LAWYERS do not expect legal fallout to arise from the spat between MMC-GAMUDA and Putrajaya after developer’s contract to build the underground section of the MRT2 project was cancelled after it allegedly refused to trim costs by RM2 billion.

They point to the “national interest” clause normally found in government contracts, where contracts would be reviewed annually as a project progresses.

“This is usually the case as these contracts involve works that intertwines with the public interest. Hence, without speculating on the details, the government would have a hand in terminating contracts if it finds that the works do not serve the utility as intended,” said commercial lawyer Abraham Au.

“I’m sure that even the Barisan Nasional government provides for that to an eye on Gamuda. Hence it is not relevant whether the present or former government terminates it.” 

On Sunday, the Finance Ministry announced that the termination of MMC-Gamuda’s contract for the underground portion of the MRT2, after two months of negotiations between the consortium and the government over costs failed to yield results.

 MMC-Gamuda retains the contract to complete the aboveground sections of the MRT line that will connect Sg Buloh to Serdang and Putrajaya, but the contract for the underground section would be put up for international tender.

Following the termination announcement, MMC-Gamuda said it had been awaiting an offer from the ministry when it was caught offguard by the scrapping of the contract.

The company said some 20,000 employees could lose their jobs because of the government’s decision, and had also questioned the qualifications of the independent engineering consultant engaged by the government to assess cost of the project.

This prompted Prime Minister Dr Mahathir Mohamad to announce the government would review its decision to cancel the contract in consideration of the jobs at stake.

Yesterday, Economic Affairs Minister Azmin Ali said a four-member cabinet committee had been formed to relook MMC-Gamuda’s contract.

 “Soon, because we don’t want to halt the project. We want to discuss after examining the project, and decide as soon as possible,” Azmin told reporters after delivering a speech at the China Conference in Kuala Lumpur yesterday.

The spat had led to angry letters and online comments from employees that Putrajaya had reneged in previous agreements with some saying they regretted voting Pakatan Harapan into power.

Au believes the government is not acting outside the bounds of law.

“However the present government must of course compensate Gamuda for work already done on a quantum meruit basis – which is to be determined by the stage of works done.”

“Gamuda has since accepted the offer by the government to reduce costs in the form of a turnkey contract – a contract which design specifications are provided for by the contractor and not the government – hence the duty is on the contractor to come up with specifications that fulfill the requirement. Technically the government can do that.”

On principle, any contract is always open to amendment, termination, negotiation, re-evaluation,” said corporate and commercial lawyer Fahda Nur Ahmad Kamar.

Normally, government has the upper hand, she said.

“My experience is that if you enter into a contract with the government, you always must agree to certain terms where they will have the edge,” she said.

“Normally government contracts would have such a clause to allow them to make the best decision on national interest, but I don’t know about this contract, I’ve not read it and I’m not privy to it.”

Au believed that it was unfair for employees to blame the government for terminating the contract: “They are employed by Gamuda and not the government. Their rights are governed under a contract for service given by Gamuda as well.

“If it is five years and if it is cut short, they will have recourse against Gamuda for compensation. If there’s none, it means Gamuda drafted the employment contracts as such to prepare for this day.” – October 12, 2018.