Indications are that the project delivery partner (PDP) model could be on its way out for the 2,324km Pan Borneo Highway project in Sabah and Sarawak.
The cabinet is supposed to make a decision soon, but already the Sabah chief minister has reportedly said the PDP model would be ditched.
The Edge Daily, citing a source, has said that a turnkey contractor model could replace the PDP model for the Pan Borneo Highway.
Under the PDP model, a project delivery partner acts as a consultant to oversee the implementation the project.
But the model has some key drawbacks, as the Edge pointed out:
– cost overruns under the existing PDP structure
– contractors not being incentivised to be cost-efficient (as PDP fees are based on a percentage of the project value.
– so different from the turnkey contractor model, where the project cost is fixed from the beginning.
The Edge added:
A recent example is how the overall cost for the mass rapid transit Line 2 (MRT2) project ballooned to RM56.93 billion from an earlier estimated cost of RM28 billion due to additional expenses under the PDP model. In the case of the MRT2, the government switched to a turnkey model and revised the scope of work for the above-ground portion, which helped reduce the portion’s cost to RM17.42 billion from RM22.64 billion previously.
I had written about the termination of the MRT2 here.
The Pan Borneo Highway project has two PDPs – one each for Sabah and Sarawak respectively:
Borneo Highway PDP Sdn Bhd (BHP) is currently the PDP for the 706km Sabah portion of the highway, whereas Lebuhraya Borneo Utara Sdn Bhd (LBU) is the PDP for the Sarawak portion.
BHP is 60%-owned by Warisan Tarang Construction Sdn Bhd, with the other 40% held by a joint venture between UEM Group and MMC Corp Bhd.The Edge Malaysia weekly reported that Warisan Tarang is perceived to be connected to Sabah Umno and former chief minister Tan Sri Musa Aman.
Meanwhile, LBU is seen as being linked to controversial businessman Tan Sri Bustari Yusuf, a media-shy tycoon closely linked to former prime minister Datuk Seri Najib Razak. The toll-free Pan Borneo Highway was launched by Najib in March 2015.
Similarly, over in Penang, critics have said the PDP model is fatally flawed.
We saw what happened when the PDP model was introduced in Penang. All of a sudden, the cost ballooned from the RM27bn estimated in the original Halcrow transport masterplan to RM46bn under the new proposal.
The original transport masterplan was changed beyond recognition as more expensive transport options were chosen. There was little attempt to gauge the financial feasibility of actually operating these transport modes. Extravagant items like a six-lane highway and tunnels and an elevated light rail transit were thrown into the rojak along with outdated monorail and “skycabs”. Better, cheaper, faster options were jettisoned.
In many ways, the rojak plan in Penang is following the same mistakes made in KL, which embarked on light rail transit lines without an integrated sustainable mobility plan. And look what happened in KL.
At Penang Transport Council meetings, it was repeatedly pointed out to the state government that there were serious conflicts of interest inherent in the PDP model.
I have written about these conflicts of interest at some length.
It wasn’t just me and Penang Forum folks saying it. Gamuda founder Koon Yew Yin also wrote about the problem of a major contractor acting as project consultant.
He said: “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….
Tony Pua, for his part, pointed out the flaws in the PDP model for the KL MRT project.
A Concerned International Banker pointed out: “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.
Apart from that, what are property developers with no experience in sustainable mobility planning doing in the consortium in Penang?
So will the federal government do the wise thing and ditch the PDP model in Penang – and go back to drawing board (the Halcrow masterplan), which should then be submitted for review by internationally acknowledged independent experts in sustainable mobility.