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MMC Gamuda JV hits back at cancelled MRT2 contract

shutterstock 1010290348 mrt2

The JV which was told its contract has been cancelled for Kuala Lumpur’s Mass Rapid Transit Line 2 (MRT2) project, has issued a statement.

Earlier this week the Malaysian government said that it had cancelled the contract with joint venture contract MMC Gamuda for Kuala Lumpur’s Mass Rapid Transit Line 2 (MRT2) project after failing to reach agreement on the underground section of the scheme.

The unfinished sections of MRT2, which is also known as the Sungai Buloh-Serdang-Putrajaya (SSP) line, will now be put out to international tender and the government has said that this will save costs.

However, in a statement issued by contractor MMC Gamuda, it says that they haven’t received official confirmation that it has been terminated as underground contractor.

In the four-page statement the contractor said it was supportive of the Malaysian government’s drive to improve fiscal health.

It said: “In spite of the agreed contract price, in view of the present austerity measures pursued by the new administration and in support, in particular of the new government’s review of its financial commitment on major infrastructure projects, MMC Gamuda has been engaged in discussions and negotiations with MOF over the past two months to review the scope of works and specifications of the project with the aim of reaching a compromise on a cost reduction.

“Following therefrom and at the request of MOF, MMC Gamuda has agreed to convert the project delivery partner model to a single Turnkey contract for the elevated works with a price reduction of 23%.

“In respect of the underground works MMC Gamuda has so far offered a 24% reduction for the balance of the underground works. Through its Media Statement, MOF has informed that it has accepted the offer in respect of the elevated and system works only.”

The statement goes on to say that the underground works awarded contract price is RM15.47bn, with 40% of the work completed, leaving a balance of RM9.6bn. MMC Gamuda has offered a reduction of RM2.3bn which represents 24% reduction, achieved through reducing the scope of works and lowering specifications for mechanical, electrical and architectural finishes of the stations, as well as reducing the number of entrances to stations and the number of stations constructed – four of the new stations will be shelved.

According to MMC Gamuda, the termination of the contract will result in immediate job losses of over 20,000 people involved in the underground works from a supply chain of over 600+ Malaysian companies. Of the 20,000, over 3,000 are made up of MMC Gamuda JV staff.

The terminated contract will also “unjustifiably expose MMC Gamuda to a flood of lawsuits for compensation from terminated employees, sub-contractors, suppliers, manufacturers, etc whose contracts will similarly be terminated due to no fault of theirs” said the statement.

MMC Gamuda has stated that it remains open to further discussion, and although it knows that the reduction of costs by RM2.3bn is “still not adequate”, “to date it has not been conveyed to MMC Gamuda an acceptable target figure that MOF has in mind. If the target figure is made known together with the components of the savings as individual items, both parties would be placed in a better position to re-examine these components from where savings could be derived and narrow the differences.”

The JV has suggested that the appointment of an international engineering consulting firm would facilitate this exercise.

“MMC Gamuda remains open to further discussion with MOF and is amenable to cooperate with MOF in reaching an agreeable reduction. Our perception of the latest cost gap is that it is an amount which is not unbridgeable.

“MMC Gamuda believes that MOF’s aim of achieving savings is best done by both parties reaching an acceptable compromise instead of terminating the contract and re-tendering the remainder of the underground works.”

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