whatever the cost of the project is. So this structure needs to change,” he said.
Pua was citing the example of the RM21 billion Klang Valley mass rapid transit (MRT) Line 1 consortium, consisting of MMC Corp Bhd and Gamuda Bhd, and one of the first projects to be based on the PDP concept, whereby the cost did not include RM7 billion associated costs for engineering consultancy, system integration works, site investigations and PDP fees.
“I am not the finance minister and there is no official decision but at this point of time, we do not see any big projects going forward being awarded via the PDP mechanism,” he said.
Well, actually there is. Look up north.
The Penang government is adamant about pushing forward with the controversial RM46bn transport proposal using the PDP model with SRS Consortium, made up of Gamuda Bhd (60%) and two Penang-based property developers, Ideal Property Development (20%) and Loh Phoy Yen Holdings (20%). The state government hopes to enter into a PDP agreement with SRS Consortium once federal approvals are obtained.
In the first place, where did the Penang government get the idea for the PDP model? Who briefed them on this PDP concept before the request for proposals was called in August 2014? Who briefed them that it was okay for a contractor, rather than an independent consulting firm, to be a project delivery partner? Something doesn’t add up here.
The state should tell us when it first held discussions with Gamuda or the two developers on the PDP model. I think it would be interesting to know the exact date the first discussions were held (in relation to the date the RFP was first called) and the various venues such discussions were held. Transparency, ya.
And what does the state government have to say now in response to Tony Pua’s comments?
And what is the Ministry of Finance’s position on the PDP model in Penang. Shouldn’t the PDP be scrapped in Penang as well?
The PDP model is clearly ill-suited for Penang and we can see that in SRS’ exorbitant reclamation proposal and its short-sighted plan for a massive RM8bn 19.5km six-lane highway (including 10.1km of tunnels) – a highway that will only get congested again by 2030 (as indicated in the EIA report).
Hardly the most visionary plan.