Thursday, October 11, 2018

MMC-Gamuda: Why So Greedy?

Today, I read with interest that shares in Gamuda Berhad and MMC Corp Berhad fell further! 

All because the Cabinet made a decision that a portion of the infrastructure project, i.e. the underground work of the Mass Rapid Transit line 2 – also known as the Sungai Buloh-Serdang-Putrajaya (SSP) line – was to be stopped temporarily as the government mull the next course of action, which is to locate a delivery partner that can finish the job at a lower cost. Meaning, the government are of the view that the price was exaggerated.







[Background info: Gamuda and MMC Corp have a 50-50 joint venture called MMC-Gamuda KVMRT (T) Sdn Bhd and given the mandate in February 2014 to complete the MRT2 project – at an initial cost of RM28 billion. 

After the change in government and Najib Razak was ousted this year, this project and other projects all came under scrutiny – as it should be. 

In fact, the Ministry of Finance further disclosed that the cost has now ballooned to almost RM56.93 billion]. 

MMC-Gamuda were obviously peeved by this 'stop order' and complained loudly how unfair the government are. They even mischievously tried to stoke sympathy from the Malaysian public by announcing that up to 20,000 people could lose their jobs, that 40 percent of the job was already completed, et cetera, et cetera to explain their unhappiness. 

Then somebody called Joyce Raj initiated an online petition on Change.org on Tuesday, urging the government to reconsider their decision to terminate the MRT 2 underground works contract. As at 10:40 AM this morning, it has already garnered 28,135 signatures. 

But here’s the thing – we only hear MMC-Gamuda's version of the story. 

And so, yesterday, Tony Pua (right), Political Secretary to the Minister of Finance and Damansara MP felt compelled to issue an Open Letter – to clarify matters: 

"Dear Directors of MMC-Gamuda, 

Let me applaud you for putting up a great show since the Minister of Finance, Lim Guan Eng announced the Cabinet decision to (i) accept the offer from MMC-Gamuda to reduce the cost of the MRT2 Above Ground works by RM5.2 billion to RM17.4 billion (23% reduction) in the form of a turnkey contract and (ii) terminate the Underground contract as both parties could not reach an agreement on the required price reduction. 

You have issued a letter proclaiming innocence, claiming that you were awaiting for an offer from the Ministry of Finance (MoF). You questioned the qualifications of the independent engineering consultant we have engaged. You implied that the decision to terminate was hasty and ill-conceived. You sought sympathy claiming the loss of jobs for no less than 20,000 people (wow!). Your social media actively promoted a campaign to “Save 20,000 Jobs” asking Malaysians to sign the petition. There are viral Whatsapp letters from first class honours engineers regretting support for Pakatan Harapan in the last general election. 

The performance and mobilisation of the above campaign are nothing short of impressive. The question of cost of the project to the Government was conveniently ignored. 

We had no intention of engaging with you in a public war of words. We tend to reserve that for our political opponents. And after all, we wanted to continue the good working relationship to complete the RM17.42 billion worth of Above Ground works. 

However, the obvious brazen attempt to paint yourself an innocent victim to an unjust Harapan government required a response to set the facts right and record straight. 

1. The original Underground contract was awarded for RM15.49 billion. MRT Corp awarded additional RM1.2 billion of variation orders which resulted in the revised contract value of RM16.71 billion. 

2. After numerous meetings and discussions, you wrote to the Minister on 15 August to offer a revised price of RM15.1 billion. This was mostly a result of shelving the 2 underground stations at Bandar Malaysia North and South. 

3. Subsequently on 7 Sep, you offered to reduce the price further to RM14.58 billion for the Underground contract (making it RM32 billion for the entire MRT2 project). This represented a cost saving of RM2.13 billion or a 12.7% reduction. In the words of the Gamuda director at the meeting with the Minister on 4 Sep – “we offer what we can offer, but anything beyond that will be meaningless to continue”. 

4. However, based on the study by the independent engineering consultant, MRT Corp should expect total savings between RM4.19 to RM5.79 billion for the estimated remaining 60% portion of works yet to be completed. Yes, this potential savings is just for the balance of works to be completed. Imagine the potential savings if it was for the entire contract. 

So the question to be deliberated upon by this new Pakatan Harapan government is very simple. 

A. Do we say, “it’s OK la, let’s just accept the RM2.13 billion reduction offered by MMC Gamuda”? After all, we can take this figure and boast to Malaysians of our ‘magnificent’ achievement, for they would know no better that we might have left another RM2 billion of potential savings on the table. Furthermore, it will certainly save us the trouble of having to deal with the negative publicity and the new international tender exercise which has to be carried out. Too much work... Or 

B. Do we honour the mandate and trust the people has given us and maximise the savings we can reasonably derive from the project? RM2 billion can pay for 5 hospitals, or 50 schools. RM2 billion is hell of a lot of money when I see my MoF colleagues who are struggling and scrimping to find RM50 million savings here, and RM80 million cuts there for the upcoming Budget. 

The Cabinet obviously made the decision to pick the latter. And you seriously telling Malaysians to blame the Cabinet for the termination? 

Or would you then pick a different target, as you implied in your media statement, that the independent consulting engineers aren’t sufficiently qualified – despite employing more than 500 staff with a track record of having completed more than 80 projects in 24 countries outside of Malaysia? 

Or was it because the government-appointed independent consulting engineer exposed the frequently expounded lie that the cost of MRT1 and MRT2 are well-below the average cost of construction of various Asian Metros, because no one was actually able to substantiate the data provided? 

Should we instead question why MMC Gamuda had initially agreed to, but subsequently refused to share costing data with the independent consulting engineer to justify its cost, claiming “trade secrets”? 

To the 26-year-old first-class honours engineering graduate, I empathize the turbulence you are facing in your life today which is due to no fault of yours. However, should Gamuda decides not to retain your services, it would only be their loss, because you would build an equally successful career in many other companies. 

To the purported 20,000 workers who, according to MMC Gamuda, would lose their jobs as a result of the underground contract termination, let me emphasize that the Malaysian government is not terminating the project. You will find plenty of opportunities when the new project is awarded at a lower cost, while the savings generated would mean even more projects for the future. 

But perhaps, instead of starting a petition on Change.org to seek the Government to reverse its decision on the termination, it might be more productive to start a petition to ask your bosses at MMC Gamuda to make the Malaysian government an offer they cannot refuse. 

Thank you”. 

Now that we have both sides of the story – I trust Malaysians will not be so gullible and sign the petition!

Please don't be fooled by corporate disinformation and deception!

MMC-Gamuda, why so greedy?!?!

Nicol David's campaign at the US Open Squash Championships (October 06-13, 2018) came to an end in the third round after her second defeat in as many weeks to nemesis Laura Massaro on Tuesday. 

Nicol (left) lost the first two games but fought her way back, forcing a decider before going down 12-10, 11-8, 7-11, 8-11, 11-6 at Drexel University in Philadelphia, Pennsylvania.

[Note: England’s Massaro had also defeated David in four sets in the quarterfinals of the Oracle Netsuite Open in San Francisco last week]. 

The Penangite, who received a bye in the first round and beat Aussie Donna Lobban in the second round, said she had given it her all. 

It’s the fight that counts! Victory is another matter altogether.

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